What are the types of dividends in Singapore?
What are dividends?
Dividends are payments released by corporations to their shareholders, generally as a way to distribute profits as a reward for their investment in the company. The company’s board of directors decide on and manage dividends, but it is the shareholders that must approve them through their voting rights.
In Singapore, dividends can be paid as shares of stock or other property, but cash dividends are still the most common. Regardless of the dividend type, they remain a great way to provide stable income and morale among shareholders.
Most dividends are paid four times per year on a quarterly basis. However, there are no set rules as to how often companies should pay dividends.
Types of dividends – Interim and Final
There are two main types of dividends a business can pay – interim and final.
An interim dividend is announced by the company’s board before annual profit or loss is ascertained and any time between the two company’s annual general meetings. It is paid out of retained earnings in the profits and loss accounts or out of the profits of the accounting year in which the dividend is to be announced.
On the other hand, a final dividend is announced after the financial statement for the fiscal year has been reported during the company’s annual general meeting. In this case, the financial position and profitability position needs to be ascertained.
How can you declare dividends and what is the necessary paperwork?
In general, directors will recommend a certain rate to be paid as dividends. Then, this is voted on and approved by the company’s shareholders in the annual general meeting (AGM). This is known as final dividends, as stated above.
As a director, you may also pay interim dividends if this is justified by the company’s profits. These dividends are paid before the AGM, accompanying the company’s interim financial statements.
When it comes to the necessary documentation for declaring Singapore dividends, make sure you have the following documents:
- Board meeting minutes (including date, location, who was present, number of dividends to be paid per share, and the fact that the decision has been made)
- Dividend register
- Resolution to pay an interim dividend or proposed final dividend
- Shareholders’ approval
- Warrants issued to each shareholder