A reasonable time period for paying a dividend is 1-3 days. There are no waiting periods however payment may be delayed due to bank processing times.
No, there are no timing restrictions on paying dividends under the Australian Corporations Act.
The directors of a company should review current management accounts in order to satisfy themselves that the requirements for payment of a dividend are satisfied. There is no requirement for such accounts to be audited under the Australian Corporations Act.
Yes, there are restrictions on the amount of dividends that can be paid.
Under the Australian Corporations Act, a company must not pay a dividend unless:
- the company's assets exceeds its liabilities immediately before the dividend is declared and the excess is sufficient for the payment of the dividend (note that assets and liabilities are to be calculated for this purpose in accordance with accounting standards in force at the relevant time (even if the standard does not otherwise apply to the financial year of the company));
- the payment of the dividend is fair and reasonable to the company's shareholders as a whole; and
- the payment of the dividend does not materially prejudice the company's ability to pay its creditors.
The company's constitution may also contain restrictions, such as requiring that the dividend be paid out of profits.
It may be feasible for a company to effect a return of capital in addition to or instead of a dividend in order to increase the amount of funds which can be repatriated to the shareholder(s).
There are specific requirements which must be met and procedures which must be followed under the Australian Corporations Act in order to effect a return of capital to shareholders (e.g. by a reduction of share capital or a share buy-back). One such requirement for a return of capital is obtaining the approval of the shareholder(s).
Certain lodgements may need to be made with the Australian Securities and Investments Commission prior to effecting the return of capital and certain waiting periods may apply.
For single shareholder companies, the procedure for a reduction of share capital is relatively straightforward and will generally not take any longer than the procedure for a dividend.
For multiple shareholder companies, the procedure for a reduction of share capital is more complicated and can take up to a month.
The procedure for a share buy-back is more onerous than the procedure for a reduction of share capital and can take up to a month.
No foreign investment or other regulatory approvals are required in connection with payment of a dividend.
No, there are no foreign exchange requirements on paying dividends to foreign parent companies.
Yes, there are no restrictions from an Australian corporate law perspective on borrowing cash to settle a dividend.
Yes, dividends in kind are possible unless otherwise prohibited by the company’s constitution.
