Constructive notice

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Constructive notice is the legal fiction that signifies that a person or entity should have known, as a reasonable person would have, even if they have no actual knowledge of it. For example if it is not possible to serve notice personally then a summons may be posted on a court house bulletin board or legally advertised in an approved newspaper. The person is considered to have received notice even if they were not aware of it.[1][2] The phrase "legal fiction" should not be construed to mean that the concept of Constructive Notice is legally invalid. In Companies law the doctrine of constructive notice is a doctrine where all persons dealing with a company are deemed (or "construed") to have knowledge of the company's Articles of association and Memorandum of association. The doctrine of indoor management is an exception to this rule. The New York City Housing Court allows use of the concept of constructive notice by either the tenant or the landlord. For example constructive notice could be given to a landlord if a broken and unsupported metal grate on a public sidewalk which when stepped on by a pedestrian collapses. The landlord is reasonably expected to know that this is a safety hazard.

A rights issue is an issue of rights to buy additional securities in a company made to the company's existing security holders. When the rights are for equity securities, such as shares, in apublic company, it is a way to raise capital under a seasoned equity offering. Rights issues are sometimes carried out as a shelf offering. With the issued rights, existing security-holders have the privilege to [1] buy a specified number of new securities from the firm at a specified price within a specified time. In a public company, a rights issue is a form of public offering (different from most other types of public offering, where shares are issued to the general public). Rights issues may be particularly useful for closed-end companies, which cannot retain earnings, because they distribute essentially all of their realized income and capital gains each year; therefore, they raise additional capital through rights offerings. As equity issues are generally preferable to debt issues from the company's viewpoint, companies usually opt for a rights issue when they have problems raising equity capital from the general public and choose to ask their existing shareholders [2] to buy more shares.
Contents
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1 How it works

o o

1.1 Considerations 1.2 Underwriting

2 Basic example

3 See also 4 References 5 External links

How it works[edit source | editbeta]

A rights issue is directly offered to all shareholders of record or through broker dealers of record and may be exercised in full or partially. Subscription rights may either be transferable, allowing the subscription-rightsholder to sell them privately, on the open market or not at all. A rights issue to shareholders is generally made as a tax-free dividend on a ratio basis (e.g. a dividend of one subscription right for one share of Common stock issued and outstanding). Because the company receives shareholders' money in exchange for shares, a rights issue is a source of capital in an organization.

Considerations[edit source | editbeta]

Issue rights the financial manager has to consider: Engaging a Dealer-Manager or Broker Dealer to manage the Offering processes Selling Group and broker dealer participation Subscription price per new share Number of new shares to be sold The value of rights vs. trading price of the subscription rights The effect of rights on the value of the current share The effect of rights to shareholders of record and new shareholders and rightsholders

Underwriting[edit source | editbeta]

Rights issues may be underwritten. The role of the underwriter is to guarantee that the funds sought by the company will be raised. The agreement between the underwriter and the company is set out in a formal underwriting agreement. Typical terms of an underwriting require the underwriter to subscribe for any shares offered but not taken up by shareholders. The underwriting agreement will normally enable the underwriter to terminate its obligations in defined circumstances. A subunderwriter in turn sub-underwrites some or all of the obligations of the main underwriter; the underwriter passes its risk to the sub-underwriter by requiring the sub-underwriter to subscribe for or purchase a portion of the shares for which the underwriter is obliged to subscribe in the event of a shortfall. Underwriters and sub-underwriters may be financial institutions, stock-brokers, major shareholders of the company or other related or unrelated parties.

