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- A company must not pay dividend otherwise than out of profit.
- Directors recommend dividend in board meeting.
- Dividend is declared by members in general meeting by ordinary resolution.
- Directors may from time to time pay to members such interim dividend as may be justified by the profits of the company.
- Once dividend is declared it becomes a debt due from company to the member.
- Members cannot in general meeting declare dividend in excess of the rate recommended by directors.
- A company must not pay dividend if it renders it incapable of paying debts as and when they fall due.
- A company is not legally obliged to make provision for depreciation before paying dividend.
- Losses of circulating assets of the current accounting period must be made good before dividend is declared.
- Losses of circulating assets of the previous accounting periods need not be made good before dividend is declared.
- Profits realized on the sale of a fixed asset may be treated as profit available for dividend.