Define: Deferred Dividend

A deferred dividend refers to a portion of a company’s profits that is set aside to be paid out to shareholders at a later date, rather than immediately.

Companies may choose to defer dividend payments for various reasons, such as preserving cash flow for future investments, reducing debt, or addressing financial challenges.

Yes, deferred dividends are legally binding if they have been properly authorized and declared by the company’s board of directors.

Yes, a company has the right to cancel or change its deferred dividend policy, but such decisions typically require approval from the board of directors and may be subject to certain legal and regulatory requirements.

Shareholders may have legal recourse if a company fails to pay deferred dividends as promised. They can potentially file a lawsuit for breach of contract or seek other legal remedies available under corporate law.

Deferred dividends are generally taxable in the year they are paid out to shareholders, regardless of when they were declared or earned.

While there is no specific time limit for deferring dividend payments, companies typically aim to pay out deferred dividends within a reasonable timeframe. Indefinite deferral may raise concerns among shareholders and could potentially lead to legal disputes.

Yes, a company can use deferred dividends to pay off debts if it is permitted under the terms of the deferred dividend agreement and complies with applicable laws and regulations.

A company can declare deferred dividends even if it is not currently profitable, as long as it has sufficient retained earnings or other sources of funds to cover the dividend payments.

In some cases, shareholders may have the option to sell their rights to receive deferred dividends to other investors. However, this would depend on the specific terms and conditions set by the company and any applicable securities laws.