First Published in The Royal Gazette, Legally Speaking, April
2020
As Covid-19 sweeps across the globe, many companies are choosing
to retract, suspend or reduce dividends to preserve cash and ensure
liquidity.
Dividend payments are a method of returning value to
shareholders, the propriety of which, apart from questions of
legality, are a matter for director discretion.
The Companies Act 1981, a company's bye-laws, regulatory
pronouncements and listing rules, if applicable, govern Bermuda
companies.
The Act provides that a company shall not declare or pay a
dividend, or make a distribution out of contributed surplus, if
there are reasonable grounds for believing that the company is, or
would after the payment be, unable to pay its liabilities as they
become due; or if the realisable value of the company's assets
would thereby be less than its liabilities.
