How shareholder getting return from Company
Company is running by appointed company director.
And shareholder is the one who willing to invest fund to have the company operate.
Director is getting remuneration for their services, how about shareholder ? How they getting return from their investment fund?
How company distribute return to its shareholder?
A) Dividend Payment
Dividend is the accumulated profit of the company over the years.
Some company prefer to offset accumulated profit to issue bonus share instead of dividend .
And bonus share will be used to expand the business .
Whereas dividend is purely sum of money return to shareholding as token of appreciation ofr their past years investment into company.
All distribution of dividend must be according to shareholding.
Different type of distribution
During Annual General meeting (AGM)
Right after finalise the financial report and management will based on it to decide will there be any declaration of dividend, how much to declare ?
Upon confirmation, approval of final dividend will become 1 o agenda to approve during AGM .
During Extraordinary General Meeting (EGM)
Company can conduct EGM anytime as they wish. Declaration dividend during EGM is called as Interim dividend .
Interim dividend is declare before preparation of financial report and company take into account for that particular year .
Which means that retain earning / accumulated profit will reduce at the end of financial year end .
Restrictions on dividend
Dividend can only declare out from retain earning account.
B) Bonus share issued
Some company prefer to issue bonus share to existing shareholder.
Bonus share means shareholder will not need to pay for the amount of new issued share.
Bonus share allotted by capitalizing the reserves and surplus fund .
If you are confident on the future performance, received of bonus share is your great choice .
How much and how often i will be issued with dividend ?
- Received dividend amount will based on your shareholding and there is no restriction number of time to declare dividend.
I owned preference share, will I have privilege over dividend issued ?
- Yes, preference shareholder normally have privilege over ordinary shareholder during declaration of dividend . But please do check company constitution is that any other term and conditions applied
Shareholder need to pay tax for received amount of dividend ?
- No, received dividend amount is tax free.
I am member of company limited by Guarantee, will i distribute with dividend ?
- No, as there is NO share in Company limited by Guarantee, so no dividend will be distributed.
Are Dividend payable in cash ?
- Yes, most company’s payment method is cash, cheque or GIRO transfer .