revocation of interium dividend

This query is : Resolved

Kapeel Bhandarkar (Querist)
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29 January 2008 PE- II MAY – 2006
Paper -3, Business and Other laws

We are herewith furnishing the questions and answers as produced in suggested answers to questions set at the PE-II Examination Group I May, 2006

Question No.10
(b) (i) Can the declaration of Board of Directors of interim dividend be revoked.

Ans: Dividend
(i) The Articles of a company may empower the directors to declare interim dividends, i.e., dividends in between its two annual general meetings. The Board may from time to time pay to the members such interim dividends as appear to it to be justified by the profits of the Company. (Article 86 of Table A)

An interim dividend is not a debt. It is a settled law that in case of an interim dividend which the directors have resolved to pay, they have an option at any time before payment to review their decision and resolve not to pay.

Hence, interim dividend declared by Board of Directors may be revoked.

We wish to draw your kind attention to the following:

Section 2(14A) defines dividend as “dividend” includes any interim dividend, [w.e.f 13.12.2000]

Section 205(1C): The provisions contained in sections 205,205A, 205C, 206,206A and 207 shall, as far as may be, also apply to interim dividend.

205(1A): The Board of directors may declare interim dividend and the amount of dividend including interim dividend shall be deposited in a separate bank account within five days from the date of declaration of such dividend.

205(1B): The amount of dividend including interim dividend so deposited under sub section (1A) shall be used for payment of interim dividend.

Friends
, in view of the above changes in the law w.e.f 13.12.2000, our understanding of the provisions as far as revocation of interim dividend is that, interim dividend can not be revoked. Even if it can be revoked then it has to be revoked within five days from the date of declaration i.e. Board resolution.

Please clarify this.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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29 January 2008 Yes, your understanding is correct, after the introduction of section 2 (14A)

prem pareek

prem pareek (Expert)
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14 March 2008 yes,your understanding is correct ,interim dividend after declaring cannot be revoked it can be revoked only within five days of declaration and with the consent of all directors.

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