DIVIDEND
If Mr.A is a person have Rs 100 and he is depositing that amount in the bank, in return the bank will
provide the interest for Rs 100 that is return on investment.
If the same person A, instead of depositing the money in the bank he is depositing the money in
share in a company, the co., may call him as a share holder or member of the company, not Only
Mr.A other number of person buy the share from the same company,and the share capital has been
increased due to this..so the company will work and gain profit, so due to the investment of the
share in the company, from the profit the company will issue DIVIDEND to Mr.A.
1. Definition
Sec 2(35) include a interim dividend
Sum of money paid by the company to its shareholders, from the profit that is a portion of amount
will be shared as a dividen to the share holders.
2. Who can declare dividend
If a company is going to declare a dividend under the companies act 2013, the company has to
comply with the provision which comes under section 123 to 127 of the Act.
3. DECLARATION OF DIVIDEND
- The board of directors will decide the rate of dividend and make a recommendation to the
members of the company.
- The members only can declare the rate of dividend
- The members can decrease the rate of dividend (for ex if the board of directors recommend
that rate of dividend is 10rs and the members only can decrease that is Rs9 or 8 the rate and
can’t increase it, if they increase it will become void)
D. where the dividend has been declared.
Dividend will be declared in annual general meeting. In this meeting only the board will
recommend and the members will declare the rate of dividend. if it has been declared in this
AGM then the item will be called as ordinary business
If the rate of dividend has not been declared in the AGM, we cant wait until next AGM, at that
time we can organize a next meeting that is for emergency purpose that is EGM- Extraordinary
General Meeting.
EGM shall be happened only there is any urgent situation.when it is declared in EGM then it is
called as special business.
E. Dividend on partly paid shares – see the pic.
if the dividend is paid from the free reserves, the RULE 3 Conditions should be satisfied.
Free reserve can be called as general reserve or revenue reserve.
Dividend should not be declared from the SECURITY PREMIUM ACCOUNT and CAPITAL
REDEMPTION RESERVE ACCOUNT.
ONLY from the free reserve we can declare the divedend.
This RULE 3 will not be applicable to the GOVERNMENT CO.,
addes
From the latest balance sheet, the paid up share capital +free reserves should be added and
from that 1/10th of the amount should be paid as an dividend.
Balance reserve amount should be above 15%
Payment of divided can be declared only to the registered share holders or if the registered
share holders gives any order then it will be paid as per the order.
Sec 123(4) will not be applicable to the government companies.
