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DLA PIPER: Distribution of Dividends, share premium & account 115

Distributions of dividends (ordinary and interim), share premium and account 115

11 November 2021 | By Céline Pignon

Want to know more on distributions of dividends, share premium and account 115 in Luxembourg? Our latest article will help you understand these concepts and the distribution conditions.


What is a dividend, at which conditions can a dividend be distributed and who can decide to distribute the dividend ?

A dividend is a portion of the profits made by a company and paid to its shareholders out of distributable amounts as defined by Luxembourg law. The right to receive a dividend is conditional upon the existence of distributable profits and a decision of the competent body of the company.

Existence of distributable profits

Every year, the board must prepare a balance sheet and profit and loss accounts and determine the company’s net results. This is achieved by comparing expenses to revenues in accordance with applicable accounting principles. When the difference between a company’s revenue and expenses is positive, it shows a profit. Once taxes have been paid, we have the net profit.

Article 461-2 of the Luxembourg law of 10 August 1915 on commercial companies as amended, provides, inter alia, that:

“Except in the case of reductions in the subscribed share capital, no distribution may be made to the shareholders where, on the closing date of the preceding financial year, the net assets as shown in the financial statements are, or further to such distribution would be, less than the amount of the subscribed share capital plus those reserves whose distribution is proscribed by law or the articles of association.”

Article 461-2 also provides that “No distribution may be made to the shareholders in an amount exceeding the amount of the profits from the previous completed accounting year plus retained profits and advance deductions from reserves available for that purpose and less carry-over losses and sums to be allotted to reserves according to law or the articles of association.”

This article refers to distributions which are larger than the distribution of dividends and these provisions seal the pillar of the distribution restrictions (see below).

Notion of distributable profits: it includes the net profit for the year, to which is added any profit carried forward (distributable reserves) minus previous losses, less sums allotted to mandatory reserves. In other words, distributable profits means:

  •  the profit of the year (if any);
  •  distributable reserves;
  • profits of the preceding years carried forward;


  • losses of the preceding years;
  • mandatory allocations to the legal reserve (until 10% of the share capital);
  • allocations to statutory reserve (very rare).

It should be noted that ordinary dividends can also be distributed out of distributable reserves in the absence of a profit for the year.

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For more information, please contact:

Céline Pignon