Betfair paid millions in illegal dividends

Betfair have several gambling off-shoots, including Betfair Bingo.

The gambling firm, Betfair, has admitted that they had mistakenly paid dividends over the last three years, which may potentially result in a law suit.

The Chairman of the company, Gerald Corbett, faces awkward questions from Betfair’s investors after admitting that they did not realise that the company had paid out as much as £60m of dividends that are considered “illegal” during the past three years.

The revelation came in the bookmaker’s latest annual report.

In the report, it states that, its final dividend in 2011 and the interim and final dividends for 2012 and 2013 were mistakenly paid.

This is because by law, Betfair “did not have sufficient distributable reserves to make those distributions and so they should not have been paid by the company to its shareholders”.

Furthermore, the purchase of £6.5 million worth shares at the year-end in April 2012 also occurred when Betfair “did not have sufficient distributable reserves”, the company has said.

As a consequence of this, the company’s investors have been asked to approve a resolution at next month’s annual meeting for the company to go to court and reduce its share capital “in order to regularise the situation”.

The firm have denied any foul play, and insist that the errors occurred “as a result of certain changes to the technical guidance issued by the Institute of Chartered Accountants in England and Wales in October 2010”.

In the UK, under company law, dividends can only be paid out of “realised” profits to ensure creditors and the company itself are not drained of cash. This was legislated in 2010.

Betfair and its auditors, KPMG, failed to register or understand the change in UK law.

A Betfair spokesman said: “This is a minor technical point arising from 2010. As soon as the current management and board became aware of this, the company immediately took corrective steps. There is no impact on shareholders.”