question archive Britney and Celine are directors of Pink Ltd

Britney and Celine are directors of Pink Ltd

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Britney and Celine are directors of Pink Ltd. Pink Ltd is a non-listed public company that is in the music promotions business. It has been running for several years at a massive loss because it has spent enormous amounts of money bringing unpopular 70s musicians to Australia. The Leo Sayer Downunder Tour caused a $2 million loss in 2007, the Rupert Holmes Spectacular resulted in a $3.5 million loss in 2008, and the Bee Gees Revival lost the company $1.9 million in 2009. During the 2010 financial year, things started looking up for Pink Ltd. They signed a contract with an aspiring young talent called Justin Badhair. The Badhair tour attracted enormous crowds, and Pink Ltd generated a $1.1 million profit during the 2010 financial year. Britney and Celine now want to declare a $1 million dividend for their long-suffering shareholders. Advise Britney and Celine.

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Answer:

Britney and Celine could distribute the dividend to its shareholders considering the losses incurred  to them since 2007. However, they are required to adopt the following procedures for awarding the dividend.

1. Organise a board meeting in order to discuss the sum of dividend to be paid.

2. Issue a notice of conducting a meeting regarding declaration of dividend.

3. The directors should record the date in which the resolution for the dividends passed.

4. Finally, the dividend is distributed among the shareholders.

However, for the distribution of annual dividend, only those shareholders who are directly connected to the company would be eligible to receive such dividend on the of organizing the annual meeting. 

Therefore, the directors of Pink Ltd., Britney and Celine should pay the dividend raised from Justin Badhair's concert to all the shareholders who are still the members of the company, considering the losses incurred to them.

REFERENCES

https://www.investopedia.com/ask/answers/102714/how-and-when-are-stock-dividends-paid-out.

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https://www.ato.gov.au/Forms/You-and-your-shares-2020/?page=3

https://www.indiafilings.com/learn/procedure-declaring-dividend/