Dividend Resolution Template | Sprintlaw Australia

Declaring dividends can feel like one of the “good problems” of running a company - you’ve made profits and you’re ready to reward shareholders.

But in Australia, paying a dividend isn’t just a bookkeeping exercise. It’s a legal decision made by directors, and it needs to be supported by proper company records. That’s where a dividend resolution comes in.

In this practical guide, we’ll walk you through what a dividend resolution is, when you need one, what to include, and provide a plain-English dividend resolution template for Australia that business owners can adapt. We’ll also cover the common pitfalls that can create tax issues, director liability, or shareholder disputes if you get the process wrong.

What Is A Dividend Resolution (And Why Does It Matter)?

A dividend resolution is a written record of the directors’ decision to declare and pay a dividend to shareholders.

For most Australian companies, directors have the power to decide whether to pay dividends (subject to the company’s rules and the law). A dividend resolution documents:

that the directors considered the company’s financial position
that the dividend is permitted under the company’s rules and Australian law
the amount, timing, and recipients of the dividend
any franking details (if relevant)

This matters because dividends affect cash flow, taxes, and shareholder entitlements. If a dividend is paid when the company can’t afford it, directors may be exposed to personal risk, including issues around insolvent trading.

Keeping proper records is also part of good governance. Even in a small family company, a clear paper trail can prevent disagreements later - especially when shareholders aren’t all actively involved in the day-to-day business.

Director Resolution Vs Shareholder Resolution

In most cases, a dividend is declared by a directors’ resolution (not a shareholder vote). However, you should always check:

your company’s constitution (some constitutions set special rules), and
any shareholder arrangements that might affect dividend expectations or decision-making

If you have multiple shareholders (especially where not everyone is a director), a tailored Shareholders Agreement can be a helpful way to set expectations around distributions, reinvestment, and decision-making.

When Do You Need A Dividend Resolution In Australia?

You generally need a dividend resolution whenever your company declares a dividend - whether it’s a one-off dividend, a regular quarterly dividend, or an end-of-financial-year dividend.

Even if:

you’re the only director and the only shareholder
the dividend amount is small
your accountant is “handling the numbers”

…you should still have a resolution recorded and stored with your company records.

Common Triggers For Declaring Dividends

Small businesses often consider dividends when:

the company has had a profitable year and has funds available for distribution
shareholders want returns (instead of reinvesting everything)
the directors want to manage how funds are distributed (as an alternative to wage increases, where appropriate)
the business is being restructured or a shareholder is exiting

Dividends are different from wages or director fees. If you’re not sure whether a proposed payment should be treated as salary, director fees, a loan, or a dividend, it’s worth getting advice early. Misclassifying payments can create tax and compliance headaches.

Legal Requirements Before Declaring A Dividend

A dividend can’t be declared just because the company has cash in the bank. Under Australian company law, there are rules designed to protect the company and its creditors.

Before you use a dividend resolution template, directors should check the dividend is lawful.

1) Make Sure The Dividend Meets The Corporations Act Test

Under the Corporations Act 2001 (Cth), a company can only pay a dividend if:

the company’s assets exceed its liabilities immediately before the dividend is declared, and the excess is sufficient for the payment of the dividend;
the payment of the dividend is fair and reasonable to the company’s shareholders as a whole; and
the payment of the dividend does not materially prejudice the company’s ability to pay its creditors.

In practice, directors often look to the company’s financial statements (including retained earnings) when assessing whether a dividend is appropriate - and your accountant can help confirm your financial position.

2) The Dividend Must Be Fair And Reasonable To Shareholders As A Whole

This doesn’t mean every shareholder must receive the same dollar amount. Shareholders are entitled based on their class of shares and the rights attached to those shares.

However, directors should be cautious about using dividends to favour one shareholder in a way that’s inconsistent with share rights or that could be challenged as unfair.

3) The Company Must Be Able To Pay Its Debts As And When They Fall Due

This is a key practical and legal check. If declaring a dividend would leave the company unable to pay suppliers, wages, rent, or tax liabilities, it may put the company (and directors) at risk.

If you’re unsure, it can help to document your reasoning in the directors’ minutes (for example, noting current cash flow forecasts and upcoming liabilities).

4) Check Your Company’s Internal Rules

Alongside the general law, your company’s internal governance documents matter. This can include:

your company’s constitution (if you have one), and
any replaceable rules that apply

If you’re updating your governance framework or you’re not sure what rules currently apply, having a clear Company Constitution can make decisions like dividends easier to manage (and easier to evidence later).

Dividend Resolution Template Australia (Sample Wording)

Below is a practical dividend resolution template Australian companies commonly use as a starting point. You should tailor it to your circumstances and ensure it aligns with your constitution and share structure.

Important note: This is a general template only. Many small businesses have unique factors (different share classes, unpaid share capital, prior dividend policies, franking considerations, or shareholder agreements) that should be reflected in the resolution.

Tax note: This guide is general information only and isn’t tax advice. Dividends and franking credits can have different tax outcomes depending on your circumstances, so it’s a good idea to speak with your accountant or a registered tax agent before declaring or paying a dividend.

