PART 2 (vi) - NEW COMPANIES ACT

Part2 (vi)

(10) DIVIDEND

continuation fm PART 2 (vi)

EXISTING COMPANIES ACT

The Existing Companies Act says that dividends to be declared out of profit.

NEW COMPANIES ACT

• Dividends to be declared out of profits
  
  
• To be distributed only if company is solvent immediately after the distribution

• Company has the power to recover dividend improperly distributed from shareholder, in addition to the director or manager who permits the payment.

The above law is inserted to ensure that any distribution made by the company will not affect or jeopardize the financial standing of the company.

The power to recover dividend should not only be limited to it being improperly distributed but also in situation where it is deemed properly distributed but has become immediately insolvent due to other unforeseen circumstances not contingent to company’s balance sheet that can render company become insolvent. If recovering the dividend made under such circumstance can save the company from brink of insolvency, then the company should also be allowed to do so.

to be continued

Mohdarismail
Company Secretarial Practitioner