dividend payment

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Vivek Rawal (Querist)

06 June 2009 Is it possible for private limited company to pay dividend to is shareholders from profit after completion of first year of formation? Thanks.

Divya

Divya (Expert)

08 June 2009 yes... generally dividend is paid by a company when it declares profit in a year out of which dividend is paid...In case of non-cumulative shares dividend can be paid in a year on declaration of profits and the pref-shareholders donot declare profits then no dividend can be claimed by them wen the company has not declared any profits.. Cumulative preference shares however give the right to the preference shareholders to demand the unpaid dividend in any year during the subsequent year or years when the profits are available for distribution i.e. when profits were declared by the company but it was not available for distribution in tat particular year.any surplus sum left after payment of dividend to all the preference shareholders is available to the equity shareholders which may either be distributed according to the rights reserved and the terms of issue and part/whole sum to be put in the reserves of the company..regards

Ankur Garg

Ankur Garg (Expert)

08 June 2009 In short there is no prohibition in the companies act, 1956 to pay dividend to is shareholders from profit after completion of first year of formation.

Regards

Vivek Rawal

Vivek Rawal (Querist)

16 June 2009 Dear Divyaji, Ankurji,
Thank you very much. This was great help.
Regards,

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