Jul 242019
 

FAQ on declaration of dividend by companies

Q: Is it mandatory for a company to declare dividend?

A: No, it is not mandatory for a company to declare dividend.

Q: In case a company declares dividend, what shall be the last date of payment of dividend?

A: The dividend warrants shall be dispatched by the company-

  • in case of Interim Dividend- within 30 days of declaration of dividend in the Board Meeting; and
  • in case of final dividend – within 30 days of its approval in the AGM.

In case of ECS transfers for distribution of dividend, the transfer shall be made within 30 days of declaration of dividend.

Q: Can a company which has inadequate profits or  has  incurred loss in the immediately preceding financial year declare final dividend out of the accumulated profits of the previous financial years? Also, is there any restriction on the rate of dividend?

A: As per the second proviso to Section 123(1) of the CA, 2013, a Company which has inadequate profit or has incurred loss in the immediately preceding financial year may declare dividend out of the accumulated profits of the company.

However, as per Rule 3 of Companies (Declaration and Payment of Dividend) Rules, 2014, the rate of dividend shall not exceed the average of the rates at which dividend was declared by the company in the immediately preceding three financial years.

If a company has not declared dividend in any of the preceding three financial years, the restriction on the rate of dividend would not be applicable.

Q: Can Board of Directors declare final dividend for the financial year?

A: The Board can only recommend the final dividend to the shareholders of the Company for declaration at the AGM.

Q: Can dividend be declared to certain class of shareholders only?

A: Dividend can be paid to any class of shareholders, but separate resolution for declaration of dividend to each class of shares  is required to be passed at the meeting of the Board or shareholders, as the case may be.

Q: Can dividend be paid to certain shareholders of the same class?

A: Dividend once declared has to be paid to all the shareholders in a particular class.

Q: Can a shareholder whose shares have been transferred to IEPF claim back his shares?

A: As per proviso to Section 124(6) of the CA, 2013 claimant of shares  shall be entitled to claim the transferred shares from IEPF and the procedure for that would be specified in the IEPF Rules.

Q: When is unpaid/unclaimed dividend transferred to Unpaid Dividend Account?

A: As per Section 124(1) of the CA, 2013, dividend declared by the company which remains unpaid/ unclaimed for a period of 30  days from the date of declaration shall be transferred to Unpaid Dividend Account within 7 days from the date of expiry of the said period of 30 days.

Sensys Technologies

 Leave a Reply

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

(required)

(required)