Dividend to shareholders

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sapna gupta

sapna gupta (Querist)
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05 January 2015 can dividend be declared even if a company suffers a loss in that particular year??

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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06 January 2015 In the event of inadequacy or absence of profits in any year, a company may declare dividend out of surplus reserves subject to the fulfillment of the following conditions,

a. The rate of dividend declared shall not exceed the average of the rates at which dividend was declared by it in the three
years immediately preceding that year. However, this condition shall not apply to a company, which has not declared any dividend in each of the three preceding financial year.
b. The total amount to be drawn from such accumulated profits shall not exceed one-tenth of the paid-up share capital and free reserves as appearing in the latest audited
financial statement.
c. The amount so drawn shall first be utilised to set off the losses incurred in the financial year in which dividend is
declared before any dividend in respect of equity shares is declared.
d. The balance of reserves after such withdrawal shall not fall below 15% of its paid up share capital as appearing in the
latest audited financial statement

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