The latest year end accounts may evidence adequate reserves to adhere to and met the standards of the Companies Act 2006’s statutory test to pay a dividend, there are other legal tests and factors to be borne in mind prior to declaring a dividend. 
During such uncertain, unprecedented times, it may be that the financial position of a company has been weaken significantly since the last accounts were prepared. Directors should therefore consider the possible application of insolvency or other laws as appropriate and moreover whether the company’s retained reserves shown in its last annual accounts have subsequently – ie, up to the date of the proposed dividend – been depleted. 
If this is the case, it would prove unlawful to make a distribution out of such lost, now non-existent profits.
Reserves may well have eroded as a consequence of stock (inventory) write downs; provisions against bad debts; loan loss provisions by banks; losses on financial investments; business interruption etc. This list is not exhaustive. In short, directors should consider whether the company will, following the payment of the proposed dividend, be solvent and be able to continue to pay its debts as they fall due, and that decision should be made taking the current factors into account.

Ordinarily, if a dividend is declared by shareholders it becomes a debt due to the shareholders and therefore cannot be simply reversed, varied or cancelled. If a company has declared a dividend which has not been paid and the directors now wish to cancel it, they should seek legal advice based on the specific facts and circumstances.