Study the following case/situation and express your opinion. (a). Can it be paid out of free reserves?

Question

Study the following case/situation and express your opinion.

ABC Co. Ltd. decides to pay Interim Dividend.

(a). Can it be paid out of free reserves?

(b). Is the Board right in declaring the same at the Board Meeting?

(c). Can the company distribute the same within 30 days of its declaration?

Answer 1

(a). No. the Interim Dividend cannot be paid out of free reserves.

(b). Yes. Board is right in declaring the same at the Board meeting as it has the power to declare an Interim Dividend.

(c). Yes, after the declaration, the Interim dividend should be paid within 30 days of its declaration.