6. Companies: Members Flashcards
What are the two requirements for a dividends to be declared?
- Must be paid from profits available for the purpose
- Must not render a company insolvent
What are profits available for the purpose?
Basically net profits
What is a preference share?
A share paid a dividend based on a fixed % ahead of ordinary shareholders, which rolls over and accumulates if unpaid, but usually lacking voting rights
Even if profits are available, who must still recommend a dividend?
The board
After the board recommend a dividend, how is it declared?
The recommendation is approved by the shareholders, who declare the dividend by ordinary resolution
Can the shareholders decline a dividend, or change the amount?
The shareholders can decline to approve the dividend, and they can lower its amount. They cannot increase the amount.
What is an unlawful dividend?
A dividend payable other than out of profits available for the purpose
In what circumstances will a shareholder be liable to repay an unlawful dividend?
If, when the distribution was made, they knew or had reasonable grounds to believe it was unlawful
Who is personally liable if a dividend is declared unlawfully?
The directors
What are preference shareholders’ voting rights typically limited to?
Decisions that affect their class rights
When may a shareholder bring a derivative claim, and against whom is it brought?
When the shareholder believes a director has or is about to breach a duty owed to the company and it appears the board are not acting to prevent this, the shareholder can bring a claim against the offending director
Only who can bring a derivative action?
- Shareholders
- Those to whom shares were transferred through operation of law, e.g. inheritance
Are shadow directors considered directors for the purpose of derivative claims?
Yes
Can a shareholder assert a claim which arose before they became a shareholder?
Yes
What must the court do if the shareholder does not show a prima facie case?
Dismiss the claim