1. What is Dividend?
♦ A dividend is a share of profits and retained earnings that a company pays out to its shareholders. When a company generates a profit and accumulates retained earnings, those earnings can be either reinvested in the business or paid out to shareholders as a dividend;
♦ However, Capitalization of Profit in form of Bonus Issue is not considered as dividend.
2. What are types of Dividends?
♦ There are two types of Dividends: –
a. Final Dividend
b. Interim Dividend
3. What is difference between Final and Interim Dividend?
|Final Dividend||Interim Dividend|
|It’s declared at the Annual General Meeting||It’s declared between 2 (Two) Annual General Meeting|
|It’s approved by the members in the Annual General Meeting after recommendation of Board in Board Meeting||It’s declared by the Board in Board Meeting|
|The amount of final dividend recommended by the Board should be stated in the Board Report||The amount of dividend interim paid by the Board should be stated in the Board Report|
4. What are the sources to pay the Dividend?
The Sources of Dividend are as under: –
a. 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; (if Company has not declared any dividend in each of the three preceding financial year, then there is no need to fulfill this Condition);
b. 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;
c. 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;
d. 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.
5. When payment of Dividend is not allowed to the Company?
6. Can Dividend be paid in any kind or it should only be paid in Cash?
c. Dividend Warrant;
d. Or in any electronic mode.
7. Explain the timeline cum procedure relating to payment of Dividend.
8. What shall be the Right to Dividend, Rights Shares and Bonus Shares to be Held in Abeyance Pending Registration of Transfer of Shares?
a. transfer the dividend in relation to such shares to the Unpaid Dividend Account unless the company is authorised by the registered holder of such shares in writing to pay such dividend to the transferee specified in such instrument of transfer; and
b. keep in abeyance any offer of rights shares or any Bonus Shares.
(Author – CS Nayan Pitroda proprietor of Pitroda Nayan & Co., Company Secretary in Practice can be contacted at +91 8866021210 and/ firstname.lastname@example.org)