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BRILLIANT’S Dividend Decision 239

business). Assuming that the stockholders are hmoëS>g© AnZr gånyU© {S>{dS>oÝS> BZH$_ H$mo nwZ: {Zdoe
willing to reinvest their entire dividend income. H$aZm MmhVo h¢Ÿ& `{X eo`ahmoëS>g© Ho$ {cE H¡${nQ>c _mH}$Q>
If better outside investment opportunities are
available to the shareholders, depending upon _| n«M{cV EÝdm`a_oÝQ> na {Z^©a ~ohVa AmCQ>gmBS>
the environment prevalent in the capital BZdoñQ>_oÝQ> Anm°À`w©{ZQ>rO CncãY h¡ Vmo do g§MmcH$-
market, they may not appreciate the recomm- _ÊS>c Ûmam {~OZog _| A{YH$ am{e cJmZo Ho$ nam_e© H$mo
endation (or action) of the Board of Directors
for retention of larger amounts in the business _hËd Zht XoVo Š`m|{H$ do Bgo AnZm ZwH$gmZ g_PVo h¢Ÿ&
as they might perceive it to their detriment. Bg pñW{V _| do A{YH$ {S>{dS>oÝS²>g àmá H$aZo _| ê${M
As such they would be interested in receiving aIVo h¢Ÿ& {S>{dS>oÝS> nm°{cgr _|, {deofV: {S>{dS>oÝS> H$mo
larger dividends. The dividend policy,
particularly the timing of the declaration of Kmo{fV H$aZo H$m g_` EH$ H$ånZr Ho$ eo`g© H$s _mH}$Q>
dividend, influences the market value of a d¡ë`y H$mo à^m{dV H$aVm h¡Ÿ&
company's shares.
The Board of directors has power to ~moS>© Am°\$ S>m`aoŠQ>g© Ho$ nmg `h {ZYm©[aV H$aZo H$m
determine whether and at what rate dividend nm°da hmoVm h¡ {H$ eo`ahmoëS>g© H$mo {S>{dS>oÝS> H$m ^wJVmZ
shall be paid to the shareholders. The payment {H$g Xa go {H$`m OmEŸ& {S>{dS>oÝS> H$m ^wJVmZ A{Zdm`© Zht
of dividend is not obligatory. Even a majority hmoVm h¡Ÿ& A{YH$m§e eo`ahmoëS>g© Ho$ nmg ~moS>© Ho$ A{YH$mar-
of shareholders have no right to interfere with dJ© _| hñVjon H$aZo H$m A{YH$ma ^r Zht hmoVm h¡Ÿ& BZHo$
the authority of the board. Its decision cannot {ZU©` na H$moB© {damoY àH$Q> Zht H$a gH$Vm Ed§ `hm±
be challenged and there is no way to force a {S>{dS>oÝS> H$mo S>m`aoŠQ> crJc EŠeZ Ûmam A{Zdm`© H$aZo
dividend by direct legal action. H$m H$moB© VarH$m Zht h¡Ÿ&
However, there are some restrictions hmcm§{H$, `hm± ~moS>© H$s gh_{V na H$mZyZ Ûmam Hw$N>
imposed by law on the discretion of the board à{V~§Y cJmE JE h¢, Omo {ZåZ{c{IV h¡:
which are as follows:
(i) Dividend may be declared out of unappr- (i) {S>{dS>oÝS>, AZEàmo{àE{Q>S> gaßcg _| go Kmo{fV {H$`m
opriated surplus. Om gH$Vm h¡Ÿ&
(ii) If there is a loss, first it should be set off (ii) `{X H$moB© bm°g hmo Vmo Cgo {S>{dS>oÝS> Kmo{fV H$aZo go
from profits before declaring dividend. nyd© g~go nhco Cgo g_m`mo{OV H$aZm Mm{hEŸ&
(iii)Dividend declaration which impairs the (iii){S>{dS>oÝS> H$s KmofUm Omo H$m°nm}aoeZ H$s H¡${nQ>c ñQ´>oÝW
capital strength of a corporation must be H$mo j{V nhþ§MmVr hmo, H$mo Adm°BS> H$aZm Mm{hEŸ&
avoided.
(iv)Proper provisions for depreciation should (iv){S>{dS>oÝS> H$s KmofUm go nyd© S>o{à{gEeZ Ho$ {cE C{MV
be made before declaration of dividend. àmdYmZ ~ZmZm Mm{hEŸ&
(v) Rights of creditors shall be taken care of. (v) H«o${S>Q>g© Ho$ A{YH$mam| H$m Ü`mZ aIm OmZm Mm{hEŸ&
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