Chapter 9 Issue of Shares and Distribution of Profits

Question 1

What are the types of dividends?

Answer 1

1. Interim Dividend:
   a. Paid during the year.
   b. Approved/declared by directors.
2. Final Dividend:
   a. Paid after the year.
   b. Recommended by directors.
   c. Approved/declared by members at the AGM.

Question 2

From which sources is dividend not allowed to be paid?

Answer 2

1. Not from profits of immovable property or assets of capital nature, unless:
   a. It is part of ordinary business, AND
   b. There is a set-off of related expenses.
2. Not from unrealized gains on investment property.

Question 3

Can members increase the dividend amount?

Answer 3

No, but they can decrease it.

Question 4

What are the allowed methods for dividend payment?

Answer 4

1. For Listed Companies:
   a. In cash (electronically).
   b. In kind (in shares).
2. For Unlisted Companies:
   a. Only in cash (via cheque, warrant, or electronically).

Question 5

To whom must dividends be paid?

Answer 5

Registered shareholders or to their order.

Question 6

What is the deadline for payment of dividends after declaration?

Answer 6

Within 10 working days after declaration.

Question 7

When is the final dividend declared?

Answer 7

On the date of the AGM.

Question 8

When is the interim dividend declared?

Answer 8

At the start of book closure or in a board meeting.

Question 9

What are the penalties for the Chief Executive in case of delayed dividend payment?

Answer 9

1. Fine up to 5 million rupees.
2. Imprisonment up to 2 years.
3. Ineligibility to become a director for up to 5 years.

Question 10

When can the Chief Executive lawfully withhold dividend payments?

Answer 10

1. In case of a dispute.
2. If lawfully set off against company liabilities.
3. If shareholder instructions cannot be followed.
4. If required by operation of law.
5. If the company is not at fault.
6. If complete shareholder information is not provided to the company.

Question 11

What is book closure?

Answer 11

A period during which a company does not transfer shares or debentures.

Question 12

Can a company close its books for any period?

Answer 12

1. Yes, but the maximum period is 30 days in a year.
2. This period can be extended for an additional 15 days (approval from commission)

Question 13

What are the notice requirements for book closure?

Answer 13

1. At least 7 days’ prior notice to members.
2. Listed companies must also publish a notice in one English and one Urdu Daily newspaper.

Question 14

From which sources can dividends be legally distributed?

Answer 14

1. From profits of the company (other than capital profits).
2. From retained earnings (undistributed profits).
3. From free reserves available for distribution.

Question 15

What are the prohibited sources for dividend payment?

Answer 15

From capital profits unless:
a. Realized in cash. AND
b. Lawfully distributable.

Question 16

Can dividends be paid from reserves?

Answer 16

Yes, but only under specific conditions.

Question 17

What is the penalty of delayed payment of dividend?

Answer 17

1. Chief executive may be fined for an
   amount up to Rs. 5 Million
2. Also imprisonment for a term which may
   extend to 2 years.
3. Ineligible to become a director or Chief
   Executive of any company for next 5 years.