ExpertEasy1 markMultiple Choice
ACCA · Question 37 · Corporate and Business Law
Under the Companies Act 2006, from which specific source must a company pay cash dividends to its shareholders?
Under the Companies Act 2006, from which specific source must a company pay cash dividends to its shareholders?
Answer options:
A.
Gross revenue
B.
Share premium account
C.
Distributable profits
D.
Capital redemption reserve
How to approach this question
Recall the strict capital maintenance rules regarding dividends.
Full Answer
C.Distributable profits✓ Correct
Under s.830 of the Companies Act 2006, a company may only make a distribution (pay a dividend) out of profits available for the purpose, which are defined as accumulated, realized profits less accumulated, realized losses (distributable profits). Capital accounts cannot be used.
Common mistakes
Believing dividends can be paid from the share premium account.
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