Dividend- query

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This query is : Resolved

SAIDEEP (Querist)

27 July 2013

SIR. THIS IS SAI DEEP. ONE QUERY? COMPANY IS
PVT LTD CO. WANTS TO DECLARE DIVIDEND 70%ON
PROFITS . WHETHER SEC: 205 APPLY?
AWAITING REPLY.

SAI DEEP 9710426886

Ajay Mishra

Ajay Mishra (Expert)

29 July 2013 Hi

Yes, Section 205 will apply.

Section 93 of the Act, states that a company may, if so authorised by its articles, pay dividend in proportion to the amount paid up and time of receipt, on each share where a larger amount is paid on some shares than on others. Therefore, if the articles of the company does not authorise payment of dividend in proportion to the amount paid up on each share, the payment of dividend will have to be made only in proportion to the called up amount on the nominal value of the share capital of the company.

In terms of the provisions of section 205 of the Act, no company can pay dividend in any year without charging depreciation in the profit and loss account for the current year and that there is no balance of un provided depreciation of any earlier year or years.
However, the Central Government has power to allow any company in the public interest to pay dividend for any financial year out of the profits for that year or any previous financial year without providing for depreciation. [Section 205(1)(c)]. The application is required to be filed to the Central Government electronically.

Ajay Mishra

Ajay Mishra (Expert)

29 July 2013
Recommendation of dividend by the Board is compulsory

In the matter of payment of dividend or not in any financial year irrespective of the profit earned by a company in the financial year is left to the discretion of the Board to recommend or not to recommend dividend for any year. If the Board does not recommend any dividend, the company in general meeting cannot consider and approve any dividend for payment. The company in general meeting cannot also increase the rate of dividend recommended by the Board.

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