Acme Manufacturing Co Ltd, has been in existence and trading for the last 5 years since it was incorporated. The company specialize in the manufacturing hardware materials used for construction. During the first four years of operations the company had made a net loss. This year it has made a substantial profit. The board of directors wants to retain the profits in the company and not declare a dividend. The directors decided that the company should consider utilizing those profits for research and development of new efficient products to broaden the company’s market base. The directors unanimously agree that the profit of the company would be best utilized this way since the company is in a very competitive environment.

Francis who is one of the shareholders of the Acme Manufacturing Co Ltd, is not happy with the decision of the board. Shae states that the company should pay out dividend since it has made a profit.

Required:

With reference to Companies Act of Fiji 2015, critically evaluate whether the company can retain the profit for investment purpose.

Answer rating: 100% (QA)

In the given case the profits of the company was decided unanimous... View the full answer