Case Study:

Miller Insurance (NZ) Ltd (MINZ) is a subsidiary of Miller Insurance Australia Ltd (MIA). MIA has suffered heavy losses due to bush fires in Australia, and is putting pressure on the board of MINZ for the company to pay MIA a dividend before 31 December 2020.

You are the financial manager of MINZ. Lara Chandler, the managing director asks you for your advice.

MINZ's assets exceed realised liabilities by $50 million, and the company has never experienced difficulties paying its creditors. A report produced by MINZ's actuaries on 1 October 2020 concludes that MINZ can meet its current contingent liabilities. (Actuaries are experts who calculate insurance risks.) On 15 October 2020, you advise Lara that the company may pay a dividend to MIA on 1 December 2020.

On 14 November 2020, a major flooding event occurs in the Wellington central business district.

On 15 November 2020, you advise Lara not to pay the dividend.

Question: Why would it be recommended for a dividend payment on 15 October 2020 and, secondly, why advised against a dividend payment on 15 November 2020. Use the NEW ZEALAND COMPANIES ACT 1993 to answer this question