Declaration and payment, Business Law and Ethics

Declaration and Payment:

There is no provision in the Act dealing with payment of dividends. It is therefore governed by the provisions of the company's articles, failing which the provisions of Table A which are as follows:

i) Article 114

The company in general meeting may declare dividends, whether no dividend shall exceed the amount recommended by the directors. The use of the word "may" means that the company in general meeting is not bound to declare dividends even if the directors have recommend a particular amount. On the other hand, no dividend can be declared if the directors have recommended none.

ii) Article 115

The directors may from time to time pay to the members such interim dividends as appear to the directors to be justified by the profits of the company. Moreover a resolution passed at a general meeting directing the directors to pay interim dividends is invalid. Scott v Scott (56)

iii) Article 116

No dividend shall be paid otherwise than out of profits. In Verner v General & Commercial Investment Trust Lindley, J expressed the view that, because the word "profits" is somewhat ambiguous, this provision should be understood to mean that "dividends should not be paid out of capital". Furthermore provided the dividend is not paid out of capital, it does not matter from whatever fund it is paid, whether called profits or otherwise.

iv) Article 118

Subject to the rights of persons, whether any entitled to shares by special rights as to dividend, all such dividends shall be declared  plus paid according to the amounts paid or credited as paid on the shares in respect whereof the dividend is paid. This provision modifies the common law rule that dividends are paid on the nominal value of the shares: Oak Bank Co. v Cram.

v)  Article 120

Any general meeting declaring a dividend may direct payment of such dividend wholly or partly by the distribution of specific assets and in particular of paid-up shares, debentures or any one or more of such ways. This article gives the company power to pay dividend in kind. In the absence of such a provision, dividend is payable in cash and the company may be restrained from paying it in any other form: Wood v Odessa Waterworks Co. (57)

Posted Date: 1/12/2013 4:34:33 AM | Location : United States

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