Bonuses paid to shareholders may be deemed sham transactions covering dividends
A minority shareholder filed a claim against the company seeking to invalidate a corporate resolution approving the payment of bonuses to employees. In his opinion, the payments concealed dividends, as some of the employees were also shareholders.
Two lower courts dismissed the claim, citing that bonuses were also paid to non-shareholders.
The court sent the case back for a new trial to determine if the shareholders had used sham bonuses to pay hidden dividends, and to compare the amounts paid with the company’s actual profits.
