Providing the constitution impose no additional requirements or restrictions on:
- the declaration or payment of dividends; and
- in the case interim dividends, on the distribution of interim dividends,
a reasonable time period is 1 week to prepare the directors resolutions, and in the case of final dividends shareholders resolutions, and dividend vouchers, obtain accounts, and collect signatures.
For dividends in cash, funds can usually be transferred on a same day basis once documentation is executed.
No, dividends are either:
- final, which can only be declared with shareholder's approval, if the company has sufficient profits from which to declare the final dividend. The final dividend declaration cannot be revoked or cancelled, nor can the dividend amount be reduced; or
- interim which can be declared at any time of year and as many times a year as the Company wishes, which are revocable until the point of actual payment, on the authority of a resolution of the board of directors. The directors must have:
- reasonable grounds at the time of declaration and payment to form a genuine opinion that there will be profits for the relevant financial year for which the declaration is made; and
- a detailed understanding of the company's financial position to assess the effect of any known or likely changes.
Final dividend: prepare audited financial statements of the Company for the past financial year.
Interim dividend: prepare interim management accounts as at the latest practicable date, on the same basis as the statutory accounts which include both the interim balance sheet and interim income statement.
Yes. A private company may make distributions only out of sufficient distributable profits in the financial year in respect of which a dividend is paid, and the directors should have regard to the affect of the dividend on the solvency of the company. The meaning of “profit” is not defined in the Companies Act and as a practical matter, the directors should consult with the Company's auditors to determine whether the Company has “available profits” to declare the dividend.
The constitution of a Singapore private company may also provide that the amount of dividend paid shall not exceed the amount recommended by the directors for payment.
Yes, based on the principles developed by the Singapore courts regarding payment of dividends a company may pay a dividend even if it has no revenue profits provided that there are capital profits. These capital profits may arise from an increase in the value of its capital assets or if a surplus is created by the revaluation of the company's assets.
Note, unlike the position in the UK, a Singapore company is not able to create or increase positive distributable reserves through a capital reduction. The underlying rationale is that this would be contrary to the doctrine of maintenance of capital (i.e. the need to preserve the share capital of the company to protect creditors and shareholders).
No regulatory approvals are ordinarily required in connection with payment of a dividend unless the Company operates in a regulated industry that imposes requirements. For example, as a pre-emptive measure to bolster resilience and capacity of locally-incorporated banks and finance companies headquartered in Singapore (Singapore Banks) to support lending to businesses and individuals through an uncertain period caused by the COVID-19 pandemic, the Monetary Authority of Singapore (MAS) has, in July and August 2020, called on Singapore Banks to cap their total dividends per share (DPS) for For Year 2020 at 60% of FY2019’s DPS, and offer shareholders the option of receiving the remaining dividends to be paid for FY2020 in shares in lieu of cash. MAS, on 28 July 2021, announced that this dividend restrictions will not be extended.
Yes, if the Company has sufficient distributable profits to cover the amount of a proposed dividend but insufficient cash to settle it, the board may resolve to borrow the cash but, when doing so, must consider, amongst others in the discharge of their fiduciary duty:
- that it is in the best interests of the company and does not place it under any undue financial distress; and
- the advisability of incurring debt to fund payments to shareholders.
Yes, provided that payment of dividend in kind is expressly permitted under the company's constitution.