When is it wrong to pay dividends?

Article Abstract:

The Companies Acts of 1980, 1981, and 1985 provide strict statutory rules for the payment of dividends. The 1985 Act has a wide range and applies to any company distributions to its members. According to the Act, profits available for distribution are accumulated, realized profits not previously distributed or capitalized, less accumulated, realized losses not previously written off in a reduction or reorganization of capital. Directors need to assure that distributions are not made until previous years' losses have been made good and that included profits have actually been received by the company. The 1981 Act requires that companies will need to make allowances for the depreciation of fixed assets before paying dividends. Certain types of companies including investment and insurance companies are covered by different rules.

Accounting and auditing, Accounting, Dividends

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Bringing relief to oppressed minorities

Article Abstract:

Corporation law in Great Britain has undergone substantial changes since 1980 in the area of minority shareholders' rights. Minority holders can now bring a petition on the basis of a single act or omission, personal representatives of minority shareholders can now sue companies, and minority remedies can now be applied to cases of unfair prejudice, which is easier to show than oppression. The minority remedy has been applied in recent years to cases involving the exclusion of minority holders from management, non-payment of dividends, and the subdivision of one class of shares and not of others. Some commentators feel that the law now gives too much power to minority interests.

Minority stockholders

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Room for manoeuvre

Article Abstract:

A consultative document on ultra vires, written by Dr. Dan Prentice for the UK Department of Trade and Industry, questions the doctrine's validity and concludes that it fails to protect either creditors or shareholders. According to the doctrine of ultra vires, companies' activities are limited to those specified or implied by its objects; businesses avoid ultra vires restrictions, however, through such means as drafting their objects in general terms. Legislative changes, together with changes in the approach to distinguishing objects from powers, have also served to erode the ultra vires rule.

Analysis, Ultra vires

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