From Resolution to Claim: The Legal Transformation of the Dividend Right

Abstract In the last 2 years, two Hungarian regional courts of appeal have published decisions in which they examined the nature of the right to dividends. The courts had to answer whether the general meeting had the right to amend its earlier decision on the payment of dividends. The judgments were based on the premise that the decision to pay dividends does not change the legal nature of the member’s right to dividends, and it does not create an obligation between the member and the company under the law of obligations. The courts therefore concluded that the decision to pay dividends could subsequently be amended by the company. In this paper, we argue that this interpretation is wrong. The decision to pay dividends creates a monetary claim (dividend claim) for the company’s members under the law of obligations. It follows therefore that company law measures, such as a resolution of the general meeting, cannot affect the dividend claim, and—as with all other monetary claims—it can only be changed based on a contract between the creditor (i.e., the shareholder) and the debtor (i.e., the company), in line with the rules of the law of obligations. We also examine the question of when such a dividend claim becomes due. We argue, acknowledging the difficulties of interpretation, that the claim becomes due when the decision is taken by the general meeting, but that the company cannot make a payment if this would jeopardise the company’s solvency.