Question: (Legal restrictions on dividend payments) Describe the types of limitations firms can face from legal restrictions on dividend payments.
2. (Practical considerations in setting dividend policy) The board of directors of Kensington Enterprises has decided to pay cash dividends totaling $5 million in the first quarter of the year. This payment represents the initiation of a cash dividend for the first time in company history, and your company CFO has asked you to look into any restrictions or constraints the firm might face in carrying out the plan. Write a brief report outlining the types of restrictions Kensington might face.