Home >> Dictionary Of Banking >> Companies to Guarantee Guaranty >> Dividend


company, paid, dividends, shares, share, profits, time and directors

DIVIDEND. The interest which is paid upon an investment, such as stock in the public funds, and shares or stock in com panies. The interest may be payable at a fixed rate, or the rate may be, as in the case of a company, dependent upon the profits that are made, or it may be cumulative.

The clauses in Table A of the Companies (Consolidation) Act, 1908 (see Section 11, under ARTICLES OF ASSOCIATION) with respect to dividends are as follow : " 95. The company in general meeting may declare dividends, but no dividend shall exceed the amount recommended by the directors.

" 96. The directors may from time to time pay to the members such interim dividends as appear to the directors to be justified by the profits of the company.

" 97. No dividend shall be paid otherwise than out of profits.

" 98. Subject to the rights of persons, if any, entitled to shares with special rights as to dividends, all dividends shall be declared and paid according to the amounts paid on the shares, but if and so long as nothing is paid up on any of the shares in the company dividends may be declared and paid according to the amounts of the shares. No amount paid on a share in advance of calls shall, while carrying interest, be treated for the purposes of this article as paid on the share.

" 99. The directors may, before recom mending any dividend, set aside out of the profits of the company such sums as they think proper as a reserve or reserves which shall, at the discretion of the directors, be applicable for meeting contingencies, or for equalising dividends, or for any other pur pose to which the profits of the company may be properly applied, and pending such application may, at the like discretion, ether be employed in the business of the or be invested in such investments (other than shares of the company) as the directors may from time to time think fit.

" 100. If several p_•rsons arc registered as joint holders of any share any one of them may give effectual receipts for any dividend payable on the share.

" 101. Notice of any dividend that may have been declared shall be given in manner hereinafter mentioned to the persons entitled to share therein.

" 102. No dividend shall bear interest against the company." Dividends must be paid only out of profits, but a company has power, in certain special cases, to pay interest out of capital. Section 91 of the Companies (Consolidation) Act, 190S, provides as follows : " Where any shares of a company are Issued for the purpose of raising money to defray the expenses of the construction of any works or buildings or the provision of any plant which cannot be made profitable for a lengthened period, the company may pay interest on so much of that share capital as is for the time being paid up for the period and subject to the conditions and restrictions in this Section mentioned, and may charge the same to capital as part of the cost of construction of the work or building, or the provision of plant : Provided that " (I) No such payment shall be made un less the same is authorised by the articles or by special resolution : " (2) No such payment, whether author ised by the articles or by special resolution, shall be made without the previous sanction of the Board of Trade : • • .

" (3) Before sanctioning any such pay ment the Board of Trade may, at the expense of the company, ap point a person to inquire and re port to them as to the circum stances of the case, and may, before making the appointment, require the company to give security for the payment of the costs of the inquiry : " (4) The payment shall be made only for such period as may be determined by the Board of Trade ; and such period shall in no case extend beyond the close of the half-year next after the half-year during which the works or buildings have been actually completed or the plant provided : " (5) The rate of interest shall in no case exceed four per cent. per annum or such lower rate as may for the time being be prescribed by Order in Council : " (6) The payment of the interest shall not operate as a reduction of the amount paid up on the shares in respect of which it is paid : • (7) The accounts of the company shall show the share capital on which, and the rate at which, interest has been paid out of capital during the period to which the accounts relate : " (8) Nothing in this Section shall affect any company to which the Indian Railways Act, 1894, as amended by any subsequent enactment, applies.'' Interest upon debentures is commonly regarded as a dividend, but it is really interest upon a loan, and must be paid by the company quite irrespective of any question of profits.

A dividend is also the name given to the amount winch is paid to creditors from a bankrupt's estate. (See COMP.-1N Ins, Divt DENDS—IN BANKRUPTCY.)