The payment of dividends : legal confusion, complexities and the need for comprehensive reform

Alevras, Stephen and Du Plessis, Jean 2014, The payment of dividends : legal confusion, complexities and the need for comprehensive reform, Company and securities law journal, vol. 32, no. 5, pp. 312-332.

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Title The payment of dividends : legal confusion, complexities and the need for comprehensive reform
Author(s) Alevras, Stephen
Du Plessis, JeanORCID iD for Du Plessis, Jean
Journal name Company and securities law journal
Volume number 32
Issue number 5
Start page 312
End page 332
Total pages 20
Publisher Thomson Reuters
Place of publication Sydney, N.S.W.
Publication date 2014
ISSN 0729-2775
Summary Submissions have closed on exposure draft legislation intending to amend thetest for payment of dividends under s 254T of the Corporations Act 2001 (Cth).Until 2010, a dividend could only be paid out of profits of a company. Sincethen, the dividends provision has been repealed and replaced with a newprovision, which allows a company to pay dividends if it satisfies an “assetsgreater than liabilities”, “fair and reasonable to shareholders” and “no materialprejudice to creditors” test. This article first examines why the profits test wasomitted from s 254T, before examining the current dividends provision,identifying the shortcomings of the 2010 reforms and critically evaluating theprovisions proposed to replace the current s 254T. The article then considersinternational developments, with a focus on New Zealand and a look at SouthAfrica, as examples of dividends tests in overseas jurisdictions, beforeproposing how to address the current confusion and uncertainty. The articleconcludes that the proposed amendments to s 254T will only partly addressexisting problems. Thus, comprehensive reform in this area of the Australiancorporation’s law is recommended.
Language eng
Field of Research 180109 Corporations and Associations Law
Socio Economic Objective 940405 Law Reform
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2014, Thomson Reuters
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