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Dividend
Practical Law ANZ Glossary w-005-8814 (Approx. 3 pages)
Glossary
Dividend
A payment by a company to its shareholders, representing the shareholders' return on their investment in the company.
The payment of dividends is governed by either the replaceable rules (sections 254U and 254W(2), Corporations Act 2001 (Cth) (CA 2001)) or the dividend provisions set out in a company's constitution (if any).
A dividend must not be paid unless all the following conditions are satisfied:
- The company's assets exceed its liabilities immediately before the dividend is declared and the excess is sufficient for the payment of the dividend.
- The payment of the dividend is fair and reasonable to the company's shareholders as a whole.
- The payment of the dividend does not materially prejudice the company's ability to pay its creditors.
There are many ways in which a company may pay dividends to its shareholders, including by:
- A payment of cash.
- An issue of shares (known as a bonus issue).
- A grant of share options over unissued shares.
- The transfer of assets.
- Applying the dividend to the payment of any amount unpaid on partly paid shares.
For more information about dividends, see Practice note, Dividends. For an example of board minutes and a resolution declaring a dividend by a company, see Standard documents:
See also Practical Law's topic: Dividends.