Company dividend distribution process
Ensure Sufficient Profits
- The company must have distributable net profits
- It must also have sufficient cash available to pay dividends
Solvency Test
- The company must ensure it can continue to meet its debt obligations after distributing dividends
- It should also remain financially stable for the next 12 months
Board Approval
- The Board of Directors must review the company's financial position and cash flow
- Dividends can only be declared after the board's approval
Distribute Dividends on Time
- Once the payment date is confirmed
- The company will issue Dividend Vouchers to shareholders
- And arrange payment through bank transfer or other approved methods
Review Bank Statements
- If dividends are paid by cheque
- The company should review its bank statements to identify any unclaimed dividends
- If dividends remain unclaimed for an extended period
- The company must take the necessary action in accordance with the Unclaimed Moneys Act 1965
Summary
- A company cannot distribute dividends merely because it is profitable
- It must pass the Solvency Test and obtain Board approval
- After payment, the company should also manage any unclaimed dividends in compliance with legal requirements