Declaration of dividend out of Accumulated profits
Vidya ( ) (24 Points)
19 May 2011Vidya ( ) (24 Points)
19 May 2011
Arvind Sharma
(ACA)
(1432 Points)
Replied 19 May 2011
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 :-
Gajendra Sethiya
(Accounts Manager)
(21 Points)
Replied 02 November 2011
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)
(157 Points)
Replied 18 January 2012
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
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