Corporation Law

Running head: CORPORATION LAW
CORPORATION LAW
Name of the Student
Name of the University
Author Note

CORPORATION LAW1
Issue
Whether the proposed dividend by the Midnight Soil Pty Ltd (The Soils) is payable.
Rule
According to S. 254SA of the Corporations Act 2001, a company needs not to pay its
members dividend if it is limited by guarantee.
According to S. 254W (2) of the Corporations Act 2001, as per the terms the shares
which are on issue in a proprietary company, may be payable upon the discretion of the directors.
According to S. 254T of the Corporations Act, 2001, a company needs to pay the
dividend to its shareholders only if the assets of the company exceeds the liability of the
company before the declaration of the dividend and if the excess is not insufficient in making the
payment; and if the payment of dividend is reasonable and fair as a whole to the shareholders of
the company; and if the dividend’s payment does not prejudice materially the payment ability of
the said company to its creditors.
In Wambo Coal Pty Ltd v Sumiseki Materials Co Ltd [2014] NSWCA 326 it was laid
down that dividend can only be paid out the arising profit which is a general law.
A company can cancel a declared dividend before the payment of the same if the
company contains such provision in its article of association.
In Grant-Taylor v Babcock & Brown Ltd (In Liquidation) [2015] FCA 149 it was held
by the Federal Court that as long as the payment of dividend is not affecting the solvency of the
company, paying the dividend is lawful.