Definition of the dividend (Section-2(35))
Dividend includes interim dividend.
- The dividend shall be paid out of profits of the company only.
- All the company can declare the dividend except the company registered under section-8 (Non-profit organisation).
Company may before declaration of the dividend transfer the amount of its profits to reserves.
Dividend can’t be declared from its reserve other than the free reserves.
In case the company does not earn profit during the financial year then also the company can declare the dividend out of accumulated profits earn by the company in previous year and the following conditions need to full fill:-
- The rate of dividend shall not exceed the rate of declaration of dividend immediately precedingthe last three financial years.
- The amount drawn from the accumulated profit does not exceed the 1/3rdof paid-up share capital and free reserve.
- The amount which is drawn shall be utilisedfor the losses during the financial year in which dividend is declared.
- The balance of reserve after drawn shall not fall below 15% of its paid-up share capital.
According to the Section-123 the company may declare dividend in two ways: –
- According to the provision of the Section-123(3) Interim dividend declared only in the board meeting and,
- Dividends declare in the annual general meeting.
Procedure of declaration of the dividend
- Issue the notice of the board meeting and hold the meeting then pass the resolution with related requirements.
- Hold the general meeting and pass the ordinary resolution about declaring the payment of dividend.
- The amount of the dividend including interim dividend declared shall be deposited in the scheduled bank within the five daysfrom the date of declaration of the dividend.
- Company shall pay the dividend to the shareholders within the period of 30 days from the date of the declaration of dividend.
- The amount which is unclaimed or unpaid company shall transfer to Unpaid & Unclaimed Dividend A/C (Section-124) within the 7 days form the expiry of the 30 days from the date of declaration of the dividend.
- The company shall within the 90 days of making the transfer in Unpaid Dividend Account prepare the list of shareholders containing the details of them and place it on the website of the company.
- The amount which is unclaimed or unpaid upto 7 years from the date of transfer of amount in Unclaimed & Unpaid Dividend A/C then company shall transfer that amount in the IEPF (Investor Education Protection Fund) A/C (Section-125) with the related details.
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Posted by: CA Neetu Saini