Distributable Profit and Cash Dividend Ceiling Calculator

Review distributable profit and the cash dividend ceiling together

A positive retained earnings balance does not mean that a company can distribute the entire amount to shareholders.
Before resolving a dividend, the company must deduct the applicable capital, reserves and unrealized gains from its balance-sheet net assets, including the new reserve associated with the proposed cash dividend.
Even when accounting resources are sufficient, cash may be tied up in receivables or property and unavailable on the payment date.

This calculator compares a company-wide gross cash dividend proposal with the entered statutory resources and available cash.
It separates the deduction schedule, new earned surplus reserve, reduction of the dividend proposal and cash funding shortfall so that you can prepare a useful discussion with the accountant.
It does not calculate individual shareholder allocations, dividend income tax or gift tax.

Documents and input definitions

Use finalized company-only accounts before dividend appropriation, with every financial input taken from the same balance-sheet date.
Do not combine consolidated equity, next-year forecast revenue and the distributing company’s reserve schedule.
Verify an unknown required amount before entering it; a guessed zero can overstate the ceiling.

Commercial Act Articles 458 and 462; Decree Article 19

A dividend generally requires a shareholders’ meeting resolution.
Article 462 paragraph 2 also provides for a board resolution when the financial statements are approved by the board under the specified Article 449-2 conditions.
Paragraph 3 permits company creditors to seek return of a dividend that breaches the limit.
A positive estimate does not establish that these procedural and substantive conditions have been met.

Formula and whole-won calculation policy

First calculate resources before the new reserve and the amount still needed to reach the reserve threshold.
Then find the largest dividend whose sum with its new reserve fits those resources.
Resources in this formula are an accounting constraint, not a bank account balance.

The model rounds the required reserve up and the maximum dividend down to whole KRW.
If stated capital is an odd number of won, it rounds the half-capital threshold up as well.
This is a conservative tool policy, not a claim that the Act prescribes a particular whole-won rounding method.
A company with higher reserve requirements under its articles or contracts falls outside this minimum-reserve model.

If G is zero, there is no new statutory reserve under this assumption and positive B is the arithmetic ceiling.
If B is negative, the ceiling is zero and the existing resource deficit is displayed separately.
Holding more cash does not turn a negative statutory resource amount into positive distributable profit.

Step-by-step use

1. Confirm the dividend scope. Check that this is an ordinary stock company’s regular year-end cash dividend and enter the statement date.
   Select the out-of-scope option for interim dividends or special company rules; the calculator withholds the ceiling.
   
2. Enter finalized financial figures. Copy net assets, capital, each existing statutory reserve and the verified unrealized-gain adjustment.
   The prefilled amounts are a hypothetical example and must be replaced for a real review.
   
3. Compare the proposal and cash. Enter the gross dividend for all shareholders and the cash set aside for that payment.
   For expected borrowing or new capital, verify funding certainty and timing before including it in the cash plan.
   
4. Confirm classifications and restrictions. Verify reserve accounts, the unrealized-gain deduction and the absence of additional reserve obligations, special rules or prior-distribution adjustments.
   Unchecking confirmation withholds numeric results when records are incomplete.
   
5. Save and hand over the review. Compare the planned dividend, statutory ceiling and cash-constrained amount, then save a TXT file or print the result.
   Select the optional handover confirmation only after actually providing it to the accountant.
   

Worked example: the proposal exceeds both resources and cash

Assume net assets of KRW 270,000,000, stated capital of KRW 100,000,000, capital reserve of KRW 20,000,000, earned surplus reserve of KRW 30,000,000 and deductible unrealized gains of KRW 10,000,000.
B is KRW 110,000,000 and G is KRW 20,000,000.
A KRW 100,000,000 dividend and KRW 10,000,000 new reserve exactly use B, giving the statutory ceiling estimate.

With available cash of KRW 80,000,000, reducing the KRW 120,000,000 proposal to the statutory ceiling requires a KRW 20,000,000 reduction.
Keeping the original proposal and its new reserve would require another KRW 22,000,000 of statutory resources.
Cash needed for the original proposal exceeds available cash by KRW 40,000,000.
These are separate comparisons and must not be added into one total shortfall; the cash-constrained review amount is KRW 80,000,000.

Why the reserve threshold changes the ceiling

Capital reserve reduces B but does not fill the earned surplus reserve threshold.
An earned surplus reserve already at or above half of capital removes the new-reserve requirement in this model; it does not remove the deduction for the existing reserve.
The ceiling estimate keeps these two roles separate.

Practical decision scenarios

• Preparing a family-company proposal: Enter the desired dividend, check whether it needs reduction, and attach reserve and adjustment schedules.
  A shareholder’s household spending target does not define the company’s distributable resources.
  
• Planning payment liquidity: A proposal below the ceiling may still lack cash.
  Deduct essential operating and tax commitments before entering the cash available for the payment date.
  
• Discussing accounts with an adviser: Compare the reserve threshold branches or rerun the calculation after correcting the unrealized-gain schedule.
  Send the underlying ledger and the review together so the adviser can assess the inputs.
  

Once shareholder allocation is planned, review dividend income tax and gift tax on excess dividends separately.
Compliance with a company-level distribution limit does not resolve shareholder-level tax treatment.
If that review changes the dividend amount or timing, revisit this company-level comparison as well.

Scope limits and incomplete records

Invalid required amounts or dates withhold numeric results.
If only cash is unknown, the statutory estimate remains available while cash-constrained amounts and cash shortfalls stay unknown.
All amounts are whole KRW and the input limit is KRW 1 trillion per field, a tool precision and scope limit rather than a statutory dividend limit.

A reserve appropriation is a transfer within equity, so it is not treated as another cash payment.
If a contract requires a separate deposit or restricts cash use, reflect that when calculating available cash.
The tool is not an audit, verification of financial statements, payment authorization or legal opinion.

Frequently asked questions