Outline the rules governing payment of dividends.

• A company must not pay dividend otherwise than out of profit.
• Directors recommend dividend in board meeting.
• Dividend is declared members in general meeting ordinary resolution.
• Directors may from time to time pay to members such interim dividend as may be justified 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 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.

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