Commercial and Corporation Law : Report
Added on 2020-02-24
8 Pages1864 Words112 Views
Running head: COMMERCIAL AND CORPORATION LAWShare and DividendsName of the student:Name of the university:Author note
1COMMERCIAL AND CORPORATION LAWAnswer to question no. 1The present case is based on the matter of dividends. Generally, dividends are somekind of additional payment made out of shares. It is important to understand the differencesbetween the shares and dividends (Jacob and Jacob 2013). A person can buy shares tobecome a member of the company or corporation. On the other hand, dividends are a certainprofits given to the shareholders of the company. In Australia, the directors are allowed to pay the dividends to the shareholders by theprovisions mentioned under the Corporation Act 2001 (Hooi, Albaity and Ibrahimy 2015).There are certain sections under the Act dealing with the matter. A company’s power overproviding the dividends is prescribed under section 254T of the said Act. Provisionsregarding the dividend right have been mentioned under section 254W of the Corporation Act2001. The rule stated under section 254T of the CA 2001 has been amended in the year2010 and there are certain changes are formed in the present section. Previously it allows thedirectors of a company to give the dividends from the gross profit of the company. before theamendment, the law engraved under section 254T was mandatory in nature and the companyhad to pay dividends to the shareholders from its profits (Iftikhar, Raja and Sehran 2017).However, after the amendment, a company is liable to pay the dividends based on certainconditions. A company has to assess the assets and it will pay the dividends only when itexceeds the liabilities. This is called as the balance sheet test. A company can also paydividend to its shareholders if the payment seems to be fair and reasonable to the othershareholders. The payment of dividend must not make to prejudice the creditors of thecompany (Garling, Smith, and Sanders 2013). In Re Centro Properties Ltd [2011] NSWSC1171, it was held that a company might pay the dividend under certain scheme of
2COMMERCIAL AND CORPORATION LAWarrangement. The section is at the discretionary of the company to pay the dividend out of theprofits of the company and the same principle was maintained in Wambo Coal Pty Ltd vSumiseki Materials Co Ltd [2014] NSWCA 326. However, recently the Court has expressedits consent over the payment of dividend from the profit of the company until the insolvencyof the company in Taylor v Babcock & Brown Ltd [2015] FCA 149. However, it has been mentioned that if the constitution of a company gives anyprovisions regarding the payment of dividend, the company has to maintain the same(Mitchell, Izan and Lim 2015). In the present case, it has been observed that the company(FWPL) maintains a constitution and it had been written that it is the discretionary power ofthe company to pay the dividends to the shareholders and specially the A Class shareholders.Based on the facts, the company had decided not to pay dividends to the A class shareholders.As it has been mentioned under the provision of the constitution that giving dividends are notmandatory, therefore, no action can be taken regarding the same against the company (Akyoland Foo 2013). This is also supported by the provision of section 254T of the Corporation Act 2001and it has been stated that a dividend can be paid based on the satisfaction of othershareholders. In this case, an allegation has been made against the Galli grandchildrenregarding their efficacy and contribution in the company. Therefore, the law to get thedividend also bars them and they cannot bring the allegation on the grounds of oppressionagainst the company.
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