Mills Oakley Lawyers detail implications of Corporations Amendment Bill 2010

On the 28th of June, 2010, the Corporations Amendment (Corporate Reporting Reform) Bill 2010 received royal assent, reports Mills Oakley Lawyers .

This legislation will affect the way companies calculate dividends, replacing the previous ‘profits’ test in section 254T of the Corporations Act 2001 with a three-tiered ‘solvency’ test.

Under the new test provisions, companies must not pay a dividend unless:

• its assets exceed its liabilities immediately before the dividend is declared
• it is fair and reasonable to shareholders as a whole; and
• it does not materially prejudice the company's ability to pay its creditors.

With the new legislation, this clause will now place unnecessary limitations on dividend payments.

Business advisors Mills Oakley Lawyers suggest that companies review their constitutions and consider whether a resolution amending the dividend section in accordance with the new law should be put to their shareholders.