saif SAOG has been in presence for a reasonably longer period of time with its business running successfully. The preceding four years had been very tough going for the company experiencing losses in all the four years. In the year 2011 the loss was estimated at OMR 15,000, 2012 at OMR 12,000, 2013 at OMR 14,000 and 2014 at OMR 8000. The board of directors felt that these losses can be reversed by bringing some innovations in advertisements and by adding more features to its products. Adding to the woes, the value of the Assets of the company decreased leading to impairment losses. This subsequently led to the complete depletion of retained earnings and dividends were not paid for all these years.

The decision of the board to innovate advertisement strategy and adding more features to the companys products brought back the previous glory of the company. The company is again on its track of earning profits. In the year 2015 the profits after interest and tax were OMR 20,000 and in the year 2016 it was OMR 35,000. The financial gains in the years 2015 and 2016 gave the shareholders a little confidence that they can receive their dividend at least for the year 2016, if not for 2015. But the board had a different stance and passed a motion declining their request for dividend for both the years 2015 and 2016. Kaif also had in issue 60,000, 8% Redeemable Preference Shares with a par value of OMR 1.9 per share fully paid. The financial statements clearly indicate that the profits earned by the company in the years 2015 and 2016 were sufficient to cover up for the losses suffered in the years 2011 to 2014. There is no way the board of directors refute their claim for dividends is the view of the shareholders. Their request for the dividends must be fulfilled by the board of directors as they did not receive dividend when the company suffered losses. The Omani Commercial Company Law states that dividend will not be paid if the company sustains a loss which has not been fully extinguished.

Questions:

1. Suggest to the shareholders of the company the kind of action they can take in the court to enforce the board of directors liable to pay the dividend for the years 2015 and 2016.

2. What is your opinion on the various circumstance under which the board of directors can refuse to pay dividends? Elucidate.

3. How the share price of Kaif SAOG will be affected due to non-payment of dividend?

4. Is there any impact on their redeemable Preference share dividend due to the losses of the company? Rationalize your answer. 5. Reckon the amount of Retained earnings or Losses at the end of the year 2016.