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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
1

Interim dividend is normally


declared in between of two
AGM.

Final dividend

Final dividend normally will be


declared after the company
financial year end and normally at
the AGM.
Authority to declare and
The authority to approve the final
approve the interim dividend dividend is the shareholders in
is the board of directors - A
general meeting but must not
99
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.

The directors may revoke the A final dividend once


interim dividend at any time declared cannot be revoked.
before payment.

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)
x)

Make a request to BMD for the ROD


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 UMA3 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