Shareholders Resolution

on Use of the Annual Surplus

Company Name: Company (Name)
Company Address: Company (Address (one line))
Date: Date of the shareholders resolution

The undersigned shareholders of Company (Name), who have reviewed the financial statements for the fiscal year Financial year of shareholder resolution, adopt the following resolution on the use of the profit:

Approval of the Financial Statements

The shareholders acknowledge the financial statements for the fiscal year Financial year of shareholder resolution, which report the following figures:

Annual Surplus: Annual surplus amount

Total Assets (Balance Sheet): Total assets amount

Date of Financial Statement Preparation: Date of financial statement preparation

The financial statements have been audited, and the annual surplus of Profit distribution total is confirmed.

Resolution on the Use of the Profit

Based on the approved financial statements, the shareholders resolve that the profit be utilized as follows:

Distribution of Profit to Shareholders

A portion of the annual surplus, amounting to Profit distribution total, will be distributed among the shareholders as follows:

Shareholder 1: Shareholder 1 distribution amount

Shareholder 2: Shareholder 2 distribution amount

Shareholder 3: Shareholder 3 distribution amount

…

Retained Earnings

The remaining profit, amounting to

Retained earnings amount, will be carried forward to the next fiscal year.

Formation of a Profit Reserve

Profit reserve amount

Timing and Method of Distribution

The profit distribution to shareholders will take place on Profit distribution date. Payments will be made Profit distribution method and distributed in accordance with the percentages mentioned above.

Voting

The shareholders are asked to vote on the following question:

Question: Should the profit of Voting question total profit be distributed to the shareholders, with the remaining profit of Voting question retained amount carried forward, and Voting question reserve amount allocated to the profit reserve?

Voting Options:

Yes – I approve the proposed use of the profit.

No – I reject the proposed use of the profit.

VoteShareholder 1Shareholder 2Shareholder 3

Deadline for Voting

The shareholders must submit their decision no later than Voting deadline for shareholder resolution. Voting will take place in writing, and each shareholder must declare their approval or rejection in writing.

Result of the Vote

The result of the vote will be determined based on the votes cast. The resolution will be considered approved if a majority of the shareholders vote "Yes."

Formal Requirements

This circular resolution is adopted in accordance with the requirements of the company’s Articles of Association. The shareholders confirm that this resolution has been made without a physical meeting. All necessary notices and approvals have been properly obtained.

Signatures

By signing this circular resolution, the shareholders confirm their approval or rejection of the resolution on the use of the profit.

Pending

Notes:

This circular resolution must be signed by all shareholders.

A copy of the signed circular resolution should be kept in the company’s records.

This circular resolution is made in accordance with Applicable law for shareholder resolution. It is considered legally valid once all shareholders have provided their written approval.

What Is a Resolution on the Use of the Annual Surplus?

A resolution on the use of the annual surplus is a formal decision made by the shareholders or board of directors regarding how the profits of the company should be utilized after a fiscal year. It can also be a part of financial statement resolution. The surplus typically results from the company earning more revenue than its expenses during the year.

Once the surplus is identified, the decision needs to be made on how to allocate it. This can involve:

Reserves: Setting aside funds for future projects, risk management, or company needs.
Dividends: Distributing a portion of the surplus to shareholders as a reward for their investment.
Reinvestment: Using the surplus to reinvest in the company, expand operations or launch new projects.

Advantages of a Circular Resolution for Annual Surplus Decisions

Using a circular resolution to decide on the use of the annual surplus has its perks:

Time savings in voting: You don’t need to wait for everyone to be available for a meeting. Shareholders can vote on the resolution remotely, speeding up the decision-making process.
Precise documentation: The circular resolution clearly documents the decision, providing a solid record of how the surplus was used and avoiding misunderstandings later on.

Legal Requirements for Circular Resolutions on the Use of Profits

Legal requirements for resolutions on the use of profits typically depend on the company’s jurisdiction and its articles of association. However, it generally requires shareholder approval to decide how to distribute or allocate profits.

According to Germany GmbHG, the following are applicable:

Appropriation of Profits (§ 29)

§ 29 outlines how profits should be distributed. Shareholders can allocate profits to reserves or carry them forward, and distribution is typically proportional to shares unless stated otherwise in the partnership agreement. Managing directors can also move revaluation reserves to profit reserves with shareholder consent.

Submission of Financial Statements (§ 42a)

According to § 42a, managing directors must submit the annual financial statements and management report for shareholder approval within the first eight months of the financial year (or eleven months for small companies). This ensures timely decision-making on profit distribution.

Shareholders’ Meeting and Circular Resolutions (§ 48)

Under § 48, circular resolutions allow decisions without a physical meeting if all shareholders agree in writing. This makes it easier to make decisions quickly and efficiently, especially in the case of profit distribution.

Circular Resolution Template on the Use of Profits

Using fynk’s template for a circular resolution on the use of profits is a simple way to ensure that everything is done properly. Here are a few reasons why using our template is a good idea:

Protected Voting and Signing: Your votes and electronic signatures are securely encrypted to prevent any unauthorized alterations.
Instant Notifications: Receive real-time updates when shareholders cast their votes or sign the document.
Simple Sharing and Collaboration: Easily share the resolution template with stakeholders, allowing them to review and access it from anywhere.
Time Efficiency: Save time by avoiding the need for in-person meetings or lengthy email exchanges.

The template also specifies the voting process, deadlines, and formal requirements for adopting the resolution, ensuring legal compliance and transparency.

FAQs

Can I use a circular resolution for other financial decisions besides the use of annual surplus?: Yes, you can use circular resolutions for various financial decisions, such as approving budgets, capital allocations, or other important financial strategies. It’s a flexible tool that works well for any decision that needs shareholder approval without the need for a formal meeting.
Is a circular resolution legally binding for the use of profits?: Yes, as long as the resolution follows legal procedures and is properly signed and approved by the shareholders, it is legally binding.
What if the company doesn’t have enough surplus to distribute?: If there isn’t enough surplus, shareholders may decide not to distribute any dividends or may choose to allocate the available funds to reserves or other company needs. The decision will depend on the company’s financial situation and strategy.