In New York, Clauses Relating to Dividends and Distributions play a significant role in corporate law and governance. These clauses outline the rights and obligations of shareholders and corporations when it comes to the distribution of profits and dividends. Let's delve into the details of these clauses and explore the various types within the New York jurisdiction. 1. Dividend Distribution Clause: The Dividend Distribution Clause, commonly found in shareholder agreements and corporate bylaws, specifies the conditions under which dividends will be distributed to shareholders. It outlines the procedure for declaring and paying dividends, the frequency of distributions, and the calculation method. This clause ensures transparency and fairness in the distribution process, protecting the interests of both shareholders and the corporation. 2. Cumulative Dividend Clause: The Cumulative Dividend Clause guarantees that if a corporation fails to pay dividends in one period, the amount owed accumulates and must be paid in future periods before dividends can be distributed to other classes of shares. This clause provides protection to cumulative dividend shareholders, preventing the company from permanently bypassing their entitlements. 3. Preferred Dividend Clause: The Preferred Dividend Clause is typically associated with preferred stock, which gives shareholders preferential treatment over common stockholders in terms of dividends. This clause defines the priority and fixed rate at which dividends must be paid to preferred shareholders before any payments are made to common shareholders. It safeguards the rights of preferred stockholders and ensures them a predictable income stream. 4. Dividend Reinvestment Clause: The Dividend Reinvestment Clause allows shareholders to reinvest their dividends automatically into additional shares of stock instead of receiving cash payments. This clause provides an opportunity for shareholders to increase their equity stake without incurring additional costs or brokerage fees. 5. Dividend Suspension Clause: The Dividend Suspension Clause permits the corporation to suspend dividend payments temporarily or indefinitely under certain circumstances such as financial distress, loss-making periods, or the need for significant capital investments. This clause gives the company flexibility during challenging times, allowing it to preserve cash flow and invest in strategic initiatives. Overall, New York's Clauses Relating to Dividends and Distributions serve as crucial guidelines for corporations and shareholders to navigate dividend-related matters. These clauses ensure a fair and transparent distribution process, protect the rights of different types of shareholders, and provide flexibility in challenging financial situations. Understanding and incorporating these clauses within corporate documents is essential for maintaining effective governance and fostering shareholder confidence in New York corporations.
New York Clauses Relating to Dividends, Distributions
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A Final Dividend is an amount declared by the board of directors after the company issues its financial statements. It is declared in the Annual General Meeting, once the BOD is sure of the company's financial health, cash flow, liquidity and other factors.
The company makes a provision for the dividend payable. It means it has made short-term fund arrangements to manage the actual dividend payment post-approval. This article explores key information about the proposed dividend to help you understand its relevance for a company and its shareholders.
Key Takeaways For companies, dividends are a liability because they reduce the company's assets by the total amount of dividend payments. The company deducts the value of the dividend payments from its retained earnings and transfers the amount to a temporary sub-account called dividends payable.
Approval by the Shareholders The dividend recommended by the Board of Directors is declared by a resolution passed at the Annual General Meeting by the shareholders. The declaration of dividend should form part of an ordinary business item to be transacted in the notice of the Annual General Meeting.
A shareholder can obtain an injunction compelling payment of a reasonable dividend where the corporation is withholding dividends in bad faith for a fraudulent or abusive purpose. Once a dividend has been declared by the corporation, it is a debt of the corporation, and shareholders may bring suit to compel payment.
Section 123 (1)(a) of the Companies Act, 2013 provides that no dividend shall be declared or paid by a company for any financial year except out of the profits of the company for that year or out of the profits of the company for any previous financial years arrived at after providing for depreciation in ance ...