A dividend is the distribution of profit or freely distributable reserves to shareholders. This article explains the most important types of dividend in Swiss corporations and shows how cash dividends, non-cash dividends, ordinary, extraordinary, interim, and advance dividends differ from one another. It sets out the applicable legal framework under Swiss company law and explains the practical implications for boards of directors and Swiss SMEs.
Dividends are among the most important financial rights of shareholders. They represent the portion of a company's profit that a corporation (Aktiengesellschaft, AG) distributes to its shareholders. In practice, however, it is not always clear what exactly qualifies as a dividend and how the different types of dividend differ from one another.
This article explains the most important forms of dividend in Swiss corporations: cash and non-cash dividends, ordinary and extraordinary dividends, interim dividends, and advance dividend payments (Akontodividende). The distinction is not merely theoretical. Depending on the type of dividend, the applicable legal basis, the timing of the resolution, and the requirements regarding financial statements, audit, and settlement differ significantly.
Table of Contents
- What is a dividend?
- Cash and non-cash dividends
- Ordinary and extraordinary dividends
- Interim dividend
- Advance dividend payment (Akontodividende)
- Key considerations for any dividend
- Conclusion
- How Konsento simplifies dividend processing
What is a Dividend?
A dividend is a distribution made by a corporation to its shareholders. Economically, it gives shareholders a share in the company's profit or freely distributable reserves. As a matter of law, however, the concrete entitlement to payment arises only once the general meeting of shareholders (Generalversammlung) has validly resolved on the dividend.
Swiss corporate law sets clear limits on distributions. Dividends may only be paid out of net profit for the year and out of reserves created for this purpose (Art. 675 para. 2 CO). Furthermore, they may only be determined after the required allocations to the statutory profit reserve and to any voluntary profit reserves have been made (Art. 675 para. 3 CO).
Before submitting a dividend proposal, the board of directors (Verwaltungsrat) must in particular address three questions:
- Are sufficient freely distributable funds available?
- Is the correct financial statement available as the basis?
- Is the statutory auditor (Revisionsstelle) required to review the financial statements and the proposal?
A dividend is therefore not simply a payment to shareholders. It is a formal corporate act serving a capital-protection function.
Cash and Non-Cash Dividends: In What Form is the Distribution Made?
The most common form is the cash dividend (Bardividende). Shareholders receive a monetary amount, usually expressed as an amount per share. For Swiss SMEs, this is the standard case: the general meeting resolves on the distribution, the company calculates the gross amount per dividend-entitled share, deducts withholding tax (Verrechnungssteuer), and pays the net amount to the shareholders.
A non-cash dividend (Sachdividende) is also possible. In this case, rather than cash, an asset is distributed. This could be, for example, a physical object, a claim, a participation interest, or any other asset of the company. In larger corporate structures, a non-cash dividend can also become relevant in the context of reorganisations or spin-offs, for instance when shares in a subsidiary are transferred to shareholders.
For SMEs, non-cash dividends are less common. They may be appropriate in specific circumstances, but are more complex to handle than cash dividends. The distributed asset must be valued, and the tax treatment must be carefully assessed. The question of withholding tax also arises with non-cash dividends. If the notification procedure (Meldeverfahren) does not apply, additional liquid funds may be required to remit the tax amount to the Federal Tax Administration (ESTV).
Closely related to the non-cash dividend is the stock dividend (Stockdividende). Here, shareholders receive shares, either from the company's own existing shares or from newly issued shares liberared out of freely available equity. Where shareholders may choose between cash and shares, this is referred to as an optional dividend (Wahldividende).
Ordinary and Extraordinary Dividends: When is the Resolution Passed?
The ordinary dividend (ordentliche Dividende) is resolved at the annual general meeting (ordentliche Generalversammlung). At that meeting, the annual financial statements are first approved, after which the general meeting decides on the allocation of the net profit for the year — in particular, whether a dividend is to be distributed or whether the profit is to be carried forward in whole or in part, or allocated to reserves.
