Clarification of section 206

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C.A Alok Mukherjee (Querist)

06 August 2012 No dividend shall be paid by a company in respect of any share therein, except—

(a) to the registered holder of such share or to his order or to his bankers; or

Can anybody please clarify what is the the significance of "or to his order", in what situation registered holder can do such order?

CS Mitesh Mehta

CS Mitesh Mehta (Expert)

06 August 2012 The word order means a person to whom the dividend is to be paid pursuant to the order of the member. This is usally called mandate. A written authority given by one person the mandator to another the mandatory giving the mandatory the power to act on behalf of the mandator. Thus by this mandate, a dividend is paid to any other person as registered member has instructed.

Normally in case where instrument of transfer is received by the company before the commencement of closure of register of members and register of transfer, but not registered before the end of the closure, the transferor i.e registered holder may give such mandate to the company to pay dividend to the transferee.

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C.A Alok Mukherjee

C.A Alok Mukherjee (Querist)

06 August 2012 thanks mr. mitesh, in that case if say a member holding 10% share if give a mandate form to transfer his share of dividend to y another member, can the company do act as per that mandate on presumption

a) company did not receive the instrument of transfer yet.
b) company received instrument of transfer but such transfer not yet effected?
c) In situation a can a company legally pay dividend based on the mandate form?
Please help.

CS Mitesh Mehta

CS Mitesh Mehta (Expert)

06 August 2012 Section 206A of the Companies Act apply only in case of Transfer of shares and in no other case.

C.A Alok Mukherjee

C.A Alok Mukherjee (Querist)

06 August 2012 right but our worry is a specific circumstance where we just want to know whether otherthan transfer of share cases can a registered member simply mandate a company to transfer his share of dividend to another member. Can company comply that order?

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