QUOTE(horror2015 @ Nov 28 2015, 11:51 AM)
Now this is correct. People cannot differentiate between dividend and directors fees. Lemme explain further from viewpoint of SME and PLC.
SME:-
Directors are paid directors fees when the company declares it during agm. Yes it doesn't has anythg to do with company's net profits. Directors fees are more affected by company's chargeable income. For simplicity purpose, directors' fee are legally used to reduce the chargeable income because a director is only taxed on the fees upon payment by the company. As such, legally, SMEs announces directors fees once they know their chargeable income is too high. In truth this is also a legal way to delay tax payments since directors fee can be paid out slowly for a few years. As long as there is payment made to directors, IRB cannot rule that you are evading taxes. Just payment is slow because of bad cash flow. Some ppl pays themselves dividend instead of directors' fees because SME has the same persons as shareholders and directors.
However dividends are different from directors fees because dividends are affected by a company's profits. You cannot declare dividend payout UNLESS you have profits to be distributed to shareholders.
PLC:-
In a listed company, yes INEDS are not paid salaries, only directors fees. Different from SME, it's harder to pass a resolution for directors fees since it has to be discussed in AGM where AC will always scrutinize the directors fees (theoretically). However a shareholder will only be paid dividend and not directors fees, UNLESS the director is also a shareholder (usually very little %).
Conclusion
Dividend manner is always the same. SME or listed, must see net profit. Directors fees are usually due to tax implications.
very great info ... thank you very much !SME:-
Directors are paid directors fees when the company declares it during agm. Yes it doesn't has anythg to do with company's net profits. Directors fees are more affected by company's chargeable income. For simplicity purpose, directors' fee are legally used to reduce the chargeable income because a director is only taxed on the fees upon payment by the company. As such, legally, SMEs announces directors fees once they know their chargeable income is too high. In truth this is also a legal way to delay tax payments since directors fee can be paid out slowly for a few years. As long as there is payment made to directors, IRB cannot rule that you are evading taxes. Just payment is slow because of bad cash flow. Some ppl pays themselves dividend instead of directors' fees because SME has the same persons as shareholders and directors.
However dividends are different from directors fees because dividends are affected by a company's profits. You cannot declare dividend payout UNLESS you have profits to be distributed to shareholders.
PLC:-
In a listed company, yes INEDS are not paid salaries, only directors fees. Different from SME, it's harder to pass a resolution for directors fees since it has to be discussed in AGM where AC will always scrutinize the directors fees (theoretically). However a shareholder will only be paid dividend and not directors fees, UNLESS the director is also a shareholder (usually very little %).
Conclusion
Dividend manner is always the same. SME or listed, must see net profit. Directors fees are usually due to tax implications.