Dividend guarantee
The dividend guarantee refers to the minimum dividend that is guaranteed by the parent company (majority owner) or a heavily involved bank. If the company that has undertaken to distribute a dividend cannot distribute that dividend due to losses, it must necessarily be paid in the next or subsequent accounting periods. This dividend guarantee mostly depends on the type of share held by the shareholder.
Dividend guarantee by type of share
As a rule, shareholders who own a preferred share are granted a dividend guarantee. The guarantee of the dividend is mostly due to the fact that preferred shares do not have voting rights at the general meeting. Conversely, the counterpart of the preference share - the common share - has voting rights at the general meeting; However, this is at a disadvantage when it comes to dividend distribution (and consequently also when it comes to guaranteeing dividends).
Measures in the event of non-compliance
If the dividend guarantee cannot be met twice in a row for preference shares (for example because of a loss), the shareholder has the right to convert his preference shares into ordinary shares.
Definition
In order to bring the dividend guarantee into a suitable form, it must be incorporated in the articles of association (partnership agreement) of the corporation under the section "Special advantages / special rights" (Section 26 (1) AktG) according to the German Stock Corporation Act .
Individual evidence
- ↑ a b Wirtschaftslexikon Gabler: Definition of dividend guarantee , dividend guarantee
- ↑ German: Equity Act §26AktG , Book One / Part Two - Special advantages and formation expenses