Shareholder transfers

[Lost1]

Can anyone explain to me what exactly shareholder transfers aka transfers of profits to shareholders are?

Do the free assets of a company decrease as a result of these transfers and the dividends shareholders receive are then paid from these transfers?

 

[Lynn Birchall]

Can anyone explain to me what exactly shareholder transfers aka transfers of profits to shareholders are?

Hi

A proprietary company will have one (or more) "long-term funds" or "long-term business funds". It needs to keep at least enough assets in these funds to demonstrate statutory solvency, ie enough to cover its liabilities to policyholders.

It will also have a separate shareholder fund.

Broadly (bit of a simplification, things get more complicated especially for WP business, but ok for this explanation I hope!), any assets in the long-term fund in excess of what's needed to demonstrate stautory solvency are available as "profit" and can be transferred from the long-term fund to the shareholder fund.

These are the shareholder transfers.

Do the free assets of a company decrease as a result of these transfers and the dividends shareholders receive are then paid from these transfers?

The free assets of the company don't decrease (as the transfers are a movement between funds within the company), but the "free assets in the long-term fund" do decrease.

Yes, the dividends to shareholders are paid from these transfers (dividends are paid out of the shareholder fund).

Hope this helps

Best wishes for Thursday...
Lynn

 

[Lost1]

Great, thanks Lynn.