Basic example[edit source | editbeta]

An investor: Mr. A had 100 shares of company X at a total investment of $40,000, assuming that he purchased the shares at $400 per share and that the stock price did not change between the purchase date and the date at which the rights were issued. Assuming a 1:1 subscription rights issue at an offer price of $200, Mr. A will be notified by a broker dealer that he has the option to subscribe for an additional 100 shares of common stock of the company at the offer price. Now, if he exercises his option, he would have to pay an additional $20,000 in order to acquire the shares, thus effectively bringing his average cost of acquisition for the 200 shares to $300 per share ((40,000+20,000)/200=300). Although the price on the stock markets should reflect a new price of $300 (see below), the investor is actually not making any profit nor any

loss. In many cases, the stock purchase right (which acts as an option) can be traded at an exchange. In this example, the price of the right would adjust itself to $100 (ideally). The company: Company X has 100 million outstanding shares. The share price currently quoted on the stock exchanges is $400 thus the market capitalization of the stock would be $40 billion (outstanding shares times share price). If all the shareholders of the company choose to exercise their stock option, the company's outstanding shares would increase by 100 million. The market capitalization of the stock would increase to $60 billion (previous market capitalization + cash received from owners of rights converting their rights to shares), implying a share price of $300 ($60 billion / 200 million shares). If the company were to do nothing with the raised money, its Earnings per share (EPS) would be reduced by half. However, if the equity raised by the company is reinvested (e.g. to acquire another company), the EPS may be impacted depending upon the outcome of the reinvestment.

See als

Statement in lieu of prospectus a. If a company does not want to issue a prospectus to the public for subscription of the
shares, this statement is required to be issued to the public for necessary information. It must be signed by every person named in it as director or by his agent authorized in writing: The nature of the information of this document is more or less similar to that given in the prospectus. A copy of this statement must be filed with registrar within prescribed time. This provision does not apply to private company.

b. Share Certificate
A share certificate is a document issued under the common seal of the company and it states the extent of the interest of its holder in the company's capital. This certificate is usually given free of charge to every member whose name is entered in the register of members. It indicates the name, address and other particulars of the holder, the number of shares and the amount paid up on share held by him.

c. Share warrant
This document is issued under the common seal of the company in respect of fully paid up shares. It is a negotiable instrument which is transferable by mere delivery. It must be stamped- according to the market value of the shares. It may be issued with- coupons attached by means of which the holder is entitled to claim and dividend.

d. Common seal
Every company must have a common seal with its registered name engraved there in legible letters. It acts as the official signature of the company. Regulations governing the use and custody of the seal are laid down in the Articles of Association. It is generally to be used by the authority of the directors. It is not necessary to use it on all documents. But the seal is

required on documents when demanded by the company Ordinance or Articles of Association i.e. debentures, share certificate or share warrant.

e. Dividend
A dividend is that portion of the company's net profit which is distributed among the shareholders in proportion to the number of shares holding. It is first declared at the Board of Directors Meeting which is finally approved by shareholders at the annual general meeting. Until a dividend is declared, no shareholders can claim any return on the capital he has invested in the: company. It must be paid out of the profits of the company. The directors are empowered to transfer some portion of profits to reserve fund before recommending a dividend.

f. Minimum subscription
It is the minimum amount of shares subscribed by public before the directors can proceed to allotment. The amount of minimum subscription fixed by the Memorandum or the Articles and named in the prospectus under the heading i.e. preliminary expenses, underwriting commission, working capital and repayment of loans. If no such amount is fixed then the whole of the capital offered for subscription must be subscribed by the public. This is intended to ensure that the company will not commence the business without adequate capital.

g. Transmission of shares
It signifies a change in ownership of the securities through the operation of law in case of death or insolvency of members. The right of member is automatically transferred to his legal representatives after his death. Similarly on becoming bankrupt, a member's shares may be transferred to trustee by operation of law. The trustee must, however, prove to the company that he is entitled to deal with bankrupt's shares.

h. Underwriting
The person who takes risk to purchase a specified number of the shares and debentures of a newly floated company is known as underwriter. He receives a commission in exchange of his services which is called underwriting commission. So the act of sale insurance by specialized person in consideration of commission is named as underwriting. Sometimes underwritings does not want to take whole risk, he may transfer a part to sub underwriter which is arranged by means of contract.

