Procedures for the declaration, payment of a dividend in a Sdn. Bhd. (Private Limited Company) & Market price per share:
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 the Company.
3.How do the directors in declaring the dividend?
Answer:
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 statements;
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 claw-back 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.
7. How to calculate market price per share?
Answer: Divide the company’s net income (after tax and dividends) by the amount of outstanding shares in calculating the price of one share. Example, the company is making net income of RM 800,000.00 with shareholding of 50,000 which means RM 800,000.00 divide by 50,000 shares and one share will be worth RM 16.00
8. What is market price share means?
It is define as share price where the amount is acceptable by the investor to own the share and agreeable by the company.
9. I’m working so hard to grow my company but what is the market value for it?
You can define the value by multiplying the market price per share by the total of shares. For example. price per share is RM 16.00 X 50,000 shares and the company is value at RM 800,000.00
Remarks:
The article is written for knowledge basis and do consult your respective COSEC if you need further information.