Preference shareholders are not entitled to dividend unless it is declared

Preference shareholders are not entitled to dividend unless it is declared

Bond v. Barrow Haematite Steel Co. [1902] 1 Ch. 353 (Ch.D)

Under the Articles of the company dividend was to be paid when declared by the directors with the sanction of the company. The article also authorized the directors to set aside out of the profits such sum as thought proper, to a reserve fund, before declaring dividends. The question was whether this article was excluded in it’s application to preference shareholders who were entitled to a fixed dividend.

Held that the provisions regarding declaration of dividend also applied to fixed preferential dividend. Where the reserve fund article applied it was obvious that such a declaration was essential for the shareholders had no right to any payment till the corporate body had determined that the money could properly be paid away.