Dividends and waivers

I have been approached to act on behalf of a very small group: a holding company and three subsidiaries. Some shareholders want to have their cake and eat it by acting as though they are still small companies and taking low salaries and dividends.

One of the subsidiaries is owned 60% by the holding company and 40% by two individuals who have 20% each. The holding company has declared an indefinite dividend waiver while the individual shareholders take the maximum dividends possible from the company leaving only minor reserves.

Some of the individual shareholders of the parent company have also waived their rights to dividends thereby allowing a minority shareholder to receive income in the form of dividends. There would be insufficient reserves if all of the shareholders received dividends at the same level. I would appreciate readers’ views on any adverse tax implications here.

I have...