Sino Grandness

[specuvestor]

It transpired that the auditor was very confident that company can make dividend payments as long as the holdco has money in 2015, in response to a shareholder's question on how the company which is at a loss can pay RMB12m dividend. Actually should have asked the ID Lawrence Wong as he is a corporate lawyer.

Any professional insights into Companies Act S403?

__________

Dividends payable from profits only

403.—(1) No dividend shall be payable to the share-holders of any company except out of profits.
[21/2005]

(1A) Subject to subsection (1B), any profits of a company applied towards the purchase or acquisition of its own shares in accordance with sections 76B to 76G shall not be payable as dividends to the shareholders of the company.
[21/2005]

(1B) Subsection (1A) shall not apply to any part of the proceeds received by the company as consideration for the sale or disposal of treasury shares which the company has applied towards the profits of the company.
[21/2005]

(1C) Any gains derived by the company from the sale or disposal of treasury shares shall not be payable as dividends to the shareholders of the company.
[21/2005]

(2) Every director or chief executive officer of a company who wilfully pays or permits to be paid any dividend in contravention of this section —

(a)

shall, without prejudice to any other liability, be guilty of an offence and shall be liable on conviction to a fine not exceeding $5,000 or to imprisonment for a term not exceeding 12 months; and


(b)

shall also be liable to the creditors of the company for the amount of the debts due by the company to them respectively to the extent by which the dividends so paid have exceeded the profits and such amount may be recovered by the creditors or the liquidator suing on behalf of the creditors.
[15/84; 21/2005]

[Act 36 of 2014 wef 03/01/2016]

(3) If the whole amount is recovered from one director or chief executive officer he may recover contribution against any other person liable who has directed or consented to such payment.
[Act 36 of 2014 wef 03/01/2016]

(4) No liability by this section imposed on any person shall on the death of such person extend or pass to his executors or administrators nor shall the estate of any such person after his decease be made liable under this section.

(5) In this section, “dividend” includes bonus and payment by way of bonus.

http://statutes.agc.gov.sg/aol/search/di...0#pr403-he-.

[owq]

Doesn't the profit mean retained profits? If so, the company should have more than enough to pay dividends, as long they have the cash to do so.

[CityFarmer]

Hi Mr. Specuvestor,

It is true that no distribution for those have accumulate losses in balance sheet, but it can be "worked-around" by a capital reduction cum dividend distribution exercises. A good case study, is the recent exercise by Global Testing Corp in SGX

I did a brief check on the company balance sheet. Company level is negative, but group level is positive in retain earning. I reckon, a cap reduction exercise will do a trick for a distribution.

What do you think?

(not vested)

[Debronic]

Yes, like CityFarmer says, dividend can only be paid out of retained profits.

However, I think the situation is very different in Global Testing's case: it had accumulated losses in both company and group level vs SG which is only at the company level.

Also, a capital reduction takes several weeks to complete, requires a court sanction and is probably not the preferred way for companies to pay dividend. Hence, I would imagine that it would have been announced together with the dividend payment if it was been needed. Seeing that there is come cash at the subsidiary level, the cleaner way to quickly do this is probably to declare enough dividends from the subsidiaries to the parent company to be recognised as dividend income in order to wipe out all the accumulated losses plus pay the the dividends. Any excess cash can then somehow be transferred back to subsidiaries as loan to subsidiary or something. Loan and dividend can probably be done simultaneously so that only the actual amount of dividend payable to share holders is transferred.

[piaopiao]

I think dividend income from the chinese subsidiaries have not been flown upwards to the holding companies in the group for the year ended 31 Dec 2015. RMB12 million is not a big amount and the operating (not purely an investment holding co) subsidiary in PRC directly owned by SG the listco should have the profit and cash to declare and pay dividend to SG the listco.

[specuvestor]

Err how does a book closure notice be relevant to this discussion? Might be more information if u started reading from post #1671 to get the full context

In any case next few days we will see their 1Q results and then see if SGX will be interested in our observations

[kkayleng]

There is still much concern on the expansion of the company. Every time it raises fund is for expanding business. Good for shareholders right? But share price again n again adjusted every time fund raise. You still feel nothing wrong right so long the business is getting bigger. One day, at the time you are leaving this world, the share price remains the same but business is dem big.

Can the "guru" refresh the merits of the issue of new shares as the company expands.

[alex]

Wondering who set up this account to post this question.. Not sure where i saw the same comment from, either from VB or sharejunction.

[Stirling]

There is still much concern on the expansion of the company. Every time it raises fund is for expanding business. Good for shareholders right? But share price again n again adjusted every time fund raise. You still feel nothing wrong right so long the business is getting bigger. One day, at the time you are leaving this world, the share price remains the same but business is dem big.

Can the "guru" refresh the merits of the issue of new shares as the company expands.

If a business couldn't expand, profit & share price will definitely come down in due course.  While it can still continue to expand and funding options are available, then it is obviously a good choice to seek growth.

[BlueKelah]

Wondering who set up this account to post this question.. Not sure where i saw the same comment from, either from VB or sharejunction.

yah kkayleng should have some net etiquette and make the first post in 

Introductions and general chat

Maybe Mods should make this a rule for all newbies post there at least 1 post first before coming to the main forum.