Chapter 14: Dividends Flashcards
What is the difference between a final and interim dividend? What authority is required for each?
A final dividend is paid at the end of the financial year, based on final audited accounts, while an interim dividend is paid before the end of the financial year. A final dividend requires shareholder approval, but an interim one does not.
How are partly paid shareholders dealt with in respect of dividends?
Dividends are declared and paid according to the amounts paid up.
What are a company’s obligations in respect of issuing dividends to joint holders?
Dividend warrant issued in the name of and sent to the first person on a joint holding. The other holders must claim from the first.
What is a dividend warrant?
Essentially a cheque by which dividends are paid.
What is the liability of a director who has made an illegal dividend payment?
Director could be liable to the company for breach of duty. There are no criminal consequences.
What are the grounds of defence of a director who has made an illegal dividend payment?
If directors relied on accounts that were unsound, they will not be liable.
What is the “record date” of a dividend?
The date at which the register of members is deemed to be fully update for the purpose of paying dividends, which should be agreed in the resolution authorising the dividend.
What is meant by ex div and cum div?
Ex div - the seller takes the dividend
Cum div - the buyer takes the dividend
Who makes the decision to pay a final dividend?
The shareholders in general meeting
How can a company deal with the problem of unclaimed dividends?
If the company is listed and the company members fails to cash their warrant for three consecutive payments, the company can stop posting them.
How does BACS work in relation to dividend payments?
Dividend details are transmitted to BACS electronically by the company at least three days before the dividend payment date. BACS reduces fraud opportunity.
What are the benefits of a dividend mandate?
Minimise the risk of dividend warrants going astray by paying the dividend straight into the member’s bank account.
What is a scrip dividend?
A dividend paid in shares instead of cash.
What are the advantages of a scrip dividend to the member and to the company?
The member can build their shareholding without incurring stamp duty or brokerage expenses. The company retains money in the business, rather than paying out as cash.
What is an evergreen scrip dividend scheme?
A mandate from the member instructing that all future dividends be paid as scrip dividends until a stop notice is sent.
