Quick answer
A Malaysian company may only pay a dividend out of profits and only if it is solvent — able to pay its debts as they fall due within 12 months after the distribution (Companies Act 2016, s.131). The directors must authorise it and make a solvency statement beforehand (s.132). A distribution made in breach can be recovered, and directors who wilfully authorised it can be personally liable (s.133).
Last reviewed： · Reviewed by：ONEKEY BIZ compliance team
01
Overview
The Companies Act 2016 replaced the old capital-maintenance rules with a solvency test. Under Section 131 a company can distribute to shareholders only out of profits, and only if it will still be able to pay its debts as and when they fall due within twelve months after the distribution.
Section 132 puts the responsibility on the directors: they authorise the distribution and must be satisfied — and make a solvency statement — that the company passes the test before it is paid. That judgment should rest on current management accounts, cash-flow expectations and known liabilities, not just the retained earnings on last year's audit.
The consequences of getting it wrong are personal. Section 133 allows an unlawful distribution to be recovered from shareholders who knew or should have known, and makes directors who wilfully authorised it liable to the company. Documenting the solvency assessment is what protects the board.
Who needs this
- Profitable companies returning cash to shareholders
- Owner-managed companies paying themselves dividends instead of salary
- Holding companies moving profits up the group
- Companies preparing interim dividends during the year
02
Documents you need to prepare
Financial position
- Latest management accounts or audited financial statements showing distributable profits
- 12-month cash-flow forecast or summary of expected receipts and debts
- List of significant liabilities and commitments
Dividend details
- Amount per share and total amount
- Record date and payment date
- Current register of members
- Dividend income paid by a Malaysian resident company is generally tax-exempt in the shareholder's hands under the single-tier system; confirm your position with your tax agent.
- Paying before the solvency statement is signed exposes directors to personal liability.
03
How to get it done with ONEKEY BIZ
- 1Profit & solvency check Day 1–2
We review accounts and the 12-month outlook with you.
- 2Solvency statement Day 2
We prepare the directors' solvency statement.
- 3Resolutions Day 2–3
We draft the directors' resolution declaring the dividend.
- 4Sign & pay Day 3–5
Directors sign; the company pays shareholders.
- 5Records Done
Dividend vouchers issued and records filed.
You do
- Provide accounts and cash-flow view
- Directors sign the solvency statement
We do
- Check the solvency test with you
- Draft the solvency statement and resolutions
- Prepare dividend vouchers
- File the records in your statutory books
04
What you receive
The signed statement required before the distribution.
Amount, record date and payment date approved.
One for each shareholder, for their records and bank.
Resolution and supporting assessment filed with statutory records.
Official sources
Frequently asked questions
Can we pay a dividend if last year's accounts show profit but cash is tight now?
Not necessarily. The solvency test looks forward 12 months, so current cash flow matters.
Do dividends need to be lodged with SSM?
The declaration itself is recorded in the company's statutory records; we advise if any lodgement applies to your case.
Can we pay different amounts to different shareholders?
Only if the constitution and share classes allow it; otherwise dividends follow shareholding.