Procedures for the declaration and payment of a dividend in a Sdn. Bhd. (Private Limited Company).
Among the hot questions & answers that we had covered:
1.What is dividend?
Answer: Dividend is a distribution to shareholders of the company (ordinary & preference) based on the number of shares however there are no
obligations for how much dividend should be paid. Therefore, it's good to draft out a dividend policy in the early stage of the business.
2.How many types are there?
Answer: i. Final dividend where it is calculated from the approved financial statements and the amount must be agreed by the shareholders during the
AGM and at the same time, the amount proposed by the shareholders cannot above the amount recommended by the directors.
ii. Interim dividend can be announced by directors at any time of the year and the amount can be calculated from the interim financial statements of
3.How do the directors in declaring the dividend?
Step 1: Directors or CoSec do check on the Constitution of the Company for any special provision on declaration on the dividend and ensuring the
company has profit available for distribution where upon giving out the dividend, the Company is able to pay its debts which is due in 12 months
through the passing of solvency test;
Step 2: To confirm if the Company wants to give interim (BOD meeting) or final dividend (AGM with shareholders) on announcing the dividend; for
example, Director in announcing dividend of RM 2.30 per share as dividend;
Step 3: Securing the money and ensure transmission documents (bank in slips, probates & updated of shareholders' correspond address)
are well kept;
Step 4: Once getting the information, CoSec will proceed to prepare the Distribution of Dividend (D.O.D) resolutions (RM 100.00) and filling up of
the solvency statement Section 113- Solvency Statement Template at the cost of RM 100.00 with the supporting from approved audited financial
Step 5: Signatory session for the directors (D.O.D resolutions and solvency statement);
Step 6: It's the CoSec's role to update SSM and to distribute the dividend voucher to all shareholders of the Company;
4.What are the obligations of the directors?
Answer: The 2 most critical that need full consideration:
i. The directors need to ensure that the Company is able to pay its debts when they become due in 12 months after the distribution of dividend is made;
ii. Prior distribution of dividend, the directors need to ensure that the Company still meets the solvency test.
5.Can the company do a clawback even if the dividend had been paid to shareholder?
Answer: All dividend paid to shareholder which more than the value of any distribution could be clawed back by the Company if the Company is
unable to meet its commitment to its debtors or legal obligations.
6.Will the directors get into "hot soup" if willfully authorized the payment of dividend?
Answer: If the directors or officer who willfully pays or authorized the payment of any improper or unlawful distribution where he will be carrying the
conviction to a 5 years imprisonment or RM 3 million fine or both.