Dee and Eff are major shareholders in and the directors of the public company Fan plc. For the year ended 30 April 2009 Fan plc’s financial statements showed a loss of ￡2,000 for the year.For the year ended 30 April 2010 Fan plc made a profit of ￡3,000 and, due to a revaluation, the value of its land and buildings increased by ￡5,000.As a consequence, Dee and Eff recommended, and the shareholders approved, the payment of ￡4,000 in dividends.Required:Advise Dee and Eff as to:

(a) the legality of the dividend payment; and (6 marks)