Regarding non inclusion of declaration of dividend in agm
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
06 September 2016
When the Board of Director 's has NOT recommended dividend in its Board Report, then in such case the notice for calling Annual General Meeting under section 102 of Companies Act 2013, SHOULD NOT contain item mentioning THE DECLARATION OF DIVIDEND as an item in Ordinary business of said AGM. If any company adds the said item in its AGM as per provision of section 102 of Companies Act 2013 / Secretarial Standards norms, even if the Board of Director's do not recommend the same in its report, then it will be still a violation of section 102 & 123 of Companies Act 2013 & the directors of the company will be held liable under section 172 of Companies Act 2013. Is my interpretation correct?
Querist : Anonymous
Querist :
Anonymous
(Querist)
15 April 2017
When the Board of Director 's has NOT recommended dividend in its Board Report, then in such case the notice for calling Annual General Meeting under section 102 of Companies Act 2013, SHOULD NOT contain item mentioning THE DECLARATION OF DIVIDEND as an item in Ordinary business of said AGM. If any company adds the said item in its AGM as per provision of section 102 of Companies Act 2013 / Secretarial Standards norms, even if the Board of Director's do not recommend the same in its report, then it will be still a violation of section 102 & 123 of Companies Act 2013 & the directors of the company will be held liable under section 172 of Companies Act 2013. Is my interpretation correct?
20 July 2025
Your interpretation is largely correct, and here’s why with some clarifications:
Key Points:
Board's Dividend Recommendation is Mandatory Before Declaration
Under Section 123(1) of the Companies Act, 2013, a dividend can be declared only if it is recommended by the Board of Directors. The AGM cannot declare a dividend on its own without the Board's recommendation (except in the case of interim dividends).
Notice of AGM under Section 102
Section 102 requires that the notice of AGM should specify the items of business to be transacted, with relevant explanations. If the Board has not recommended any dividend, the item "Declaration of Dividend" should not be included in the notice as an item of ordinary business.
Including Dividend Declaration in Notice Without Board’s Recommendation
If the company includes "Declaration of Dividend" as an agenda item in the AGM notice without Board's recommendation, it would be:
Misleading to shareholders.
Contrary to the provisions of Section 123 (no dividend without Board recommendation).
In violation of Section 102, because the item is not validly proposed.
Secretarial Standards
Secretarial Standards on Meetings (SS-2) also require that the agenda should be accurate and should not include items not properly proposed.
Liability of Directors (Section 172)
Section 172 relates to the duty of directors to act in the company’s best interest and for lawful purposes. Including an invalid item knowingly may attract liability under this section for not acting in good faith or due diligence.
Summary:
If Board does not recommend dividend → Do NOT include "Declaration of Dividend" in AGM notice.
Including it anyway = violation of Section 102 & 123.
Directors may be held liable under Section 172 for such violation.
Key Points:
Board's Dividend Recommendation is Mandatory Before Declaration
Under Section 123(1) of the Companies Act, 2013, a dividend can be declared only if it is recommended by the Board of Directors. The AGM cannot declare a dividend on its own without the Board's recommendation (except in the case of interim dividends).
Notice of AGM under Section 102
Section 102 requires that the notice of AGM should specify the items of business to be transacted, with relevant explanations. If the Board has not recommended any dividend, the item "Declaration of Dividend" should not be included in the notice as an item of ordinary business.
Including Dividend Declaration in Notice Without Board’s Recommendation
If the company includes "Declaration of Dividend" as an agenda item in the AGM notice without Board's recommendation, it would be:
Misleading to shareholders.
Contrary to the provisions of Section 123 (no dividend without Board recommendation).
In violation of Section 102, because the item is not validly proposed.
Secretarial Standards
Secretarial Standards on Meetings (SS-2) also require that the agenda should be accurate and should not include items not properly proposed.
Liability of Directors (Section 172)
Section 172 relates to the duty of directors to act in the company’s best interest and for lawful purposes. Including an invalid item knowingly may attract liability under this section for not acting in good faith or due diligence.
Summary:
If Board does not recommend dividend → Do NOT include "Declaration of Dividend" in AGM notice.
Including it anyway = violation of Section 102 & 123.
Directors may be held liable under Section 172 for such violation.
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