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A private limited company has unamended model articles as set out in Schedule 1 to the Companies (Model Articles) Regulations 2008. The company has issued ordinary shares only and has no shareholders’ agreement. Its most recent set of accounts show that the company did not make a profit or a loss in the most recent accounting period, although it has distributable profits of £50,000 carried forward from previous accounting periods. The shareholders want the company to declare a dividend out of these profits, but the directors intend to retain the profits within the company to finance an expansion of the company’s trade.
Can the shareholders compel the directors to recommend a dividend?
A. Yes, because the directors have a duty to act in the best interests of the shareholders.
B. Yes, because the shareholders have the power to require payment of a dividend by ordinary resolution.
C. Yes, because the shareholders have a right to receive a dividend if the company has distributable profits.
D. No, because only the directors have the power to recommend the payment of a dividend.
E. No, because the directors can only recommend a dividend out of profits of the most recent accounting period.
D - No, because only the directors have the power to recommend the payment of a dividend.
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