ACCA · Question 15 · Capital and the financing of companies
Section A
A company declares and pays a dividend to its shareholders. It is later discovered that the company did not have sufficient distributable profits to cover the dividend. What is the legal consequence for a shareholder who received this unlawful dividend, assuming they knew or had reasonable grounds to believe it was unlawful?
Answer options:
The shareholder is allowed to keep the dividend, but the directors are fined.
The shareholder must repay the dividend to the company.
The shareholder must transfer their shares back to the company.
The dividend is automatically converted into a loan from the company.
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