ADM657

COMPANY SECRETARIAL PRACTICE II

DIVIDEND

PM Alicia Tan & Dr Norziana Lokman

Dividend Lecture outline

1. Introduction

2. Types of dividend: interim and final dividend

3. Authority to approve dividend

4. The rules that courts have made in relations to payment of dividend

5. Dividend procedures : private and non-listed company

6. Dividend procedures : public listed company

7. E-dividend and procedure

8. Unclaimed dividend

Dividend A dividend is a payment paid to a shareholder from the company

distributable net profits. It is normally in form of cash.

Types of dividend

Interim dividend Final dividend

1 Interim dividend is normally

declared in between of two

AGM.

Final dividend normally will be

declared after the company

financial year end and normally at

the AGM.

2 Authority to declare and

approve the interim dividend

is the board of directors - A

99

The authority to approve the final

dividend is the shareholders in

general meeting but must not

exceed the amount recommended

by the board of directors - A 98

Dividend

3 Declaration of an interim

dividend does not create a

debt.

A final dividend once validly

declared is a debt owed by

the company to the

shareholders.

4 The directors may revoke the

interim dividend at any time

before payment.

A final dividend once

declared cannot be revoked.

5 There is no distinction

between payable and paid.

Only on payment does the

shareholders acquire a right.

It must be paid immediately

to shareholders once declared

unless the resolution specify

that the dividend shall be

payable at a later date.

Dividend

Authority to approve the dividend:

1. The directors interim dividend

2. The shareholders final dividend

S365 of CA 1965 provide that dividend shall be paid out of the company

profits or pursuant to S60 (share premium). Profits shall be available at the

time of declaration. However there is no requirement that the profit must be

available at the time when it is to be paid.

Every director or manager of company who willfully pays or permits

payment of dividend out of what he knows is not profits:

a) shall be guilty of an offence against this Act;

b) shall also be liable to the creditors of the company for the amount of the

debts due by the company to them respectively to the extent by which

the dividends so paid have exceeded the profits and that amount may be

recovered by the creditors or liquidators suing on behalf of the creditors.

Dividend

Provision of CA 1965 and the companys AOA

1. S60 and S365

2. Table A, article 98 to Article 105.

The rules that the courts have made in relation to payment of dividend:

i. A dividend cannot be paid if it would result in the companys asset

being insufficient to pay its debts

ii. A dividend cannot be paid out of borrowed money unless the

company has divisible profit available

iii. A dividend can be paid out of the revenue profits of the year

without first making good the losses of previous year.

iv. A loss of circulating capital /asset during the year must be made

good before revenue profit can be ascertained.

Dividend

v. A dividend can be paid out of the revenue profits of the year

without first making good the trading losses of previous year

vi. A dividend can be paid even though the total assets of the company

are less than the original capital subscribed by the shareholders so

long as the company makes a profit on revenue account.

vii. A dividend may be declared out of profits in a reserve fund (i.e.

undistributed profits from previous year) which profits have not

been capitalised even where there is a revenue loss in the current

year.

viii. A dividend can be declared out of a realised capital profit on the

sale of fixed assets even when there is no revenue profit.

ix. A dividend can be declared out of unrealised profits (i.e. unrealised

profits from a revaluation of fixed assets)

Dividend Procedure for non listed companies (private and

public companies)

INTERIM DIVIDEND

i) Check AOA to ensure power to declare and pay interim dividend

ii) Convene BOD to decide on the declaration of interim dividend and to

pass the necessary resolution. Fix the entitlement date and date of

payment. (Prior to the meeting check the bank balance and ensure there

is enough distributable profits. Check that the company has sufficient tax

credit to frank the dividend, if applicable)

iii) After the entitlement date, update the ROM.

iv) Prepare a dividend list and dividend voucher and the cheques.

v) Check the dividend vouchers and the cheques are proper and correct.

vi) On the payment date, send/ post the dividend voucher and the cheques.

vii) Check the bank statement to find out if there is any unclaimed dividend

for the necessary action to be taken as required under the Unclaimed

Moneys Act 1965.

Dividend Procedure for non listed companies (private and

public companies)

FINAL DIVIDEND

(i) Check the articles to ensure the dividend rights of the various classes of shares.

(ii) After the accounts are closed, check to ensure that there is enough cash for the payment. Then convene a BOD meeting to decide the amount of dividend to be recommended for each class of shares.

(iii) Prepare for the AGM to declare the final dividend

(iv) At the AGM pass the ordinary resolution for declaration of final dividend.

(v) If the entitlement date and date of payment is not fixed at the AGM, the BOD shall convene a meeting to fix the dates.

(vi) The secretary prepares a dividend list based on the register of members and prepares dividend voucher/warrants based on the dividend list.

(vii) The secretary shall check that the dividend vouchers are correct and properly signed.