The extraordinary dividend (ausserordentliche Dividende), by contrast, is resolved at an extraordinary general meeting (ausserordentliche Generalversammlung). It may become relevant, for example, when additional freely distributable funds are to be paid out to shareholders following the ordinary general meeting. It is likewise based on net profit and freely distributable reserves as reflected in the annual financial statements.
In practice, the main difference between ordinary and extraordinary dividends lies in the procedural context:
- The ordinary dividend is part of the normal annual financial statement and profit allocation process.
- The extraordinary dividend is resolved outside the ordinary general meeting.
- For an extraordinary dividend, particular care must be taken to assess whether the most recent annual financial statements still provide a reliable basis.
If the financial position has materially deteriorated since the balance sheet date, an additional review or an interim financial statement may be required. The key requirement remains that the distribution must not encroach upon restricted equity.
Interim Dividend: Distribution from the Current Financial Year
The interim dividend (Zwischendividende) has been expressly regulated since the Swiss corporate law reform. The general meeting may, on the basis of interim financial statements, resolve on the payment of an interim dividend (Art. 675a para. 1 CO). Unlike the ordinary or extraordinary dividend, the basis is not the most recent annual financial statements, but a set of financial statements prepared during the financial year.
This is of particular interest when a company has already generated profits during the year and does not wish to wait until the end of the financial year to distribute them. In practice, this can be relevant in group structures, in the case of predictable revenue streams, or in specific liquidity arrangements.
The interim dividend is, however, not an informal advance payment. It requires interim financial statements. In principle, these must be reviewed by the statutory auditor before the general meeting resolves on the distribution (Art. 675a para. 2 CO). No review is required where the company is not subject to a limited statutory audit (eingeschränkte Revision) of its annual financial statements. A review may also be dispensed with if all shareholders consent to the payment of the interim dividend and the claims of creditors are not thereby jeopardised (Art. 675a para. 2 CO).
The key requirements for an interim dividend can be briefly summarised as follows:
- Interim financial statements must be prepared.
- The company must have sufficient freely distributable funds.
- The statutory auditor must be involved, unless a statutory exception applies.
- The general meeting must resolve on the interim dividend.
The general rules on dividends apply mutatis mutandis to interim dividends as well (Art. 675a para. 3 CO). The general meeting therefore remains the competent body.
Advance Dividend Payment (Akontodividende): An Advance Rather Than a True Dividend
The advance dividend payment (Akontodividende) sounds similar to the interim dividend, but is legally distinct. It involves the pre-financing of a future dividend. It is not a dividend that has already been validly resolved, but rather an advance payment — or a payment in the nature of a shareholder loan — made to the shareholder.
This has significant consequences. If the general meeting subsequently resolves on an actual dividend, the advance can be set off against the dividend entitlement. If no dividend is resolved, or if it turns out to be lower than anticipated, the shareholder is in principle required to repay the outstanding amount.
The board of directors must therefore exercise caution. Whenever funds are paid out to shareholders before a valid dividend resolution has been passed, the following questions must in particular be examined:
- May the amount be granted as a shareholder loan?
- Is the principle of equal treatment (Gleichbehandlungsgrundsatz) respected?
- Are capital maintenance and creditor protection preserved?
- Can repayment be enforced if no dividend is subsequently resolved?
Since the statutory introduction of the interim dividend, it is in many cases more appropriate to resolve a proper interim dividend in accordance with the statutory requirements, rather than resorting to advance payments.
Overview of the Main Types of Dividend
The different types of dividend can be characterised as follows:
- Cash dividend (Bardividende): Distribution in cash. This is the standard case for Swiss SMEs.
- Non-cash dividend (Sachdividende): Distribution of an asset. Relevant primarily in specific circumstances, reorganisations, or asset transfers.
- Ordinary dividend (ordentliche Dividende): Resolved at the annual general meeting. Part of the normal annual financial statement and profit allocation process.
- Extraordinary dividend (ausserordentliche Dividende): Resolved at an extraordinary general meeting. Allows an additional distribution outside the ordinary general meeting.
