Office Address: S-193, Ground Floor, School Block, Gali No.

2, Shakarpur, Delhi-110092
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Declaration and Payment of Dividend

Part-1
Relevant Provisions as per Companies Act, 2013

Sections: 2(35), 51, 123, 124, 125, 126 and 127

Rules : Companies (Declaration and Payment of Dividend) Rules, 2014.

: The Investor Education and Protection Fund Authority (Appointment

of Chairperson and Members, Holding Meetings and Provision for
Offices and Officers) Rules 2016.

: Investor Education and Protection Fund Authority (Accounting, Audit,

Transfer and Refund) Rules, 2016.

What is Dividend?

In General terms,
“Dividend” means the profit of a Company, which is not retained in the
business and is distributed among the Shareholders in proportion to the
amount paid-up on the shares held by them.

As per Section,
"Dividend" includes any interim dividend.

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Source of Dividend

1. For Financial year

Out of the profit of the Company for that year, or
Out of the profit of the Company for any previous financial year(s), or
Both, or
Out of money provided by the Central Government or a State Government
for the payment of dividend by the company in pursuance of a guarantee
given by that Government.

2. For Interim Dividend

Out of surplus in the Profit and Loss Account, or
Out of profits of the financial year for which such interim dividend is
sought to be declared, or
Out of profits generated in the financial year till the quarter preceding the
date of declaration of the interim dividend.

Declaration of Dividend Out of Reserves

A company may declare dividend out of free reserves subject to the fulfillment
of the following conditions, namely:-

 The rate of dividend declared shall not exceed the average of the rates at
which dividend was declared by it in the three years immediately preceding
that year.

 The total amount to be drawn from such accumulated profits shall not
exceed one-tenth of the sum of its paid-up share capital and free reserves as
appearing in the latest audited financial statement.

 The amount so drawn shall first be utilised to set off the losses incurred in
the financial year in which dividend is declared before any dividend in
respect of equity shares is declared.

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 The balance of reserves after such withdrawal shall not fall below fifteen per
cent of its paid up share capital as appearing in the latest audited financial
statement.

Time Line

Conduct Board meeting for Declaration of Dividend

Open a Separate Bank Account and deposit the sum decided for distribution as Dividend within 5
days from the date of Declaration

Distribute the Dividend within 30 days of Declaration

Transfer the remaining unclaimed/unpaid amount of Dividend to Unpaid Dividend Account within 7
days from date of expiry of the said period of 30 days

Transfer the unclaimed amount of Dividend from Unpaid Dividend Account to Invester Education
and protection after the expiry of 7 years from the date of such transfer to Unpaid Dividend Account

Office Address: S-193, Ground Floor, School Block, Gali No. 2, Shakarpur, Delhi-110092
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General Points

o A company before the declaration of any dividend in any financial year,

transfer such percentage of its profits for that financial year as it may
consider appropriate to the reserves of the company.

o No dividend shall be declared or paid by a company from its reserves other

than free reserves.

o No company shall declare dividend unless carried over previous losses and
depreciation not provided in previous year or years are set off against profit
of the company for the current year.

o The company shall within a period of ninety days of making any transfer of
an amount to the Unpaid Dividend Account, prepare a statement containing
the names, their last known addresses and the unpaid dividend to be paid
to each person and place it on the web-site of the company, if any, and also
on any other web-site approved by the Central Government for this purpose,
in such form, manner and other particulars as may be prescribed.

o If the Company delays the transfer of the unpaid/unclaimed dividend

amount to the unpaid dividend account, it shall pay interest @ 12% p.a. till it
transfers the same.

o where a dividend has not been paid by the Company within 30 days from
the date of declaration, every Director shall, if he is knowingly a party to the
default, be punishable with imprisonment for a term which may extend to 2
years and shall also be liable to a fine of rupees 1000 for every day during
which default continues and the Company shall be liable to pay simple
interest @ 18% per annum during the period for which such default
continues.

Office Address: S-193, Ground Floor, School Block, Gali No. 2, Shakarpur, Delhi-110092