Unit 5: Divisible Profits and Dividend
5.1 Meaning and Definition of Dividend
The dividend = the company’s distributable profit distributed to shareholders — the return on equity, declared by the company’s organs within the capital-maintenance law. The key distinction: dividends come only from profits — never from capital (the capital-maintenance doctrine’s first commandment: return of capital is a winding-up matter; return on capital is a profit matter). “Divisible profits” = the pool left after the law’s and the accounts’ deductions (the accrued losses’ absorption, the reserves’ proper creation, the statutory provisions) — the free reserves’ face.
5.2 Declaration of Dividend and Its Procedures
The procedure (the organ map): (1) the board’s recommendation — the directors assess the profits, propose the rate (final dividend) and the record dates; (2) the general meeting’s declaration — the dividend is declared at the AGM (or an extraordinary general meeting) as the shareholders’ act; (3) the statutory order of events — the audited accounts’ foundation, the losses’ first absorption. The disciplines: no dividend without profit (the board’s certificate of distributability); the interim exception (5.4 — the board’s own declaration within the authority); the listed company’s calendar and disclosure (SEBON/NEPSE’s book-closure and record-date discipline); the not-for-profit company’s bar (no distribution at all — the non-distribution clause).
5.3 Payment of Dividend
The mechanics: the declared dividend becomes a debt to the shareholder from the declaration (payable within the statutory window); payment by the modes the company offers (the bank-transfer and dividend-warrant practice; the listed companies’ depository route — the shareholders’ register and CDS’s coordination); the withholding tax discipline (the dividend’s tax face — the tax laws’ deduction at source); the unpaid and unclaimed dividend’s journey (5.4). Payment is the company’s duty — declared-but-unpaid dividends are enforceable debts.
5.4 Interim Dividend, Unpaid Dividend, and Unclaimed Dividend and their Status
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