POSTED BY I2BIZ AT 9:10 AM LABELS: BUSINESS

Meaning of Dividend Dividend means that portion of the corporate profit set aside and declared by the company which will be shared by each individual member of a company. Almost all Corporate operate with a view to make profits and to share the same with its members. Thus, the profits of a Corporate when distributed among its members are called Dividends. Further, the power to pay dividends is implied and it need not necessarily be captured in the Memorandum of Association or in the Articles to enable

a company to pay dividends. Before declaring and payment of dividend a company has to fulfil various formalities and in case of listed companies, the same is compounded with listing formalities. This Article enumerates the various laws and provisions governing declaration and payment of dividend from Company Law, Listing Agreement and Regulatory point of view. Provisions governing declaration and payment of dividend The provisions governing declaration and payment of dividend by a company are provided in the Companies Act, 1956 (referred to as Act) and the Rules made there under including the Companies (Transfer of Profits to Reserve) Rules, 1975, Companies (Declaration of Dividend out of Reserves) Rules, 1975. Further, in case of companies listed on the Stock Exchanges, the relevant clauses of Listing Requirements are to be followed. The Companies Act allows dividends to be paid out of three sources namely (a) Profits of the company for the year for which dividends are to be paid. (b) Undistributed profits of the previous financial years. (c) Moneys provided by the Central Government or a State Government for the payment of dividends in pursuance of a guarantee by the Government concerned. Determination of Dividend Section 205 of the Act only prescribes that dividend shall be paid out of profits of the company. As dividends can only be declared out of surplus earnings, there must be an exact method of determining whether surplus earnings for that purpose actually exist. But the Companies Act do not provide any guidance in this regard. In the matter of Hariprasad Vs. Amalgamated Commercial Traders the Chief Justice of Madras High Court observed that the Companies Act, 1956 does not say further how those profits have to be ascertained. There is nothing at all in the Act about how dividends are to be paid, nor how profits are to be reckoned; all that is left and very judiciously and properly left, to the commercial world. Further, it has become obligatory for a company to provide for depreciation as required by Section 205(2) of the Act. Depreciation has to be provided for the current year as well as for arrears of depreciation if any. It further states that the depreciation must be provided to the extent specified in the Section 350 of the Act. If we refer this Section, it states that the depreciation is to be calculated at the rate specified in Schedule XIV of the Act. Further, it is to be noted that if the Act makes no provision for a particular kind of asset, then its depreciation may be worked out on a basis approved by the Central Government in this regard. A company has got two choice to arrive at depreciation i.e. either to adopt the above said procedure or to work out depreciation by dividing ninety five percent of the original cost of the depreciable asset by the specified period in respect of such asset. But, if any asset is sold, discarded, demolished or destroyed for any reason before depreciation for such asset has been provided for in full, the excess, if any of the written down value of such asset over its sale proceeds or its scrap value shall be written off in the financial year in which it is sold. It is to be noted that the Act does not require any provision to be created for depletion of a wasting asset. Further, the previous years losses, if any must also be set off against the profits of any subsequent year or years before any dividend can be paid. The proviso (c) of Section 205(1) of the Act empowers the Central Government to waive in any particular case, the requirement of providing for depreciation. The word loss also includes depreciation (as declared in the case ofGarden Silk Weaving Factory Vs. CIT (1991) SC). There is no reason to give the word loss as used in Section 205 a different meaning from one in which it is ordinarily understood only because it has to be read with Section 115 of the Income Tax Act, 1961 (V.V.Trans-Investments (P) Ltd Vs CIT (1999) SC) Declaration of Dividend

