Everite ltd showed an increase in profits for the 2023 financial year. at a board meeting, the directors decide that dividends should be paid out to the company’s shareholders. indicate what the requirements are in terms of the companies act 71 of 2008 that must be adhered to before the dividends may be declared and paid.

Question: Everite ltd showed an increase in profits for the 2023 financial year. at a board meeting, the directors decide that dividends should be paid out to the company’s shareholders. indicate what the requirements are in terms of the companies act 71 of 2008 that must be adhered to before the dividends may be declared and paid.

Before the directors of Everite Ltd can declare and pay dividends to the company's shareholders, they must adhere to the following requirements in terms of the Companies Act 71 of 2008:

• The company must have sufficient distributable profits. This means that the company must have enough profits after accounting for all of its liabilities, including taxes, creditors, and minority interests.
• The company must comply with the solvency and liquidity test. This test ensures that the company will be able to pay its debts after paying the dividends.
• The board of directors must pass a resolution declaring the dividends. The resolution must specify the amount of the dividends, the date on which the dividends will be paid, and the record date.
• The company must give notice of the dividend declaration to its shareholders. The notice must be given at least 14 days before the record date.

If the directors fail to adhere to any of these requirements, the dividends may be declared and paid invalid.

In addition to the above requirements, the directors should also consider the following factors before declaring and paying dividends:

• The company's financial position: The directors should make sure that the company has enough cash reserves to pay the dividends without jeopardizing its financial stability.
• The company's investment plans: The directors should consider the company's investment plans and whether or not paying dividends will impact the company's ability to fund its future growth.
• The expectations of the shareholders: The directors should consider the expectations of the shareholders and whether or not paying dividends is in the best interests of all of the shareholders.

By considering all of these factors, the directors can make an informed decision about whether or not to declare and pay dividends.

Here is a summary of the requirements for declaring and paying dividends in terms of the Companies Act 71 of 2008:

• The company must have sufficient distributable profits.
• The company must comply with the solvency and liquidity test.
• The board of directors must pass a resolution declaring the dividends.
• The company must give notice of the dividend declaration to its shareholders.

Additional factors to consider:

• The company's financial position.
• The company's investment plans.
• The expectations of the shareholders.

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