Accounting Essay

1104 WordsSep 4, 20125 Pages
Content Key facts………………………………………………………………….2 Parties…………………………………………………………………….2 Issues….………………………………………………………………….2 Rules…………………...…………………………………………………2 The common law rules………………...…………………………..3 Corporations Act 2001……………………………………...……..3 Application………………………………..……………………………...4 Conclusion………………………………………………………………..4 Reference List…………………………………………………………….5 Textbook………………………………………………………...…5 Table of Legislation………………………………………………..5 Key Facts: Tazie Fazie Homes Ltd is considering restructuring its operations, and perhaps diversifying into industrial cleaning. This company has a wholly owned subsidiary Clean Bean Pty Ltd which has made a profit of $300,000 this financial year. The company will make a profit of $750,000 this year. The 60 shareholders have not been paid a dividend last two years. The managing director contends that the profits this year are required to build up working capital. Parties: Tazie Fazie Homes Ltd The managing director Brent Issues: * Is there any legal action the shareholders can do to force the director to pay a dividend? * If the director does decide to pay all profits out as dividend, could the shareholders do anything to reduce or prevent the payment of these dividends? * Is the director required to pay a dividend and if so what amount should be paid and why? Rules: Generally, there is no bylaw that requires the directors to pay a dividend, subject to what the company’s constitution sets. The company’s constitution may have quite clear rules on dividend payment; the directors must follow this, as Section 140 provides that the constitution is a statutory contract. There are some cases that give guidance: 1. Burland v Earle [1902] – shareholders do not have the power to demand a dividend from directors even if the company is profitable. 2. Sanford v Sanford Courier Service Pty Ltd

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