A company cannot declare dividend in the following circumstances:a) When a Company is not having profit i.e. is a loss making company. b) When a Company fails to redeem its preference shares as per the provisions of Section 80A of the Companies Act. (Sub Section 2B) Further, a Company cannot declare a dividend without the prior approval of Financial Institution, in case if the covenants of the loan agreement stipulates in this regard. Section 205(3) stipulates that no dividend shall be payable except in cash. Dividends cannot be declared out of the Securities Premium Account or the Capital Redemption Reserve Account or Revaluation Reserve or Amalgamation Reserve or out of the Profit on re-issue of forfeited shares or out of profit earned prior to the incorporation of the Company. Compulsory Reserves Section 205 (2A) of the Act prescribes that before any dividend is declared or paid, certain percentage of profits as may be prescribed by the Central Government, but not exceeding 10% will have to be transferred to the reserves of the Company. The company may, however, voluntarily create more than the prescribed percentage and transfer to the reserves of the Company. If in a particular year, on account of inadequacy of profit, the company has to pay dividends out of the previous years reserves, it should follow such rules as may be made by the Central Government. In case of any deviation from such rules, then the company can do so only with the previous approval of the Central Government. The term Reserve meant in the said Rules means Free Reserves i.e. reserve which are not created or set apart or intended for any special purpose. For e.g. Development Rebate Reserve, Capital Reserve or Special Reserve will not come under the category of free reserves for the purposes of this rule. According to the Companies ( Transfer of Profits to Reserves) Rules 1975, before declaration or payment of dividend, profits shall be compulsorily transferred to reserves at the following rates:Rate of proposed dividend Not exceeding 10% Exceeding 10% but not exceeding 12.5% Exceeding 12.5% but not exceeding 15% Exceeding 15% but not exceeding 20% Exceeding 20% Amount to be transferred to Reserves Nil 2.5% of current profits 5% of current profits 7.5% of current profits 10% of current profits.

Under the Companies Bill 2009, it is left to the discretion of the company to determine the percentage of profits to be transferred to reserves.
Capitalisation of Profits The proviso to Section 205 further states that there is no prohibition for capitalisation of profits or reserves for the purpose of issuing fully paid up bonus shares or paying up any amount for the time being unpaid on any shares held by the members of the company. Thus, a company may in general meeting, on the recommendation of the Board of Directors resolve and convert into capital any sum standing to the credit of profit or loss account or reserve fund account or otherwise available for distribution. As a general rule only such funds can be capitalised as would be available for dividend distribution. Entitlement -Equity Shareholders

A company can pay dividend only to the shareholders of that company a) whose name appears on the Register of members maintained by the Company (in case the shares are held in physical form) or b) whose name appear on the register of beneficial owners maintained by a depository (in case the shares are held in dematerialised form) Preference shareholders (a) Preference shares carry a preferential right as to dividend in accordance with the terms of the issue and the Articles, and hence preference shareholders are paid dividend before the dividend is paid to the equity shareholders of the company. (b) Preference shares may be cumulative or non-cumulative. Dividend in arrears on cumulative preference shares can be paid in the subsequent years where there are profits sufficient for such payment. In case of non-cumulative preference shares, if no dividend is paid in a year, there is no right to receive it in future years. Further if any shares are delivered to a Company for registration and the same have not been registered by the Company then any dividend to be paid on those shares need to be transferred to the unpaid dividend account. Dividend entitlement for shares with Differential voting rights/dividend As per Section 86(a) (ii) of the Companies Act, 1956 and also according to the Companies ( Issue of Share Capital and Differential Voting Rights) Rules, 2001, a company can issue shares with differential rights as to voting as well as dividend subject to fulfilment of certain conditions given thereunder. In fact such issue of shares with Differential voting rights were also upheld by Company Law Board in Anand Pershad Jaiswal Vs.Jagatjit Industries Limited.(2009) stating that issue is well within the scope of Section 86 of the Companies Act as well as the Companies ( Issue of Share Capital and Differential Voting Rights) Rules, 2001. In this connection, it must be stated that CLB did not have the opportunity to get into much deeper details of this case, as it was settled through a consent order. Based on this judgement, a limited number of companies have come forward to issue shares with differential voting rights as well as dividend. Tata Motors is one such example which had issued shares both with differential rights as to vote as well as dividend. In July, 2009 SEBI amended the Listing Agreement to state that listed Companies are prohibited from issuing shares with superior voting rights and Clause 28A was inserted in the Listing Agreement. It states that The Company agrees that it shall not issue shares in any manner which may confer on any person, superior rights as to voting or dividend vis--vis the rights on equity shares that are already listed. So, after this amendment a Company whose equity shares are already listed on the Stock Exchange, cannot issue shares in any manner conferring superior rights as to voting and dividend on equity shares. It is to be noted that under Clause 37 of the Companies Bill, 2009, the different kinds of share capital which can be issued by a company excludes issue of equity share capital with differential voting rights. Thus, the Companies Bill prohibits issue of equity share capital with differential voting rights as well as differential dividend. But there is no transitory provision in the Bills for those companies which had already issued share capital with differential rights or dividend. So, it is utmost necessary that the Bill should include certain period to allow the companies which had issued equity share capital with differential voting or dividend to bring back their capital structure in accordance with the provisions of the Bill. Declaration of dividend out of profits earned by earlier years Section 205 of the Act, provides that a company can declare dividend out of the profits of the previous years. But, Clause 110 of the Companies Bill, 2009 stipulates further conditions to declare dividend in

