The profits available for distribution among shareholders of a company as dividend are called divisible profits. The profits are calculated by comparing income and expenses of one year. The necessary adjustments are made before calculating profit of ,business concern. The accounting principles are followed. The directors have right to create provisions, reserves and funds out of business profits under the articles of association and the Companies’ Ordinance 1984. The remaining profit may not be used in full for dividend. A part of such profit can be used to pay dividend to shareholders. The directors can propose rate of dividend keeping in view the business conditions. The shareholders can approve such rate of dividend in annual general meeting. The rate of. dividend proposed by directors cannot be increased by shareholders. The proposed dividend is paid within forty-five days after its declaration in case of listed companies, and within 30 days in case of other companies.
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