DECLARATION OF DIVIDEND
SECTION 123 TO SECTION 127 OF THE COMPANIES ACT 2013 READ WITH COMPANIES (DECLARATION AND PAYMENT OF DIVIDEND) RULE 2014
Definition of Dividend
Section 2(35) of Companies Act 2013 dividend includes interim dividend.
Interim Dividend Means – The Dividend which is declared between financial year/ Calendar year (Company follows)
Sum of money paid by the Company to its shareholders, if authorised by the articles in proportion to the paid up on each share.
Section 123 of the Companies Act 2013
Sources of Funds
(i) Out of profit of after providing depreciation,
(ii) Out of Undistributed profit (Profits for any previous financial year after providing depreciation.)
(iii) Out of money provided by Central Government or State Government for the payment of dividend
→ Company may transfer such percentage of profits to the reserve before declaration of any dividend
where inadequacy or absence of profits the Company propose to declare dividend out of free Reserve, such declaration of dividend shall be made in accordance with Rule 3 of Companies (Declaration and payment of Dividend) Rule 2014
Rule 3 of Companies (Declaration and payment of Dividend) Rule 2014
1. *The rate of dividend declared shall not exceed the average of the rates at which declared by it in the immediately three preceding financial year.
* This is not applicable to a company which has not declared dividend in the last 3 immediately preceding year.
2. The Total amount to be withdrawn from such accumulated profits shall not exceed 1/10th of the sum of its paid-up share capital and free reserve in the latest audited financial statement.
3. The balance of reserve after such withdrawal shall not fall below 15% of the paid-up share capital as per latest audited financial statement.
No dividend shall be declared or paid by the Company from its reserve other than free Reserve
Free Reserve means:
Any amount representing notional unrealized gain, Notional gain, revaluation reserve, whether shown as reserve as otherwise
Any change in carrying of an asset or of a liability recognized in equity.
Depreciation shall be provided in accordance with schedule II
The Board of Directors declare interim dividend during any financial year out of surplus in the profit and loss account and out of profits of profits of financial year in which such interim dividend is sought to be declared.