Section 205 of the Companies Act 1956 read with Article 85 of Table A deals with payment of Dividend
Section 123 of the Companies Act, 2013 provides for declaration of Dividend and Table F of article 80 of Articles of Association provides the following clause.
80.The company in general meeting may declare Dividends, but no Dividend shall exceed the amount recommended by the Board
Its own Articles of Association other than Table F, then the above clause will not be applicable and moreover the Companies Act, 2013 is silent about the same.
Suppose a company adopts it own article giving powers to members to increase or decrease the quantum of Dividend recommended by the Board it is valid.
Had it been included in the Act, there is no question of confusion prevails now. Now the companies adopt their own articles and also increase or decrease the percentage of Dividend
ItemNo.1ofAGMnoticeis adopted after that where is the question of Dividend revised. Because provision for Dividend and appropriation of account all being approved by the members. Incase of itemno.2 of declaration of Dividend revised then how the accounts passed by members will be changed or modified.
Apple credit corporation ltd members wanted to increase the quantum of Dividend percentage in the AGM but could not succeed because of the Article.
Ashok Leyland another listed company members wanted to increase the Dividend and the same was put to vote in the general meeting and the same has been turned down by 80% of the shareholders.
Dhanush Technologies Limited a listed company recommended 15% Dividend-maiden Dividend
After IPO The shares were issued at a hefty premium.
This was turned down in the general meeting on the assurance given by the board that bonus shares will be declared. Nobody knew what had happened to the company for the last 3 years.
SEBI or MCA have not taken any action against the company.
Finally if the clause 80 of Articles of Association inserted in Section 123, all the above confusion would not have arisen.
LAND MARK JUDGEMENT:
A listed Company declared Dividend and did not pay
After a year of so the company filed petition under Sec 391 – 394 of the Companies Act 1956 to give shares at premium in lieu of Dividend already declared andremained unpaid.This was approved by Madras High Courtas there was no objection from DCA thru RD
Is it a Land Mark Judgmentor……… ?
Section 205 of the Companies Act, 1956 states that Dividend Should be paid in cash (cheque includes cash)and not in kind.
This aspect has been completely ignored or overlooked by DCA and of course by the Hon’ble High Court
CA Nitesh Kumar More
Tags :Corporate Law