DIVIDEND

DIVIDEND
• Dividend: a sum of money paid regularly (typically annually)
by a company to its shareholders out of its profits (or
reserves).

• Is a distribution, by a company to its members, representing

the return on capital invested by the members as a reward for
the risk of such investment.

• In fact, dividend is that portion of accumulated profits of a

company which is divided amongst its members in proportion
to their shares.
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• Declaration
• The provisions of Companies Ordinance, 1984 regarding dividends

• Dividend is declared and approved in the general meeting, however,

interim dividend may be approved and declared by the directors (S.248).

• Dividend shall not exceed the amount recommended by the directors

(S.248).

• Dividend shall not be declared from the gain arising from sale of
immovable property unless such gain is adjusted against losses on sale of
Capital assets (S.248).
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• Dividend once declared becomes an obligation of the

company.
• Dividend is paid out of the profits of the company
(S.249).

• No dividend shall be declared or paid out of

unrealized gain on investment property credited to
profit and loss account (Sec. 248).
 
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Definition of 'Unrealized Gain'

• Profit which has been made but not yet realized through a transaction,
such as a stock which has risen in value but is still being held.

• A profit that exists on paper, resulting from any type of investment. An

unrealized gain is a profitable position that has yet to be cashed in, such as
a winning stock position that remains open. A gain becomes realized once
the position is closed for a profit.
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• Payment

• Dividend is payable only to the registered holder of shares or to someone on his order
to his banker or to a financial institution nominated by him for the purpose (Sec 250).

• Dividend warrants are sent by registered post unless the entitled shareholder requires
otherwise in writing (S.250).

• Dividend must be paid within 30 days of declaration. It is not lawful for the directors
to withhold or defer the payment when dividend has been declared. (S.251).

• If dividend is not paid within 30 days of its declaration, the Chief Executive of the
company shall be punishable with imprisonment up to a period of 2 years and a fine
up to Rs 1,000,000 (1 million) (S.251).