Can dividend be issued out of profits from sale fixed assets
This query is : Resolved
24 January 2014
sir,
i have doubt regarding the distribution of dividend. suppose if a company has no revenue profits but there is profit from the sale of fixed assets. in this case profits are available with the company in cash. so can the company distribute the profit in the form of dividend.
thanks in advance,
Hope a quick reply.
i have doubt regarding the distribution of dividend. suppose if a company has no revenue profits but there is profit from the sale of fixed assets. in this case profits are available with the company in cash. so can the company distribute the profit in the form of dividend.
thanks in advance,
Hope a quick reply.
24 January 2014
There is no prohibition in the companies act,1956 to declare dividend out of profit on sale of assets, but prudence may not allow to do so.
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24 January 2014
As per guidance note on Audit of Payment of Dividend, one of the conditions to be satisfied to declare the dividend out of capital profit is- "The board or similar authority is satisfied that the net aggregate value of the assets remaining after distribution of that profit will not be less than book values so that share capital and reserves remaining after the distribution will be fully reprented by the remaining assets." Does this mean that we can distribute Full capital profit as dividend? Is there any situation where only part of the capital profit is distributed and book value of the assets are less than reserves and surplus? If yes, Please give an example.
sir the above para has been taken from caclubindia site. from the above they say that until the assets value does'nt fall they can use the capital profits for dividend distrubution.
can i conclude that dividend can be distributed from capital profits they it satisfied the above condition.since from your word i came to know that there is no section which prohibit the distribution of dividend from capital profits.
thank you sir.
sir the above para has been taken from caclubindia site. from the above they say that until the assets value does'nt fall they can use the capital profits for dividend distrubution.
can i conclude that dividend can be distributed from capital profits they it satisfied the above condition.since from your word i came to know that there is no section which prohibit the distribution of dividend from capital profits.
thank you sir.
24 January 2014
As per guidance note on Audit of Payment of Dividend, one of the conditions to be satisfied to declare the dividend out of capital profit is- "The board or similar authority is satisfied that the net aggregate value of the assets remaining after distribution of that profit will not be less than book values so that share capital and reserves remaining after the distribution will be fully reprented by the remaining assets." Does this mean that we can distribute Full capital profit as dividend? Is there any situation where only part of the capital profit is distributed and book value of the assets are less than reserves and surplus? If yes, Please give an example.
sir the above para has been taken from caclubindia site. from the above they say that until the assets value does'nt fall they can use the capital profits for dividend distrubution.
can i conclude that dividend can be distributed from capital profits they it satisfied the above condition.since from your word i came to know that there is no section which prohibit the distribution of dividend from capital profits.
thank you sir.
sir the above para has been taken from caclubindia site. from the above they say that until the assets value does'nt fall they can use the capital profits for dividend distrubution.
can i conclude that dividend can be distributed from capital profits they it satisfied the above condition.since from your word i came to know that there is no section which prohibit the distribution of dividend from capital profits.
thank you sir.
25 January 2014
The above extract is from ICAI publication viz., Hand book on Auditing Standards Pronouncements Volume-II (July 1, 2013 edition, page 540). You can , therefore, conclude accordingly.
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