Non-payment of dividends & unfair payment policies

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Dividends are one of the key benefits of owning shares in a company. When they are withheld without good reason, it can lead to serious shareholder conflict and potential breaches of directors’ duty.

At Francis Wilks & Jones, we help shareholders resolve disputes about unpaid or unfairly distributed dividends. Whether the issue stems from poor governance, director misconduct or minority exclusion, our team combines commercial insight with deep company law experience to protect your interests and restore fairness.

What are dividends and how should they be declared?

A dividend is a payment made to shareholders as a return on their investment.
Under sections 830–831 of the Companies Act 2006, dividends may only be paid out of distributable profits and must be properly approved by the board and shareholders.

Directors have a duty to ensure:

• the company has sufficient post-tax profits;
• the payment complies with its articles of association; and
• the dividend is formally declared through a board or members’ resolution.

If these requirements are ignored, the payment may be unlawful and directors can be personally liable to repay it.

When is it lawful to withhold dividends?

There are legitimate reasons why a company might not declare a dividend. Directors may choose to retain profits to:

• fund future growth or manage cash flow;
• meet loan or investment conditions; or
• ensure the company remains solvent.

However, problems arise when dividends are withheld selectively or unfairly.
Common examples include:

• paying dividends only to directors who are also shareholders;
• diverting profits into inflated salaries or personal expenses;
• refusing dividends to pressure minority shareholders; or
• withholding payments without explaining the decision.

Where such conduct occurs, directors may have breached their statutory duties to act fairly and for proper purposes.

When does non-payment become unfair or unlawful?

A refusal to pay dividends may become unfairly prejudicial when it damages a shareholder’s legitimate expectations.
Under section 994 of the Companies Act 2006, shareholders can ask the court to intervene where the company’s affairs are conducted in a way that is unfairly prejudicial to their interests.

Typical examples include:

• excluding minority shareholders from information or decisions;
• using company profits for personal benefit rather than distributions;
• paying dividends inconsistently between classes of shareholder; or
• ignoring long-standing dividend policies without justification.

In some cases, deliberate withholding can also amount to a breach of directors’ duties under sections 171–177 of the Companies Act 2006.
Our lawyers assess whether the conduct meets this threshold and advise on the best remedy, from negotiated settlement to formal legal action.

What legal remedies are available for unpaid dividends?

The right approach depends on the severity of the issue and your objectives.
FWJ regularly helps clients pursue the following routes:

1. Negotiation or mediation – most disputes are resolved once clear financial information is shared and terms agreed.
2. Settlement agreements – directors or the company agree to pay outstanding dividends or buy out the affected shareholder.
3. Unfair prejudice petition – under section 994 of the Companies Act 2006, the court may order the company or other shareholders to buy your shares at fair value.
4. Derivative claim – under section 260 of the Companies Act 2006, shareholders can sue directors on the company’s behalf for misuse of funds.
5. Buy-out or exit strategy – negotiated sale of shares where ongoing conflict makes continued ownership untenable.

Our priority is to achieve a swift, commercial result – protecting business value while avoiding unnecessary litigation.

How can FWJ help resolve dividend disputes?

At Francis Wilks & Jones, we advise both shareholders and company directors on dividend-related issues.
Our expertise covers:

• assessing whether non-payment is legitimate or unlawful;
• drafting settlement agreements or buy-out terms;
• issuing or defending unfair prejudice petitions; and
• negotiating resolutions that preserve the company’s trading position.

We understand the importance of discretion in these cases and work to protect business relationships wherever possible.

Our shareholder disputes team at FWJ includes

Andrew Carter (Partner)

Andrew Carter is a commercial litigation partner with extensive experience resolving shareholder and partnership disputes. He acts for business owners, directors and investors in complex conflicts over control and value. Clients trust his calm, strategic approach and focus on achieving practical, commercial outcomes.

Gemma Newing (Senior Associate)

Gemma Newing is a commercial litigation solicitor with strong experience in contractual and company disputes. She acts for businesses and shareholders in complex claims requiring clear strategy and efficient resolution. Clients value her focus, responsiveness and commitment to achieving practical results.

Anna Beetson (Solicitor)

Anna Beetson advises SMEs, directors and shareholders on commercial and company disputes, with a focus on efficient and practical resolution. She combines strong technical knowledge with a clear, client-focused approach. Her work covers contractual claims, shareholder disagreements and boardroom issues.

Athena Kam (Paralegal; Unregistered Barrister)

Athena Kam supports clients across commercial litigation, director disqualification and debt recovery matters. Drawing on her background as an unregistered barrister, she brings analytical precision and attention to detail to every case. She assists in preparing evidence, drafting submissions and managing proceedings efficiently.

At Francis Wilks & Jones we advise both companies and shareholders on the rights to dividends, and remedies available for breach of duty. If you are a shareholder and believe that a company is exercising a policy of deliberately failing to declare a dividend, then contact one of our expert teams to today to discuss further. This is a complex issue. Speak to one of our team today if you have concerns.

Supportive and friendly with partner-led involvement, I would recommend Francis Wilks & Jones to anyone facing a similar situation.

A shareholder we helped settle a dividend dispute