Accountancy Forum
  • Accountancy
  • Forum Home
  • Members
  • Team
  • Help
  • Search
  • Register
  • Login
  • Home
  • Members
  • Help
  • Search
Accountancy Forum The Profession Accounting and Audit v
« Previous 1 … 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 … 28 Next »
DIVIDEND DECLARATION AS PER CO.1984

 
  • 0 Vote(s) - 0 Average
DIVIDEND DECLARATION AS PER CO.1984
kamranACA
Offline

Posting Freak

Posts: 2,351
Threads: 42
Joined: Feb 2007
Reputation: 0
#2
07-24-2009, 10:01 AM
Bilal,

It's really a nice question. Thanks God we are seeing some professional queries, otherwise the forum was becoming a place of only the academic questions.

First of all I remind you that term PROFIT(s) has no where been defined in CO84. For guidance purpose judiciary, regulators as well as advisors always refer to the definition given in repealed Companies Act 1913. Probably in its section 87C.

Having said that I come to your queries.

Reply to query 1

The company can pay dividend to the extent of all the accumulated profits keeping the capital unaffected. The current year's loss does not make it illegal. However, in certain cases entities have to keep in view the minimum capital requirements stipulated by specific legislature where the term minimum capital means equity instead of paid up capital. Examples are banks, NBFCs, Modarabas, Insurance companies, stock exchange brokers etc. They cannot pay dividend even out of profits if it results in non compliance of minimum capital (capital adequacy) requirement.

Reply to query 2

In my confirmed view company can pay dividend out of current year's profit regardless of accumulated losses which might have eroded the paid up capital.

The reason is, the capital has not been eroded by current year's results. Rather it was a past event which will be partially repaired even if the company pays the dividend somewhat lesser than the profit earned during the year.
I know some companies which had paid dividend in the situation described in your second query. I also know some companies which did so on the instructions of SECP in similar circumstances.

This matter has not been discussed in law specifically but there are legally enforceable precedents available for doing so.

The known logic is what I have explained.

Hope your question has been replied.


Regards,



KAMRAN.
« Next Oldest | Next Newest »

Users browsing this thread: 1 Guest(s)



Messages In This Thread
DIVIDEND DECLARATION AS PER CO.1984 - by bilal azhar - 07-23-2009, 06:54 PM
[No subject] - by kamranACA - 07-24-2009, 10:01 AM
[No subject] - by faisal_desperado - 07-24-2009, 06:00 PM
[No subject] - by kamranACA - 07-24-2009, 07:33 PM
[No subject] - by bilal azhar - 07-25-2009, 12:38 AM
[No subject] - by kamranACA - 07-25-2009, 03:07 AM
[No subject] - by farazkpmg - 08-07-2009, 10:52 PM
[No subject] - by kamranACA - 08-08-2009, 01:57 AM

  • View a Printable Version
  • Subscribe to this thread
Forum Jump:

© 2002-2024 Accountancy. Copyrights of all content on this web site are owned by Accountancy except where indicated in source or copyright statements. Accountancy must be contacted for permission to copy or redistribute any material published on this website.

Linear Mode
Threaded Mode