such cases. It stipulates that if owing to inadequacy or absence of profits in any Financial Year, the Company proposes to declare dividend out of the profits of the previous financial year or years and transferred to its reserves, such declaration shall be passed by a resolution at the Board Meeting with the consent of all the directors and approval of the financial institution whose term loans are subsisting and also to be passed by the shareholders by a special resolution at the Annual General Meeting. Already the Ministry has received suggestions, stating that the resolution passed by the Board should be approved by all the directors present at the Board Meeting and not by with the consent of all the directors of the company. Procedure for declaration of Dividend A company which intends to declare and pay dividend should adopt the following procedures. Further, in case the companys shares are listed on the Stock Exchanges, additional requirements relating to Listing Agreements are to be followed. 1) Recommendation by Board of Directors:Dividend can be declared only on the recommendation of the Board of Directors of the Company. The shareholders do not have any power to declare any dividend. The Board of Directors after considering and approval of the financial statements of the Company, determines the rate of dividend to be declared and then recommends the same to the shareholders. For this purpose, a Board Meeting shall be convened to pass the resolution for a) rate of dividend and the amount of dividend to be paid. b) book closure date for dividend purposes c) date of annual general meeting d) Bank with which the account shall be opened for the purpose of remittance of dividend. 2) Approval by the Shareholders:The dividend recommended by the Board of Directors is declared by a resolution passed at the Annual General Meeting by the shareholders. The declaration of dividend should form part of an ordinary business item to be transacted in the notice of the Annual General Meeting. While approving the rate of dividend at the Annual General Meeting, the shareholders have power to declare a lower rate of dividend than what is recommended by the Board but they have no power to increase the amount or the rate of dividend so recommended by the Board of Directors. Dividend when declared becomes debt against the company. 3) Dividend now includes interim dividend:After the Companies (Amendment) Act, 2000, interim dividend is now recognised as a part of final dividend (clause 14A of Section 2). Interim dividend can be declared by the Board of Directors and they have authority to do so. Further, the provisions contained in Section 205, 205A, 205C, 206, 206A and 207 shall apply to interim dividend. 4) Dividend to be deposited in a separate bank account:The Company should deposit the dividend amount ( including interim dividend) within 5 days of its declaration in the separate bank account opened for this purpose. It means that the interim dividend will have to be deposited in a bank account within 5 days of the Board Meeting whereas final dividend will have to be deposited within 5 days from the date of Annual General Meeting in which it was approved by the shareholders. Also Section 205 (1B) stipulates that the amount so deposited shall be used only for the purpose of payment of dividend ( whether interim or final). 5) Dividend to be paid by cheque or warrant Section 205(5)(b) of the Companies Act, 1956 provides that the dividend payable in cash may be paid either by cheque or warrant.

