2. Coverage
Treatment of Profits
Meaning of Dividend
Types of Dividend
Forms of Dividend Declaration
Sources of Dividend
Dividend out of Current year’s profit
Provision for Depreciation
Dividend out of Previous year profits
Dividend out of Capital Profits
Declaration and payment of divined
Investor Education and Protection Fund
Key dates with respect to dividend
4. Definition of DividendDefinition of Dividend
The Companies Act, 2013 defines 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.
5.
6. Forms of DividendsForms of Dividends
Daily Dividend
Weekly Dividend
Monthly Dividend
Quarterly Dividend
Semi Annually or Half Yearly Dividend
Annual Dividend
Final Dividend
Interim Dividend
Special Dividend
Supplementary Dividend
8. Sources of DividendSources of Dividend
Under Sec 123 of the Act, Sources out of which
dividend can be declared was as follows:
Out of the profits of the company for the current
year after providing for depreciation under Sec
123(2); or
Out of the profits of the company for the previous
year or years arrived at after providing for
depreciation under Sec 123(2) and remaining
undistributed; or
Out of moneys provided by the Central or State
Governments for the payment of dividend pursuant
to a guarantee given by the Government; or
Out of Capital Profits
9. Ascertainment of divisible profits and dividend out ofAscertainment of divisible profits and dividend out of
current year’s profit:current year’s profit:
Profits {as per result of P&L A/C} XXX
Less: a. Current year’s depreciation
(If not provided)
XX
b. Loss of P.Y (or) Dep of P.Y
(whichever is less)
XX
c. Amount to be transferred to
reserves
XX
Total (a+b+c) XX XX
Divisible profits (Such amt can be
declared as dividend)
XXX
Calculation of divisible profits:
10. Provision for DepreciationProvision for Depreciation
Calculation of Depreciation as per the
provisions of Schedule II of the
Companies Act, 2013
To the extent of Section 350- Both on
WDV and SLM
11. Dividend in case of Absence or Inadequacy of ProfitsDividend in case of Absence or Inadequacy of Profits
Sec 123 of the Companies Act, 2013
As per Rule 8.1 the following conditions:
1. The Rate of dividend declared shall not exceed average dividend
rate of last 3 years; or
2. Amount drawn from reserves shall not exceed 10% of sum of paid
up capital+ reserves
3. The amount so withdrawn( in step 2) should be first utilized to
setoff current year losses.
4. The Balance of reserves after such drawn shall not fall below 15%
of the paid up share capital.
12. Dividend from Capital profitsDividend from Capital profits
“Capital Profits” mean profits earned out of capital transactions.
Sources of capital profits are:
• Profits on sale or revaluation of fixed assets
• Share Premium
• Profits on reissue of forfeited shares
• Capital redemption reserve account
• Profit prior to incorporation
• Profit on redemption of Debentures
The capital profits cannot be considered as available for distribution
as dividend unless;
a. The Articles of Association authorize such a distribution; and
b. The surplus is realized in cash and remains after a valuation of
the whole of the assets and liabilities.
13. Declaration of DividendDeclaration of Dividend
As per Sec. 123(3), a dividend when proposed does not become a
debt but only becomes debt when declared and a shareholder is
entitle to sue for recovery of the same after expiry of the period of
30 days.
The board of directors recommend the dividend in the board
meeting and later at the annual general meeting it will be approved
and declared for the payment.
As per Sec 123(4) – The Amount to be deposited to a separate
account once dividend declared within 5 days from the date of
declaration of dividend.
As per Sec 123(5) – Dividend may be paid by cheque or warrant
or in any electronic mode to the shareholders.
RevocationRevocation of Declared Dividend:of Declared Dividend:
A dividend including interim dividend once declared becomes a
debt and cannot be revoked, except with the consent of the
shareholders.
14. Payment of Dividend:
Sec 123(5)- Dividend in respect of a share has to be paid to the
registered shareholders or to his order or to his bankers.
Sec 123- Company close the register of members or fix a
record date of which 7 days notice should be given by
publication of advertisement in two newspapers- one English
and other in the local language where the registered office of the
company situated.
Sec 123 - Dividend has to be distributed within 30 days of the
declaration. For this purpose a ‘dividend warrant’ is posted
within 30 days will be deemed to be payment of dividend
irrespective of the fact whether it has been enchased or not.
15. Section 124 (Dividend Unclaimed)Section 124 (Dividend Unclaimed)
Under Sec 124(1), if a dividend declared by a company has not
been paid or claimed within 30 days of the declaration the same
shall within 7 days have to be transferred to a special account called
‘unpaid dividend account of ‘X’ company’.
Sec 124(2) - Later with in ninety days, if there is no claiming of the
dividend then we should prepare statement containing names,
addresses and unpaid dividend amount and should be kept in
company website or any Govt approved website.
Sec 124(3)- Any default of transferring amount to the unclaimed
account, the company from the date of default, shall pay an interest
rate of 12% P.A.
Sec 124(7)- Company fails to comply any of the requirements of
this section, punishable with a fine not less than five lakh but may
extend to twenty five lakh for each officer involved in the default.
16. Investor Education and Protection Fund
Under Sec 124, if the amount remains unpaid or unclaimed for seven
years period from the date of transfer to the “Unclaimed Dividend
Account” then the amount should be transferred to a fund which was
established by the Central Govt. as per the provisions of Section 125
called as “Investor Education and Protection Fund”.
The main sources of Fund as follows:
• Amounts in the unpaid dividends of the companies;
• The application moneys received by companies for allotment of any
securities and due for refund;
• Matured deposits and debentures with companies;
• Grants and donations given by Central Govt, State Govt, companies
and any other institutions etc.
Any person claiming to be entitled to the amount may apply to the
authority administering this fund for the payment of the money claimed.
17. Utilization of IEPFUtilization of IEPF
The refund in respect of unclaimed dividends, matured deposits,
matured debentures, the application money due for refund and
interest thereon;
Promotion of investors’ education, awareness and protection;
Distribution of any disgorged amount among eligible and identifiable
applicants for shares or debentures, shareholders, debenture-holders
or depositors who have suffered losses due to wrong actions by any
person, in accordance with the orders made by the Court which had
ordered disgorgement;
Reimbursement of legal expenses incurred in pursuing class action
suits under sections 37 and 245 by members, debenture-holders or
depositors as may be sanctioned by the Tribunal; and
Any other purpose incidental thereto.
18. Key Dates with respect to DividendKey Dates with respect to Dividend
Date of Declaration of Dividend
Cum-dividend Date
Ex-dividend Date
Record Date
Book Closure Date
Dividend Payment Date
