Company Law

Declaration and Payment of Dividend [Ch. IX]

1.

Declaration of dividend out of – [S. 123(1)]
  • profits of the Co for that year arrived at after providing for depreciation, or
  • profits of the Co for any previous FYs arrived at after providing for depreciation and remaining undistributed, or
  • both (the aforesaid profits), or
  • money provided by CG/SG for the payment of dividend by the Co in pursuance of a guarantee given by that Govt.

2.

Transfer to reserves

[1st proviso to
S. 123(1)]
  • a Co may transfer such percentage of its profits for that FY as it may consider appropriate – its voluntary

3.

Declaration of dividend in case of inadequacy/absence of profits [2nd proviso to
S. 123(1), R. 3]
  • out of the accumulated profits earned by it in PYs and transferred by the Co to the reserves, subject to the following conditions:
    • Rate of dividend declared NOT > average rate of dividend declared by it in 3 years immediately preceding that year
      • Not Applicable to a Co, which has not declared any dividend in each of the 3 preceding FY
    • Total amount drawn from such accumulated profits NOT > ? (paid-up share capital + free reserves as appearing in the latest audited FS)
    • The amount so drawn shall first be utilised to set off the losses incurred in the FY in which dividend is declared before any dividend in respect of equity shares is declared
    • Balance of reserves after such withdrawal shall NOT < (fall below) 15% of (paid-up share capital + free reserves as appearing in the latest audited FS)
    • Dividend shall be declared only after set off of carried over previous losses and depreciation not provided in PY against profit of the Co for the CY.
    • Depreciation shall be provided in accordance with the provisions of Sch II

4.

Dividend Schedule

Action point

Time line

Deposit of Dividend amount in a scheduled bank in a separate a/c

within 5 days from the date of declaration
[S. 123(4)]

any Dividend has remained unclaimed/unpaid,

at the end of 30 days from the date of Declaration, then

Transfer the total amount of UnPaid/UnClaimed dividend to a special a/c opened by the Co in that behalf in any scheduled bank to be called the Unpaid Dividend A/c

within 7 days from the date of expiry of the said period of 30 days [S. 124(1)]
  • If delay
  • also transfer the Interest @ 12% p.m. from the date of Default till the date of transfer
    [S. 123(3)]

Placing a statement containing Details of transfer to Unpaid Dividend A/c on websites

within 90 days of making any transfer to the Unpaid Dividend A/c [S. 124(2)]

Every subsequent year, furnishing a statement or information through Form No. IEPF 2, till 7 years

within 90 days after the holding of AGM or the date on which it should have been held as per S. 96 of Co Act 2013

Furnishing a statement in Form No. IEPF 6 to IEPFA stating therein the amounts due to be transferred to IEPF in next FY

within 30 days of end of FY i.e., 30th April every year

Filing a statement to IEPFA stating the reasons of deviation, if any, of amounts detailed in Form No. IEPF 6 above and actual amounts transferred to the IEPF

within 30 days of the closure of its accounts for the FY

If any Dividend has remained unclaimed/unpaid in “UNPAID DIVIDEND ACCOUNT” for 7 YEARS from the date of transfer to UNPAID DIVIDEND A/c, then transfer to IEPF (into specified branches of Punjab National Bank, along with challan)

within 30 days of such amounts becoming due to be credited to IEPF

Filing a copy of the challan indicating the deposit of the amount to IEPF, alongwith Statement in Form No. IEPF 1

within 30 days of submission of challan

5.

Transfer of shares to IEPF

[S. 124(6)]

All shares in respect of which Dividend has not been paid/claimed for 7 CONSECUTIVE YEARS or more, then such shares shall be transferred by the Co in the name of IEPF.

  • in case any dividend is paid/claimed for any year during the said period of 7 consecutive years, the share shall not be transferred to IEPF.