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    PracticeACCAACCA LW — Corporate and Business Law Practice Exam 4Question 37
    Easy1 markMultiple Choice
    Corporate and Business LawSection ASyllabus ECapital and Financing

    ACCA · Question 37 · Corporate and Business Law

    Under the Companies Act 2006, from which specific source must a company pay cash dividends to its shareholders?

    Answer options:

    A.

    Gross revenue

    B.

    Share premium account

    C.

    Distributable profits

    D.

    Capital redemption reserve

    How to approach this question

    Recall the strict capital maintenance rules regarding dividends.

    Full Answer

    C.Distributable profits✓ Correct
    Under s.830 of the Companies Act 2006, a company may only make a distribution (pay a dividend) out of profits available for the purpose, which are defined as accumulated, realized profits less accumulated, realized losses (distributable profits). Capital accounts cannot be used.

    Common mistakes

    Believing dividends can be paid from the share premium account.
    Question 36All questionsQuestion 38

    Practice the full ACCA LW — Corporate and Business Law Practice Exam 4

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