Payment of dividend

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 October 2013 My Query :

Sir, is it necessary to pay the dividend through a separate Bank A/c even in the case of Private Limited Company (Closely held Company)as stipulated in Section 205 of Comp Act.

Is this condition is not applicable, if the Dividend disbursed in the same day where the AGM was held ?

Arun Biyani

Arun Biyani (Expert)

08 October 2013 Yes..its compulsory that the amount of dividend including interim dividend to be deposited in a separate bank account within 5 days from the date of declaration of such dividend..

Ajay Mishra

Ajay Mishra (Expert)

08 October 2013 Agreed with expert...........

Section 205A state that the amount of dividend including interim dividend shall be deposited in a separate bank account within five days from the date of such declaration. Therefore, a company cannot use the amount even upto the period of thirty days and it is obligatory on the part of the company to keep the entire amount of the dividend into a separate bank account, which shall be exclusively utilised for payment of the dividend.
A company which has declared dividend must open an account in a scheduled bank and transfer the entire net amount of dividend to the above account within 5 days from the date of declaration and simultaneously should dispatch the dividend warrants to the shareholders and should not wait for 37 days to transfer the amount to that account. What the companies generally do is instruct the bank to first open an account styled as "ABC Limited Dividend, 2005 Account" and than the bank further asked that on the 37th day after the date of the annual general meeting (which date may be indicated to the bank) the nomenclature of the said account be changed as "ABC Limited Unpaid Dividend Account-2005"

Ajay Mishra

Ajay Mishra (Expert)

08 October 2013 You should also follow the practice:

Dividend Warrants/cheques for an amount exceeding Rs. 1,500 per instrument should be sent by registered post and the dividend warrant/cheques below the said amount be dispatched under certificate of posting. However, the company may also deliver the dividend warrant to the members personally on obtaining a request letter to that effect in writing.