Seperate dividend account

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Indra Chatterji (Querist)
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02 June 2012 Our is a private limited company. Authorised Share Capital 20 Lacs and Paid-up Share Capital 6.30 Lacs.

We have 4 shareholders holding 25% of the Paid-up Share Capital.

Is it mandatory to open a seperate Dividend Account (current account)to transfer the dividend and then pay to the shareholders - 4 Nos.

Ajay Mishra

Ajay Mishra (Expert)
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02 June 2012 Hi

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"

Regards

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