The right of an JSC and LLC member to receiving dividends: court practice

  • N.D. Vintoniak
Keywords: dividends, the right to dividends, Joint-Stock Company (JSC) Limited Liability Company (LLC), general shareholders meeting


The article is dedicated to analyzing court practice regarding the right of an JSC and LLC member to receiving dividends. Relevance of the current research is dictated by the fact that the right to receiving dividends is one of the key corporate rights of a company member as it is of property interest, since each member makes a predetermined contribution in order to receive future gains.
Upon completing the research, it has been concluded that the right of a member to receiving dividends within the terms set up at the general shareholders meeting is unconditional. The law does not envisage the need for a company member to submit a statement for receiving the dividend payout if the decision has been made at the general shareholders meeting. Dividend payout is a liability of a company therefore the company is liable to fulfill the aforementioned obligation.
If a dispute is to arise about dividend payout or the dividend payout is past due, the decision is made in favor of a company member. Failure to pay the dividends when due is regarded as monetary breach. Meaning, a company member whose dividend payment is past due can demand to be paid an amount that also includes interest and inflation rate.
The analyses of the court decisions indicates that company members do not have the right to cancel previous decisions about dividend payout to a member who had withdrawn from a company, since cancelling such a decision by currant company members is regarded as abuse of rights.
In general, the courts conclude that violation of a company member’s right to receiving dividends equals violating the right to property.