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Review Your SQE 1 Practice Records

Examination Timing: 00H00M01S

In the bustling city of Leeds, directors of a private limited company, "Whitfield Textiles Ltd.", which operates under the model articles (unamended), are contemplating declaring a second interim dividend for the current financial year due to strong financial performance. Previously, an interim dividend was declared earlier in the year without the need for a members' resolution. The company secretary, Sarah Jennings, seeks to confirm the correct procedure for this subsequent dividend declaration.

Which of the following answers best describes the authorisations required, if any, to declare the interim dividend?

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The correct answer is A. According to Article 30(1) of the Companies (Model Articles) Regulations 2008, the declaration of interim dividends by a private company limited by shares does not necessitate any form of members’ resolution. Directors can declare such dividends based on the company's profits available for distribution. This provision simplifies the process for companies operating under the model articles and enables directors to make agile financial decisions in response to the company's performance.

Key Learning Points:

  • Interim Dividends: These can be declared by the directors without needing a resolution from the company members, unlike final dividends.

  • Model Articles of Association: Understanding these foundational documents is crucial for company directors and secretaries to ensure compliance and proper corporate governance.

  • Financial Decision-Making: Directors must regularly review financial performance to make informed decisions about dividends, balancing business sustainability with shareholder returns.

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