Chapter 9

Question 1

Basics of Dividend
Dividends

Answer 1

: Company uses profits to pay dividends to shareholders unless restricted by MOA or AOA.
Forms: Dividends can be in cash or shares of listed company held by the distributing company.

Question 2

Restrictions on Declaration of Dividend

Answer 2

Cannot declare dividend from:
Profits from sale of immovable property or items of capital nature, except:
If the business consists of buying and selling such items.
After adjusting profits against losses on sale of such properties or assets.
Unrealized gains from re-measurement of investment property credited to Income Statement.

Question 3

Book Closure

Answer 3

Book Closure: Closure of register of members (or debenture-holders) during which company will not handle requests to transfer shares (or debentures).
Purpose: Identify cut-off date for determining eligible members for notice of a meeting or dividend.
Notice: At least 7 days’ notice required.
Duration: Cannot exceed 30 days in each year (extendable by 15 days by SECP).
Listed Company Requirement: Book closure must start within 15 days of approval.
Notice for Closure: Must be in English and Urdu newspapers with wide circulation.

Question 4

Final Dividend

Answer 4

Proposed by: Directors.
Approved by: Members in AGM.
Members’ Rights: May reduce, accept, or reject the proposed dividend (cannot increase).
Payment Time: Within 10 working days of declaration.
Paying Agent: Company may appoint a paying agent (approved by SBP) for distribution of cash dividends.

Question 5

Interim Dividend

Answer 5

Proposed and Paid by: Directors before the end of the year.
Payment Time: Within 10 working days from:
Commencement of book closure for this purpose; or
Directors’ Meeting (if books were not closed for this purpose).
Note: Listed Company must ensure book closure starts within 15 days of approval.

Question 6

Payment of Dividends

Answer 6

Listed Companies: Cash dividends must be paid electronically to the bank account designated by shareholders.
Other Companies: Shareholders choose between:
Cross Cheque
Dividend Warrant
Electronic Mode
Penalty for Delay: Fine up to Rs. 5 Million and imprisonment up to 2 years.
Ineligibility: Director or Chief Executive ineligible for 5 years if penalized.

Question 7

Circumstances for Withholding Dividend

Answer 7

Withheld after SECP Approval (within 45 days of declaration) if:
Operation of any law prevents payment.
Shareholder’s instructions regarding payment cannot be followed.
Dispute regarding the right to receive dividend.
Payment of dividend withheld against sum recoverable from shareholder.
Non-payment or non-posting of warrant not due to company’s default.
Member has not provided complete information or documents as specified by SECP.