Listen to a Business English Dialogue About Illegal dividend
Ella: Hey Violet, have you ever heard of an illegal dividend?
Violet: Hi Ella. Yes, an illegal dividend is a payment made by a company to its shareholders that violates laws or regulations, such as using funds that should be retained for operational needs or paying dividends when the company is insolvent.
Ella: Right, so it’s essentially a dividend paid out improperly, which can lead to legal consequences for the company and its executives?
Violet: Exactly, Ella. Illegal dividends can result in legal liabilities for both the company’s management and the shareholders who received the improper payments.
Ella: How can investors identify if a dividend is illegal?
Violet: Investors should closely monitor a company’s financial health and performance indicators. If a company consistently pays dividends despite reporting losses or has insufficient retained earnings, it could be a sign of illegal dividend payments.
Ella: So, it’s crucial for investors to conduct thorough due diligence before investing in a company to avoid any legal complications related to illegal dividends?
Violet: Absolutely, Ella. Conducting proper research and seeking advice from financial professionals can help investors make informed decisions and avoid potential legal risks associated with illegal dividends.
Ella: Thanks for the clarification, Violet. I now understand the importance of being vigilant about dividend payments.
Violet: No problem, Ella. If you have any more questions about business or finance, feel free to ask anytime.