(viii) Despatch the dividend vouchers and the cheques to the shareholders.

(ix) Check the bank statement to find out if there is any unclaimed dividend for the necessary action to be taken as required under the Unclaimed Moneys Act 1965.

Dividend Procedure for Listed Companies

INTERIM DIVIDEND

i) Check AOA

ii) Convene BOD to decide on the declaration of interim dividend and to pass the necessary resolution. Prior to the meeting check the bank balance and ensure there is enough distributable profits

iii) Make announcement to the BM

iv) At least three and a half clear market days prior to entitlement date make a request for ROD to BMD

v) BMD will issue the ROD as at the lodgement date.

vi) After the entitlement date, prepare a dividend list and dividend voucher and the cheques.

vii) Check the dividend vouchers and the cheques are proper and correct.

viii) On the payment date, send/ post the dividend voucher and the cheques.

ix) Check the bank statement to find out if there is any unclaimed dividend for the necessary action to be taken as required under the Unclaimed Moneys Act 1965.

Dividend Procedure for Listed Companies

Final Dividends

i) Check AOA

ii) After FYE, check to ensure that there is enough cash for the

payment and S108 to frank the dividend.

iii) At the BOD meeting discuss and decide to recommend

payment of dividend and the rate

iv) Make announcement to BM.

v) Instruct secretary to call for the AGM.

vi) At the AGM pass the ordinary resolution for declaration of

dividend together with the entitlement date.

vii) Make announcement to BM.

viii) If the entitlement date is not fixed at the AGM, call for BOD

meeting to fixed the date.

Dividend

ix) Make a request to BMD for the ROD

x) Prepare a dividend list based on the ROD AND also prepare a

dividend list based on the ROM . Then prepare the dividend

voucher and cheques.

xii) The secretary shall check that dividend voucher and cheques are

proper and correct and then arrange the cheques for signature.

xiii) On the payment date, send out the dividend voucher and the

cheques to the entitled shareholders.

xiv) The secretary shall check the bank statement to find out if there

is any unclaimed dividend for the necessary action to be taken

as required under the Unclaimed Moneys Act 1965.

e-dividend

e-dividend is a service which allows an issuer to electronically

pay the shareholders cash dividend entitlements directly into

their bank account instead of making payment via bank

cheques.

One of the main objectives of implementing e-dividend is to

promote greater efficiency of the payment system which is

aligned to the national agenda of migrating to electronic

payment.

Registration for e-dividend

e-dividend procedure

eDividend_payment.pdf

Unclaimed dividend

The Unclaimed Moneys Act 1965 (UMA 1965) requires companies holding dividends which have remained unpaid for one year or more after they became payable to maintain a record of all these unclaimed dividends in a Register of Unclaimed Moneys (Form UMA-3) at its principal office or place of business in Malaysia (sec 8 and sec 10(1) UMA 1965).

Annually, within the month of March (before Form UMA-3 and the

unclaimed moneys reported in the register are lodged with the Registrar of

Unclaimed Moneys), submit a copy of the Register (Form UMA-3) with

information of unclaimed dividends held up to the last day of December of

the previous year, for publication in the Gazette. All unclaimed dividends

which have remained unpaid up to the last day of December of the previous

year shall be entered into the register (sec 10A(1) UMA 1965).

Annually, not later than the last day of March, lodge a copy of Form UMA-

3 with the Registrar of Unclaimed Moneys together with all the unclaimed

dividends reported in the register which remained unpaid and 2 copies of

Form UMA-4 (a covering letter) signed by a director or the secretary or the

share registrar (sec 10(2) UMA 1965).

Failure to comply with the above requirements will render the company and

any officer of the company who is in default liable on conviction to a fine of

not exceeding RM20,000 and in the case of continuing offence, a further

fine of not exceeding RM1,000 for each day during which the offence

continues (sec 10(4) and 10A(2) UMA 1965.

Owners of the unclaimed dividends may recover them from the company at

any time before those moneys are paid to the Consolidated Trust Account (sec

10(5) UMA 1965).

The unclaimed dividends lodged with the Registrar of Unclaimed Moneys

shall be credited to the Consolidated Trust Account. The unclaimed dividends

will be kept in the Consolidated Trust Account for a period of 15 years from

the date the unclaimed dividends were credited to it (unless they have been

paid out following claims by owners) and thereafter transferred to the

Consolidated Revenue Account (sec 11(2) UMA 1965).

After the unclaimed dividends have been credited to the Consolidated Trust

Account, the owners of the unclaimed dividends may claim back the

dividends from the Registrar of Unclaimed Moneys by submitting Form

UMA-7. After the unclaimed dividends have been transferred to the

Consolidated Revenue Account, payments will be made only on the directive

of the Minister of Finance (sec13(1) UMA 1965).

Copyright Alicia Tan and Norziana Lokman