6) Time frame for payment of dividend As per Section 207 of the Companies Act, 1956, the dividend warrants shall be despatched within 30 days of declaration of dividend. 7) Transfer of unpaid dividend As per Section 205A of the Act, where a dividend has been declared by a company but has not been paid (or claimed) within 30 days from the date of declaration to any shareholder entitled to the said payment of dividend, the Company shall within 7 days from the expiry of the said period of 30 days transfer the total amount of dividend which remains unpaid or unclaimed within the said period of 30 days to a special account to be opened by the Company in that behalf with any Scheduled Bank which is called unpaid Dividend Account of ----- company Limited. Interest at the rate of 12% p.a. is payable by the Company for delay in making the above transfer. 8) Transfer of unpaid or unclaimed dividend to the Investor Education and Protection Fund:Any amount of dividend which remains unpaid or unclaimed for a period of 7 years from the date it became due for payment shall be transferred by the company to the Investor Education and Protection Fund. When making a transfer to the Fund, the Company shall furnish to the authority appointed by the Central Government, the details relating to a) all sums included in such transfer b) nature of the sums, c) names and last known addresses of the persons entitled to receive the sum. D) the amount to which each person is entitled and such other particular as the case may be prescribed. The said fund shall be utilised for promotion of investor awareness and protection of the interests of investors in accordance with the Investor Education and Protection Fund Rules, 2001. Further as per Section 205B of the Act, once any amount on account of unpaid / unclaimed dividend has been transferred to the Investor Education and Protection Fund in pursuance of Section 205C, no claim, for payment for any sum, from any person shall be entertained by the Fund. Thus, any person claiming to be entitled to any dividend Clause 113 of the Companies Bill 2009 stipulates that the amount lying in the Investor Education and Protection Fund established under section 205C of the Companies Act, 1956 shall stand credited to the Investor Education Protection Fund established under sub section (1) of Section 112 of the said Bill. Further Clause 112 of the Bill stipulates that the fund shall be utilised for the refund in respect of unclaimed dividends, application monies due for refund and interest thereon etc. which is different from the present provisions. Also, the said fund shall be used for protection of investors education, awareness and protection in accordance with the Rules as may be prescribed. 9) Directors Report Section 217(1)(c) of the Companies Act, 1956 requires that the report of the Board of directors shall state the amount, if any, which it recommends should be paid by way of dividend. The Board may choose not to declare any dividend even though the company has made profit and the same be captured in the Directors Report with reasons. Compliance relating to Listing Agreement:-1) Clause 12A (4) As per this clause, the company should adhere to the provisions of Section 206A as well as Section 27 of the Securities Contracts (Regulations) Act, 1956, wherein it is the duty of the company to keep dividend, offer of rights shares and bonus shares in abeyance in a situation where such dividend, right etc. are declared in the interval between lodgement of a valid instrument for transfer of shares with the company and its eventual registration.

2) Clause 16 The Company agrees to close its transfer books for the purpose of declaration of dividend and will give notice to the Stock Exchange at least 7 working days in advance of the date of closure of transfer books and will also intimate the purpose for which the transfer books are closed. Regarding the book closure, advertisement should be issued in the newspapers and copies of such advertisements shall be sent to Stock Exchanges ( As per Section 154 of the Companies Act, 1956). 3) Clause 19 :The company will give prior intimation to the Stock Exchange about the Board Meeting at which proposal for recommendation of dividend and or passing over of dividend due to be considered at least 2 working days in advance. Further, the Company will recommend or declare dividend at least 5 days before commencement of the closure of its transfer books. 4) Clause 20A The company agrees to declare and disclose the dividend on per share basis only. 5) Clause 21 The Company will fix and notify the Stock Exchange at least 21 days in advance of the date on from which the dividend on shares will be payable and will issue simultaneously the dividend warrants/cheques which shall be payable at par at such centres as may be agreed to between the Exchange and the Company and which shall be collected at par, with collection charges, if any, being borne by the Company, in any bank in the country at centres other than the centres agreed to between the Exchange and the company so as to reach the holders of shares on or before the date fixed for payment of dividend. 6) Clause 28A The Company agrees that it shall not issue shares in any manner which may confer on any person, superior rights as to voting or dividend vis--vis the rights on equity shares that are already listed. 7) Clause 34 The Company agrees that it will not forfeit unclaimed dividends before the claim becomes barred by law and that such forfeiture, when effected will be annulled in appropriate cases. Further, the Company agrees that if any amount be paid up in advance of calls on any shares, it will stipulate that such amount may carry interest but shall not in respect thereof confer a right to dividend or to participate in profit. 8) Clause 41 In respect of requirements as to financial figures, the Company shall disclose the following to the Stock Exchanges, the dividends paid or recommended for the year, including interim dividends:a) the amount of dividend distributed or proposed for distribution per share and the amounts in respect of different classes of shares shall be distinguished and the nominal values of shares shall also be indicated. b) Where dividend is paid or proposed to be paid pro-rata for shares allotted during the year, the date of allotment and number of shares allotted, pro-rata amount of dividend per share and the aggregate amount of dividend paid or proposed to be paid on pro-rata basis. 9) Clause 49

