How should the concepts of “distributed dividend” and “paid dividend” be distinguished, and more specifically, does a decision of the General Meeting to pay a dividend in the amount of over 1000 BGN /or its equivalent in euros/ and a paid dividend in the amount of less than 1000 BGN /or its equivalent in euros/ contradict the provisions of the Cash Payments Restriction Act?
The relationships related to the right to receive dividends from a partner/shareholder in Bulgaria arise as a result of a complex factual situation, i.e. upon fulfillment of the prerequisites specified in the Commercial Law. A dividend is income that is paid to the partners or shareholders of a commercial company, as the decision to distribute it is within the competence of the General Meeting.
In case the partners/shareholders decide to distribute a dividend, the restriction under the Cash Payments Restriction Act must be observed when paying it – payments (for dividends) on the territory of the country must be made only by a transfer or a deposit into a payment account, when they are of a value equal to or exceeding 1000 BGN.
A dividend is a distribution in favor of a person arising from his share in the capital of another person, as a result of which the latter’s capital decreases, including:
– income from shares;
– income from participations, including from unincorporated companies and from other rights treated as income from shares;
– hidden distribution of profit.
A distribution that, according to accounting legislation, is reported by the distributing entity as an expense is not a dividend, except in cases of hidden profit distribution.
Thus, the explicit restriction on the payment of a dividend in cash introduced in the Cash Payments Restriction Act is tied both to the amount of the permissible sum for payment in cash (under 1000 BGN) and to the above-mentioned definition of a dividend. In case the amount of the dividend is 1000 or more than 1000 BGN, the payment should be made by a transfer or a deposit into a payment account.
For the purposes of applying the Cash Payments Restriction Act, the restrictive threshold of 1000 BGN is relevant, as the total amount of dividends paid to all partners/shareholders is legally irrelevant with regard to the application of the restriction on payment in cash. In cases where the total amount of dividends paid to all partners/shareholders exceeds 1000 BGN, but for a specific partner/shareholder the amount of the dividend, determined by virtue of a decision of the General Meeting of Partners/Shareholders in accordance with their shareholding/shares held, is less than 1000 BGN, the restriction on payment in cash under the Cash Payments Restriction Act should not apply. In the opposite case, when this amount is equal to or exceeds 1000 BGN, the payment should only be made by a transfer or a deposit into a payment account. This is so because for the restriction under the Cash Payments Restriction Act to apply, the amount of the distribution to a specific person (a partner/shareholder) is important.
It should be borne in mind that the amount of the dividend is determined by virtue of the decision of the General Meeting of Partners/Shareholders, i.e. the amount specified as a dividend in the decision should be decisive and coincide with the amount that will subsequently be paid. In the event that the amount specified in the decision of the General Meeting exceeds the threshold of 1000 BGN, and the amount paid is less than the specified threshold, it could be assumed that the failure to implement the decision of the General Meeting of Partners/Shareholders is intended to circumvent the law, in view of non-compliance with the provisions of the Cash Payments Restriction Act.
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