Question 4

Andriana is the managing director in a private limited liability company. Although there were no accounting profits shown in the company's financial statements as of the end of 2017, Andriana believes that the company's performance improved significantly during the past year and wishes to reward its shareholders. Andriana is looking into the following options with a view to distributing funds to the shareholders:

(1) Declaration of dividends

(2) Declaration of interim dividends

(3) Reduction of share capital

(4) Redemption of redeemable preference shares.

Required:

In relation to the above options:

(a) Explain which is the most appropriate option under the circumstances.

(b) State what is required in order to implement the above.