Template: Directors’ Resolution To Declare A Dividend

Company: ACN
Date:
Type: Directors’ Resolution

RESOLUTION

The directors of ACN resolve that:

Declaration of Dividend
A dividend of $ per share (total dividend amount: $) is declared to shareholders registered on the record date.
Record Date
The record date for determining entitlement to the dividend is .
Payment Date
The dividend will be paid on .
Eligible Shareholders
The dividend will be paid to shareholders holding shares as recorded in the company’s register of members as at the record date, in proportion to their shareholdings (unless otherwise provided by the rights attached to the shares).
Franked / Unfranked (If Applicable)
The dividend is declared as to the extent permitted under Australian taxation law, with a franking percentage of (if applicable).
Solvency And Compliance
The directors confirm that, in their opinion, the company satisfies the requirements for declaring a dividend, including that:
- the company’s assets exceed its liabilities immediately before the dividend is declared, and the excess is sufficient for the payment of the dividend;
- the payment of the dividend is fair and reasonable to the company’s shareholders as a whole; and
- the payment of the dividend does not materially prejudice the company’s ability to pay its creditors.
Authority To Pay
Any director (or the company secretary, if applicable) is authorised to take any steps necessary to give effect to this resolution, including making payments and completing required accounting entries.

Signed as a directors’ resolution:
Name:
Signature: ______________________
Date:

Name:
Signature: ______________________
Date:

Do You Need A Meeting, Or Can You Use A Circular Resolution?

Many small companies use a circulating resolution (a written resolution signed by all directors) rather than holding a formal meeting.

What matters most is that you:

follow your company rules
properly document the decision
keep the signed resolution with your company records

If you want a clean, consistent way to record director decisions (not just dividends), a Directors Resolution Template can be a useful starting point.

Common Mistakes When Using A Dividend Resolution Template

A template is helpful, but it won’t protect you if the underlying decision is wrong or incomplete. Here are some common issues we see for small businesses declaring dividends in Australia.

1) Declaring A Dividend Without Checking The Company’s Financial Position

It’s easy to assume “we had a good year” means “we can pay a dividend”. But accounting profit isn’t always the same as cash, and your balance sheet position can be affected by prior losses, accounting adjustments, or tax provisions.

Tip: confirm your financial position before the resolution date, not after the money has already been transferred.

2) Mixing Up Dividends With Director Loans Or Wages

If the company has previously paid personal expenses for directors or shareholders, there may already be a director loan account in play. Paying a dividend without understanding how that interacts with existing loans can create complications.

Similarly, paying “dividends” as a substitute for wages can cause issues if it means you’re not meeting employment obligations or PAYG withholding requirements.

3) Paying The Wrong People (Or The Wrong Amounts)

Dividends are paid to shareholders, based on their shareholdings and rights attached to their shares.

This can get tricky if:

your share register isn’t up to date
shares were transferred but not properly recorded
you have different share classes with different dividend rights

It’s worth ensuring your company records are current before using a dividend resolution template that Australia directors often download online.

4) Not Recording Franking Details Properly

If you’re paying franked dividends, you’ll need to ensure the franking details are correct and supported by your franking account position.

Your accountant typically handles the tax side, but directors should still ensure the resolution matches what’s being reported and paid.

5) Forgetting The Practical “Admin” Steps

Even when the resolution is signed, you still need to implement it properly. This often includes:

ensuring the company’s accounting records reflect the dividend declaration and payment
updating your dividend register (if you keep one)
issuing dividend statements to shareholders (particularly where franking credits apply)

Good record-keeping is part of running a company responsibly - and it’s much easier to do it right as you go than try to rebuild records later (for example, during a sale, dispute, or ATO review).

What Other Company Documents Should You Keep Alongside Dividend Resolutions?

Dividends don’t exist in isolation. They sit within your broader company governance and legal documentation.

Depending on your business and how it’s structured, you may want to keep your dividend resolutions alongside documents like:

Company Constitution: sets out internal rules for your company, including how director decisions are made and how shares/dividends may be handled.
Shareholder arrangements: helps avoid disputes about reinvestment versus distributions and how decisions are made.
Share records: up-to-date share register, share certificates (if used), and any transfer documentation.
Director loan documentation: if directors or shareholders are borrowing from or lending to the company.

If you’re unsure whether your current structure and paperwork supports clean dividend decisions, it may help to review your overall setup (especially if you’ve grown quickly or brought on new shareholders).

In many small businesses, dividends are declared around the same time as other key decisions - like changes to director remuneration, shareholder changes, or reinvestment plans. The more aligned your documentation is, the easier it is to keep your records consistent and defensible.

If You’re Transferring Shares In A Family Business

Dividends often become a bigger topic when shares are transferred within a family (for example, adult children becoming shareholders, or parents stepping back).

It’s important the share register and governance documents match what you’re trying to achieve. Share transfers should be properly documented - not just agreed to informally - because entitlements to dividends flow directly from share ownership.

If you’re navigating this, transferring shares to family members is a good topic to get clear on early, so dividend decisions don’t accidentally go to the wrong people later.

Key Takeaways

A dividend resolution is the formal written record of directors approving a dividend, and it should be kept with your company records every time you declare a dividend.
Before declaring a dividend, directors should check the Corporations Act requirements are met (including the company’s balance sheet position, fairness to shareholders, and the impact on creditors), and also check the company’s constitution (if any) and share rights.
A dividend resolution template for Australia should be tailored to your share structure, constitution, and (if relevant) franking position.
Common mistakes include not checking the company’s financial position, paying the wrong shareholders, mixing dividends with wages/loans, and failing to record franking details properly.
Dividend resolutions work best when supported by good governance documents like a Company Constitution and Shareholders Agreement, and up-to-date share records.

If you’d like help preparing or reviewing a dividend resolution (or getting your company governance documents in order), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

Dividend Resolution Template: Guide for Australian Directors