In respect of complaint received from any shareholder regarding non-receipt of dividend, a board committee under the chairmanship of a non-executive director shall be formed to specifically look into the redressal of shareholder. This Committee shall be designated as Shareholders/Investors Grievance Committee. Further, under the matters to be placed before the Board Meeting, one of the item is to place the non-compliance relating to payment of dividend. Hence a listed company will have to compulsorily place before the Board of Directors any grievances relating to shareholders with respect to non-payment of dividend. 10) Shareholders Information under Corporate Governance Report Under the Corporate Governance Report, the dividend payment date should be mentioned under the heading Shareholders Information. Interim Dividend Whether a statutory debt The declaration of an interim dividend does not create a debt against the company. Dividends can be declared only by a resolution of the shareholders in accordance with the Directors recommendation at a general meeting. But, if so permitted by the Articles of Association of the company, the Directors can declare an interim dividend between two Annual General Meetings. While declaring interim dividend, the Board should carefully assess and examine the financial statements and should ensure that the company has adequate profits. However, it does not create a debt enforceable against the company, because, the Directors can very well rescind the resolution before payment. Thus, the shareholders do not get any vested right under a Directors resolution declaring an interim dividend. It is to be noted that Section 207 of the Companies Act which applies to interim dividend also, stipulates penalty for failure to distribute dividend to the shareholders within 30 days of its declaration. The penalty prescribed under the Act is that the directors shall be punishable with simple imprisonment of three years along with a fine of Rs.1000 for every day during which such default continues and the company shall be liable to pay simple interest at the rate of 18% p.a. during the period for which such default continues. Further, since the penalty prescribed is by way of both fine and imprisonment, the offence is also not compoundable under Section 621A of the Companies Act. Thus, going by the principle, in law one cannot take advantage of his own default, the Board of Directors have got power to rescind the payment of dividend only upto the 29th day of its declaration and not thereafter. It is because, after the 30th day, it becomes a statutory default. Clause 110(3) of the Companies Bill, 2009 also stipulates that the board of directors of a company may declare interim dividend during any financial year out of the profits of the company for part of the year. When dividend need not be paid In the following cases, a company need not pay dividend within 30 days from the date of declaration:a) Where dividend could not be paid by reason of the operation of any law. b) Where a shareholder has given directions to the company regarding payment of dividend and those directions cannot be complied with. c) Where there exist a dispute regarding the right to receive the dividend. d) Where dividend is lawfully adjusted by the company against any sum due to its from the shareholder. e) Where the non-payment of dividend is not due to any default of the company. Disqualification for directors:-

