Please Wait ..

Sign-in to your account


Username:
Password:

Remember Me

Forgot your password?

Sign-up now



Join CAclubindia.com and Share your Knowledge. Registered members get a chance to interact at Forum, Ask Query, Comment etc.


Discussion > Corporate Law > Others >

Declaration of dividend out of Accumulated profits

    Post New Topic
Pages : 1








[ Scorecard : 24]
Posted On 19 May 2011 at 12:49 Report Abuse

 

Dear members
 
Can anybody provide checklist in case of declaration of dividend out of accumulated profits (i.e surplus profits not transferred to reserves.)
 
Also pls clarify
 
- will the rules of declaration of dividend out of reserves apply in this case
- Should the Company transfer profit to reserves out of that accumulated  previous year(s)profits as per transfer of profit to reserves rules
- will the company have to pay dividend tax out of accumulated previous year(s) profit
 
 
Thanks & Regards
Vidya

Online classes for CA CS CMA



Arvind Sharma
ACA


[ Scorecard : 1401]
Posted On 19 May 2011 at 13:05

I dont know about practicle approach., but as far I learned, there is not need to comply with Companies (Decleration of Dividend Out of Reserve) Rules in case of decleration of Dividend out of accumulated profits.. In that case, only Sec 205(2A) has to comply and other procedural requirement...

But in case of decleration out of RESERVE, then there is need to comply with these Rules....

So answer to your query will be as below :-

 

1)  Can anybody provide checklist in case of declaration of dividend out of accumulated profits (i.e surplus profits not transferred to reserves.) - 
- Yes, Only need is to transfer appropriate %age of Profit to Reserve as per Sec 205(2A)
 
 
2) will the rules of declaration of dividend out of reserves apply in this case -
- No. These rules are applicable only in case of Div our of RESERVE

3) Should the Company transfer profit to reserves out of that accumulated  previous year(s)profits as per transfer of profit to reserves rules - 

- There is no specification whether transfer has to be made out of previous year profits or Current Year Profits..., but it doesnt make any difference, becasue, both are treated as distributable profits and so no need to segrigate them..

4) will the company have to pay dividend tax out of accumulated previous year(s) profit.
- Here also, it is not spefic which profit has to be utilised for payment of Divdend Distribution tax. But also it doesnt make any difference becasue it is a below the line item and not considerable as Expenses and deducted out of Accumulated Profit (ie CY + PY)

Above are my views and all are based on provisions. I have no idea about relevent case laws.. so experts opinions are invited...






Gajendra Sethiya
Accounts Manager


[ Scorecard : 21]
Posted On 02 November 2011 at 11:29

I need advice on declaration of Dividend in case of Pvt Ltd Co out of accumulated profits  of past years as there is No profit earned in last 4 to 5 years .What is the maximum limit of dividend that can be declared under current laws.




CS SAJU PHILIP MANALEL
Company Secretary in Practise


[ Scorecard : 157]
Posted On 18 January 2012 at 13:10

A leteral interpretation of Section 205 shows that the dividend can be paid out of 

a) current year profit 

b) out of accumulated profits of previous years remain undistributed and not earnmarked to any reserves

c) out of both (a) and (b)

d) out of Govt grants

e) out of reserves after complying with Companies (Declaration of Dividend Out of Reserve) Rules

If option (a) is chosen, the Transfer to Reserve Rules have to be complied with.

If Option (b) is chosen, then both Companies (Declaration of Dividend Out of Reserve) Rules and Transfer to reserve Rules are not required to be complied with. Only compliance is that required is to provided for depreciation for the current as well as the past years where losses had occured.My opinion is based on literal interpretaion of the words and phrases used in the Section 205 and allied Rules.

Regards

 

 

CS Saju Philip

sajuphilipcs @ yahoo.com

 



There are 3 Replies to this message





Related Files








Related Threads


Post your reply for Declaration of dividend out of Accumulated profits



Your are not logged in . Please login to post replies

Click here to login


Not a member yet ?? Click here to signup

Message







    

  • Use thank button to convey your appreciation.
  • Maintain professionalism while posting and replying to topics.
  • Try to add value with your each post.




Forum Home | Forum Portal | Member Control Center | Who is Where | Popular Threads | Today's Topic | Recent Posts | Today's Posts | Post New Topic | Thread With Files | Top Threads This Month | Forum Stats | Unreplied Threads

back to the top