Corporations Act 2001

CHAPTER 2H - SHARES  

PART 2H.5 - DIVIDENDS  

SECTION 254SA  

254SA   COMPANIES LIMITED BY GUARANTEE NOT TO PAY DIVIDENDS  

A company limited by guarantee must not pay a dividend to its members.

SECTION 254T   CIRCUMSTANCES IN WHICH A DIVIDEND MAY BE PAID  

254T(1)    
A company must not pay a dividend unless:

(a)    the company ' s assets exceed its liabilities immediately before the dividend is declared and the excess is sufficient for the payment of the dividend; and

(b)    the payment of the dividend is fair and reasonable to the company ' s shareholders as a whole; and

(c)    the payment of the dividend does not materially prejudice the company ' s ability to pay its creditors.

Note 1: As an example, the payment of a dividend would materially prejudice the company ' s ability to pay its creditors if the company would become insolvent as a result of the payment.

Note 2: For a director ' s duty to prevent insolvent trading on payment of dividends, see section 588G .

Note 3: Section 1230M applies to a CCIV instead of this section.

254T(2)    
Assets and liabilities are to be calculated for the purposes of this section in accordance with accounting standards in force at the relevant time (even if the standard does not otherwise apply to the financial year of some or all of the companies concerned).

SECTION 254U   OTHER PROVISIONS ABOUT PAYING DIVIDENDS (REPLACEABLE RULE - SEE SECTION 135)  

254U(1)   [ Directors may fix certain matters]  

The directors may determine that a dividend is payable and fix:

(a) the amount; and

(b) the time for payment; and

(c) the method of payment.

The methods of payment may include the payment of cash, the issue of shares, the grant of options and the transfer of assets.

254U(2)   [ Interest]  

Interest is not payable on a dividend.

SECTION 254V   WHEN DOES THE COMPANY INCUR A DEBT?  

254V(1)   [ Fixing amount or time]  

A company does not incur a debt merely by fixing the amount or time for payment of a dividend. The debt arises only when the time fixed for payment arrives and the decision to pay the dividend may be revoked at any time before then.

254V(2)   [ Declaration of dividend]  

However, if the company has a constitution and it provides for the declaration of dividends, the company incurs a debt when the dividend is declared.

SECTION 254W   DIVIDEND RIGHTS  
Shares in public companies

254W(1)    
Each share in a class of shares in a public company has the same dividend rights unless:

(a)    the company has a constitution and it provides for the shares to have different dividend rights; or

(b)    different dividend rights are provided for by special resolution of the company.

Note: Section 1230N is about dividend rights in a CCIV.

Shares in proprietary companies (replaceable rule - see section 135)

254W(2)    
Subject to the terms on which shares in a proprietary company are on issue, the directors may pay dividends as they see fit.

No liability companies

254W(3)    
A person is not entitled to a dividend on a share in a no liability company if a call:

(a)    has been made on the share; and

(b)    is due and unpaid.

254W(4)    
Dividends are payable to the shareholders in a no liability company in proportion to the number of shares held by them, irrespective of the amount paid up, or credited as paid up, on the shares. This subsection has effect subject to any provisions in the company ' s constitution relating to shares that are not ordinary shares.

SECTION 254WA   APPLICATION OF THIS PART TO MCI MUTUAL ENTITIES  

254WA(1)    
Section 254SA does not prevent an MCI mutual entity that is a company limited by guarantee paying a dividend in respect of an MCI.

254WA(2)    
Without limiting section 254T , an MCI mutual entity must not pay a dividend unless the payment of the dividend is fair and reasonable to the entity ' s members as a whole.