Are You Illegally Distributing Dividends?

Dividends withdrawn from the company's capital contributions is prohibited in China.

Any capital reduction shall be agreed by the board of shareholders and shareholders' resolutions shall be passed. However, capital reduction shall not be conducted for the purpose of dividends.

At Horizons, we encounter many cases of indirect illegal dividends distribution, where the overseas headquarters are not alert to the legal obligations before dividends are distributed. Hence, understanding and implementing the correct dividend distribution is a must for any headquarters with a Chinese subsidiary. In the below, we provide five takeaways for dividend distribution.

First Offset Losses