The Provisions governing declaration and distribution of dividend by a company are provided under companies Act 2013 And the Rules made there under including the Companies (Transfer of Profit to Reserve) Rules 1975, Companies (Declaration of Dividend out of Reserve) Rules 1975,. Further in case of the Companies whose shares are listed on stock exchanges, relevant clauses of Listing Agreement are required to be followed. The compliance requirement as per companies Act 2013, are as follows:
Companies can declare Dividend on the recommendation of its Board of Directors. The Shareholders do not have any power to declare any dividend.
A Separate Bank Account need to be created with a Schedule Bank and the amount of the dividend, including interim dividend, shall be deposited in such account within 5 days from the date of declaration of such dividend.
The Dividend should be paid within 30 days from the date of its declaration.
Where a dividend has been declared by a company but has not been paid or claimed within 30 days from the date of declaration to any shareholders entitled to the payment of the dividend, the company shall within 7 days from the date of expiry of 30 days, transfer the total amount of dividend which remains unpaid or unclaimed to a separate bank account to be opened by the company in hat behalf in any schedule bank to be called “Unpaid Dividend Account”.
Unpaid Dividend Account
Procedural Manner for dealing with “Unpaid Dividend Account” as per section 124 of the Companies Act 2013:
A statement to be place on the website: Section 124 (2) of the Act, states that the company shall, within a period of 90 days of making any transfer of an amount to the Unpaid Dividend Account, prepare a statement containing the names, their last known address and the unpaid dividend to be paid to each person and place it on the website of the company, if any and also on any other website approved by the Central Government for this purpose, in such form and manner and other particulars as may be prescribed.
Interest @12% in case of default: As per sub section 3, if any default is made in transferring the total amount of unpaid or uncalled dividend or any part thereof to the Unpaid Dividend Account of the Company, it shall pay, from the date of such default, interest on so much of the amount as has not been transferred to the said account, at the rate of 12 % p.a. and the interest accruing on such amount shall ensure to the benefit of the members of the company in proportion to the amount remaining unpaid to them.
Claim for Dividend: Sub section 4 of the Act provides that any person claiming to any money transferred under to the Unpaid Dividend Account of the Company may apply to the company for payment of the money claimed.
Transfer of unpaid or unclaimed Dividend Amount laying in Unpaid dividend Account to the fund (IEPF): As per sub section 5 any money transferred to the Unpaid Dividend Account of a Company in pursuance of this section which remains unpaid or unclaimed for a period of 7 years from the date of such transfer shall be transferred to Investors Education and protection fund(IEPF) and the Company shall send a statement in the prescribed form of the details of such transfer to the administrating authority of the said fund and that authority shall issue a receipt to the company as evidence of such transfer.
Transfer of shares to IEPF: Sub section 6 of the Act incorporates a provisions that all shares in respect of which unclaimed or unpaid dividend has been transferred to IEPF under sub section 5 shall also transferred to Investor Education and Protection Fund along with statement containing such details as may be prescribed.
Provided that any claimant of shares transferred above shall be entitles to claim the transfer shares from the said IEPF in accordance with such procedure and submission of such documents as may be prescribed.
Penalty Provision: If a Company fails to comply with any of the requirements of this section, the Company shall be punishable with fine not less than five lakh rupees but which may extend to twenty five lakh rupees and every officer of the Company who is in default shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.
Tags :Corporate Law