The reform of the limited company – what effects on the dividend policy?

The distribution of dividends is both made more flexible and more cumbersome by the reform!


Dividends are decided by the shareholders at the ordinary general meeting and are based on the closed financial statements not older than 6 months. Indeed, the meeting must be held no later than 6 months after the end of the accounting year.

In principle, shareholders are not allowed to have the share capital returned to them until the liquidation is completed, but the appropriation of profits is also strictly regulated. Currently, 5% of the year’s profit must be allocated to the general legal reserve until it reaches 20% of the paid-up share capital (“first allocation”). In addition, and except for holding companies, 10% of dividends exceeding 5% of the share capital is also allocated to the reserve until it reaches 50% of the share capital (“second allocation”). Thus, only the profits remaining after these allocations can be distributed as dividends.

In addition to the distribution of profits, shareholders may have their contributions made directly to the company and recorded in the general reserve distributed, but only on the amount exceeding 50% of the share capital. The reform now provides for an increase in the first allocation to 50% of the share capital, and at the same time abolishes the second allocation. It will come into force in 2022, the date not yet set by the Federal Council.

It must be noted that there are other legal and statutory reserves that must be respected, which is why the dividend distribution must take them into account. It is therefore advisable to make a careful calculation in order to avoid a violation of the law.