Dividend Distribution

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CS Ashish Jain (Querist)
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25 March 2010 A Ltd. is a government company which has declared the dividend on its 4% Cumulative Preference Shares in the AGM held on 09/03/2010 and diposited the dividend amount in the dividend A/c on 14/03/2010 (within 5 days from declaration). On 16/03/2010 company received a letter form the Central Government directing the company not to pay any dividend to the shareholders because Central and State Government is providing grants to the Company for specific purposes.

Considering the directions of the C.G. Board of Directors in there meetind held on 22/03/2010 decided to write a letter to CG mentioning the fact that company has already declared the divided and it is bound to pay dividend within 30 days from the date of declaration.

Board of directors also decided not to pay dividend untill the further clarification of CG in this regard.

Now my question is (it is very unlikely to receive the clarification before the expiry of 30 days) in such situation after the expiry of 30 days whether compnay should hold the dividend amount in the dividend account or it should be transferred to the unpaid dividend account.

Please also advise me whether the decision of Board of Directors to hold the payment of dividend is correct.

Rasesh

Rasesh (Expert)
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25 March 2010 In my view dividend once declared or approved by the members cannot be withdrawn by the company.

The company should pay the dividend to the shareholders instead of holding it with them.

CS Ashish Jain

CS Ashish Jain (Querist)
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27 March 2010 As the board of directors has decided not to distribute the dividend till the further clarification from the Central Government so after the expiry of 30 days from the declaration of dividend whether we should keep the amount in the dividend account or it should be transferred to the unpaid dividend account.

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