Dividends - alteration of capital, Business Law and Ethics

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DIVIDENDS:

As a commercial term, the word "dividends" has a variable meaning which depends on the context in which it is used. For purposes of company law, it denotes the payments which a company makes out of its profits to the shareholders in the company.

BASIC RULE

The basic rule is that "dividends must not be paid out of capital": Verner v General & Commercial Investment Trust (per Lindley, J). For purposes of this rule "Capital" means the money subscribed pursuant to the memorandum of association, or what represents that money: Verner v General & Commercial Investment Trust.


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