The Distribution of Profits in Companies: Legal Requirements, Accounting Support, and Directors’ Liability

Abstract

This article analyzes profit distribution in companies from an interdisciplinary perspective, articulating the legal framework, accounting techniques, and the directors’ liability regime. Building on the tension between the partner’s individual right to dividends and the corporate interest in self-financing, the theory of profit and the risk-aversion theory are contrasted, demonstrating that distribution is not a discretionary act but a procedure conditioned by the existence of liquid and realized earnings. In this scenario, regular accounting and inflation adjustments operate as unavoidable prerequisites of legality. The article also addresses the triple orbit of directors’ liability towards the company, partners, and third parties —joint and unlimited liability triggered both by the distribution of fictitious profits and by the abusive retention of earnings through vague annual reports or majorities attempting to grant an indemnity bill. It concludes that the legal system requires an equilibrium that protects corporate assets without nullifying the rights of the partners.