The dividend cap limits how much of its profit a community interest company limited by shares can pay out to its shareholders. The total dividends declared in a year cannot be more than 35% of the profits available for distribution.
Who it applies to
Only a CIC limited by shares whose articles allow dividends to investors can pay them at all. A CIC limited by guarantee has no shareholders and pays no dividends.
The limit
The dividend cap restricts the total of all dividends declared for a year to 35% of the company’s distributable profits. The rest stays in the company for its community purpose. Unused capacity can be carried forward for up to five years.
Dividends paid to an asset-locked body, such as a charity that owns the shares, do not count towards the cap.
Interest on loans
A similar cap applies to performance-related interest, where the rate on a loan varies with the company’s profits or turnover. Ordinary loans at a normal commercial rate are not affected.
Reporting
Dividends are reported in Part 5 of the CIC34 report, and performance-related interest in Part 6.