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1- Instrument to be classified as equity must be irredeemable and dividends should be at discretion of issuer (should ANY of them for example “dividends are compulsory” ,then that irredeemable instrument will be classified as debt and dividends should be expensed?)
2-a )Some companies have past pattern of dividends does it not create obligation ,why?
b) how to create a fine difference of Obligation of dividend or otherwise? ( legal,covenants,unavoidable? )1. If dividends are compulsory then there is an obligation to pay cash and therefore it would be treated as debt.
2. The past is no indication of what happens in the future, so there is no obligation created. Law will determine the obligation on dividends, like on preference shares.
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