Corporations Act 2001

CHAPTER 1 - INTRODUCTORY

PART 1.5 - SMALL BUSINESS GUIDE

9 Returns to shareholders

Shareholders can take money out of the company in a number of ways, but only if the company complies with its constitution (if any), the Corporations Act and all other relevant laws. If a company pays out money in a way that results in the company being unable to pay its debts as they fall due, its directors may be liable:

• to pay compensation; and

• for criminal and civil penalties.

[ sections 588G , 1317E , 1317G , 1317H , 1317P ]

9.1 Dividends.

Dividends are payments to shareholders. They can only be paid if:

• the company ' s assets are sufficiently in excess of its liabilities immediately before the dividend is declared; and

• the payment of the dividend is fair and reasonable to the company ' s shareholders as a whole and does not materially prejudice the company ' s ability to pay its creditors.

It is a replaceable rule (see 1.6) that the directors decide whether the company should pay a dividend.

[ sections 254T , 254U ]

9.2 Buy-back of shares.

A company can buy back shares from shareholders.

[ sections 257A - 257J ]

[ CCH Note: there is no Clause 9.3]

9.4 Distribution of surplus assets on winding up.

If a company is wound up and there are any assets left over after all the company's debts have been paid, the surplus is distributed to shareholders in accordance with the rights attaching to their shares.

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