Companies Act 19,550 · Article 68 — Dividends

When and how dividends may be distributed (LGS art. 68)

Section 68 of the General Companies Law states the core rule for profit distributions: dividends may be approved and paid only out of realized and liquid profits shown by financial statements prepared in accordance with law and the bylaws and approved by the competent corporate body. Dividends paid in breach of this rule are recoverable.

Source: Act 19,550

What article 68

Section 68 establishes the requirements for distributing dividends and the remedy - recovery - for improper dividends.

Official text · Act 19,550, art. 68

Dividends may not be approved or distributed to shareholders or members except out of realized and liquid profits shown by financial statements prepared in accordance with the law and the bylaws and approved by the competent corporate body, except in the case provided for in article 224, second paragraph.

Profits distributed in breach of this rule are recoverable, except in the case provided for in article 225.

Source: Law 19,550, art. 68 - InfoLEG (updated official text)

Commentary

The rule protects capital integrity and third parties: amounts that are not real profits may not be distributed. It requires three elements: realized and liquid profits, financial statements prepared in accordance with law and the bylaws, and their approval by the competent body (the shareholders' meeting).

Fictitious dividends - distributed without real profits or approved financial statements - are recoverable by the company, subject to article 225 (good-faith receipt of dividends based on regularly approved statements). Improper distributions may also expose directors to liability.

Distinctions often confused

Realized and liquid profit is not the same as Non-liquid accounting profit. Only profit actually realized and available may be distributed; a positive accounting result is insufficient if it is not liquid and approved.

Lawful dividend is not the same as Fictitious dividend. A lawful dividend is supported by approved statements and real profits; a fictitious dividend lacks that support, is recoverable and may engage directors' liability.

Practical impact

Before distributing profits, the company must have approved financial statements and liquid profits. Interim dividends and distributions without approved statements are a source of liability and recovery claims.

Frequently asked questions

When may dividends be distributed?

Only out of realized and liquid profits shown by financial statements prepared under the law and bylaws and approved by the shareholders' meeting.

What happens to improperly distributed dividends?

They are recoverable by the company, subject to article 225 for good-faith receipt under regularly approved financial statements.

This page is informational and does not constitute legal advice nor replace professional consultation. It quotes the official text of the rule; for its application to a specific case, consult a licensed professional.

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