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Read this article to learn about the Dividend Declaration and payment in a Company Registration where share transfer is restricted.

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Published by manish.rw1234, 2022-12-06 06:20:03

Dividend Declaration and Payment in a Company Registration

Read this article to learn about the Dividend Declaration and payment in a Company Registration where share transfer is restricted.

Dividend Declaration and Payment in a
Company Registration

Every registered Company, listed on a Stock Exchange, can declare its dividend to its
shareholders. Many Public Limited Companies in India, on a quarterly or half-yearly
basis, issue dividends to their shareholders. But there are some regulations relating to
the dividend declaration and payment procedure. In this article, we will detail the
regulations on dividend declaration by a Company as per the Companies Act of 2013.

Profit Transfer in a Company Registration

Before the declaration of the dividend in the concerned financial year, the Company
Registration can transfer the percentage of its profits for that year as the Company
seems appropriate to the reserves of the Company.

Accumulated Profits of a registered Company

In case of owing to inadequacy or absence of profits in any financial year, any
registered Company Registration can propose to declare its dividend out of the
accumulated profits earned by it in previous years. The Company Registration can then
transfer the dividend to the reserves. But such a declaration of the dividend must not be
made except in accordance with rules prescribed on this behalf by the Authority. Also,

no Company Registration must declare or pay dividends from its reserves other than
free reserves.

What if the Company is going through Depreciation?

No company should declare a dividend unless it carries over losses and Depreciation,
which are not provided in the previous year(s), set off against the Company's profit for
the current year. The Depreciation accounted for by the Company Registration can be
provided by the provisions of the Schedules of the Companies Act of 2013.

Interim Dividend by the BoD

A company's Board of Directors (BoD) can declare an interim dividend during the
current financial year. The Company Registration can declare its dividend out of the
surplus in the profit and loss account. Also, the Company can declare the dividend out
of profits of the financial year in which such interim dividend is sought to be declared.

Dividend payment if the Company Registration incurs
Loss

Suppose the Company has incurred a Loss during the current fiscal year up to the
quarter's end. This immediately precedes the date of declaration of the interim dividend.
In that case, the PLC must not declare the interim dividend at a rate higher than the
average rate of dividends declared by the Company. If at all done, the dividend must be
declared during the immediately preceding three financial years.

Dividend Deposition regulations

A registered Company must deposit the dividend amount, including the interim dividend,
in a scheduled bank. The PLC must deposit in a separate account within five days from
the dividend declaration date.

No company must pay the dividend in respect of any share except to the registered
shareholder of such claim, his order, or his banker. The Company must not pay the
dividend except in cash.

Paid-up Bonus Shares

A Company Registration cannot prohibit a company's capitalization of profits or reserves
from issuing entirely paid-up bonus shares. Also, the Company must not restrict the
payment when it doesn't pay on any shares held by its members.

Dividend Payment Options

The Company can pay the shareholder's dividend the payment in the following manner:

 Cheque
 Cash
 Warrant
 Any electronic mode

Exceptions to the Dividend Declaration

Company Registration must not declare a dividend or pay it for any financial year. But
there are some exceptions to this enlisted in the following points:

 The profits of the Company for the concerned financial year arrived after
providing for Depreciation

 The profits of the Company collected for any previous financial year or years
arrived after providing for Depreciation following the provisions and the remaining
undistributed dividend, or both

 The money provided by the Central or the State Government for the dividend
payment by the Company in pursuit of a guarantee by the concerned
Government

For original resources: https://medium.com/@manish.rw1234/dividend-declaration-
and-payment-in-a-company-registration-d3f8841bd434


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