As per Section 274 (1)(g) of the Companies Act, 1956, if a public company fails to pay dividend and such failure continues for one year or more, then any person who is a director of the company at the time when default is made, shall not be eligible to the appointed a director of any other public company for a period of 5 years. Conclusion The payment of dividend will instil confidence to the shareholders of the company, after all a company can declare and pay dividend only if it makes profit. Further, payment of dividend consistently over a period of time would enhance the image of the company. The company would also stand to benefit as whenever it requires additional funds for expansion, it can very easily tap the capital markets (as investors would be ready and willing to invest) without resorting to huge borrowings from Banks and Financial Institutions. The shareholders can be rewarded by other means i.e. declaring bonus shares, rights shares etc. but since dividend is paid in cash it is considered one of the best reward a company can do to its shareholders for enhancing their wealth. The shareholders also enjoy additional benefit since the dividend which they receive is tax free and need not pay any tax on dividend and the company would be liable to pay Dividend Distribution Tax. Thus, a consistent dividend paying company is considered to be a good investment option to the investors.

Director (business)
Director refers to a rank in management. A director is a person who leads or supervises a certain area of a company, program, or project.[1] Companies that use this title often have many directors spread throughout different categories (e.g. director of human resources).[2] The director usually reports directly to a Vice President or to the CEO. In companies with advanced ranks within director, the next rank is usually Senior Director, followed by Executive Director. Large organizations also sometimes have Assistant Directors. Director commonly refers to the lowest level of executive in an organization, but many large companies are designating titles of Associate Directors more frequently.

What is a Shareholders' Meeting?

A shareholders' meeting is an annual meeting of everyone who has purchased shares in acorporation. The meeting is usually scheduled around the public release of the annual financial statements. It provides an opportunity for shareholders to vote on key issues, such as the direction of the company, the decisions made over the last year and the financial results. Shareholders' meetings are required as part of the articles of incorporation and there are a series of laws and routine requirements surrounding the timing, subjects and structure of this meeting. By law, shareholders must approve of any merger or restructuring of the corporation, changes to the articles of incorporation, amendments to the bylaws, sales or transfers of assets, use of stock option plans, issuing of securities and the dissolution of the corporation. The attendees at a shareholder's meeting are usually representatives from investment firms, banks and pension funds that own large number of shares, as well as private investors. These professional are well-informed on the issues at hand, the significance of the requests and the details of the financial statements. Individuals who hold a minimal number of shares rarely attend the meeting and instead submit a shareholder proxy form before the shareholder's meeting. A shareholder proxy form allows a shareholder to give permission for another party to vote on their behalf. If no specific shareholder is named, a default proxy is appointed, normally

thechairman/woman of the meeting. On the form is a list of the items to be voted on and a space for the shareholder to indicate their vote. The proxy is responsible for collecting these forms and casting their votes on behalf of the absent shareholders during the shareholder's meeting. In order for an item to be passes, a quorum must be present. A quorum is a predetermined number of shares that must pass a motion before it can be accepted. This value of shares may be represented by a large number of people, or several companies. The number of shares for a quorum is based on the total number of shares issued and the number outstanding. A quorum vote must represent the wishes of the majority of voting shares. The value of the quorum required to pass a motion can be set based on each issue, with more significant issues requiring a larger supporting vote from shareholders. Meeting minutes must be taken at shareholder's meeting and distributed to all shareholders with a set time period after the meeting. A shareholder's meeting provide an opportunity for investors to hear about the plans of the corporate executive for the next year and the explanations behind any financial losses or missteps. Minority shareholders can achieve a disproportionate amount of influence over corporate executives through active participation in shareholder's meetings. Educated investors who challenge the claims of the company and illustrate a focus on a particular issue or cause can have deep impact.

Annual general meeting

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An annual general meeting (commonly abbreviated as AGM, also known as the annual meeting) is a meeting that official bodies, and associations involving the general public (includingcompanies with shareholders), are often required by law (or the constitution, charter, bylaws etc. governing the body) to hold. An AGM is held every year to elect the board of directors and inform their members of previous and future activities. It is an opportunity for the shareholders and partners to receive copies of the company's accounts as well as reviewing fiscal information for the past year and asking any questions regarding the directions the business will take in the future.