- Interim dividend (Zwischendividende): Distribution from the current financial year. Requires interim financial statements.
- Advance dividend payment (Akontodividende): An advance on a future dividend. Legally precarious if the subsequent dividend does not materialise.
Key Considerations for Any Dividend
Regardless of the type of dividend, the same fundamental questions always arise: Are there sufficient freely distributable funds? Is the correct financial statement available? Has the statutory auditor been properly involved? And has the general meeting passed a valid resolution?
The allocation must also be correct. Dividends are in principle calculated in proportion to the amounts paid in on the share capital (Art. 661 CO). The articles of association (Statuten) may provide otherwise, for example through preferential rights (Vorzugsrechte). Before making a distribution, it is therefore necessary to determine which shares or other financial instruments are entitled to dividends and whether any special rights exist.
Withholding tax (Verrechnungssteuer) must also be taken into account. Dividends paid by a Swiss corporation are in principle subject to withholding tax at a rate of 35% (Art. 4 para. 1 lit. b in conjunction with Art. 13 para. 1 lit. a of the Federal Act on Withholding Tax, VStG). The company is the tax debtor but must pass the tax on to the recipient (Art. 10 para. 1 and Art. 14 para. 1 VStG). In practice, this means that the company calculates the gross dividend, deducts 35% withholding tax, and pays the net amount to the shareholders. In certain cases, the notification procedure (Meldeverfahren) may be used instead of the direct remittance of the tax.
Particularly in non-listed corporations, the challenge often lies in the practical execution. The company must determine the dividend-entitled holdings, calculate amounts per shareholder, keep banking details up to date, correctly set out the withholding tax deduction and net amount, and prepare the payment instruction for the bank.
Conclusion
A dividend is more than a profit distribution. It is a formal corporate act that requires a permissible financial basis, a proper proposal, and a valid resolution by the general meeting.
For practical purposes, it is essential to clearly distinguish between the different types of dividend. The cash dividend is the standard case. The non-cash dividend is possible, but more complex. The ordinary dividend is part of the annual profit allocation process, whereas the extraordinary dividend is resolved outside the ordinary general meeting. The interim dividend allows for a mid-year distribution, but requires interim financial statements. The advance dividend payment, by contrast, is not a properly resolved dividend, but an advance carrying repayment risk.
Those who prepare dividends carefully and handle them in a structured manner reduce the risk of errors, create transparency for shareholders, and facilitate cooperation with the statutory auditor, the bank, and the tax authorities.
How Konsento Simplifies Dividend Processing for Swiss SMEs
Konsento supports Swiss SMEs not only in resolving dividends correctly, but also in settling them efficiently. In the general meeting tool, shareholders can vote on dividend distributions. Agenda item templates with calculation bases are available so that the dividend resolution can be seamlessly embedded in the general meeting workflow.
After the resolution has been passed, Konsento simplifies the preparation of dividend confirmations (Dividendenbestätigungen). For all dividend-entitled financial instruments, dividend confirmations can be generated in a few clicks and signed by the board of directors. This covers in particular:
- Shares (Aktien)
- Participation certificates (Partizipationsscheine)
- Profit participation certificates (Genussscheine), where applicable
The dividend confirmation automatically calculates, based on the recorded gross dividend amount per share, the withholding tax deduction of 35%, the net dividend amount, and thus the payment amount. This transforms an error-prone manual Excel exercise into a structured process with consistent data and traceable documentation.
Konsento also assists with the preparation of the PAIN payment file for the bank. This file contains the payment instructions for the individual dividend recipients. The necessary account details can be requested, recorded, and updated directly at the level of each shareholder and participant within Konsento.
In this way, Konsento significantly reduces the administrative burden — from collecting bank details and preparing dividend confirmations through to generating the payment file for the bank. If you no longer want to manage your next dividend distribution manually through spreadsheets, individual calculations, and scattered banking details, Konsento is worth a closer look.