Live Course on Drafting of Appeal and Reply of Penalty Notice by CA Sachin Sinha. Register Now!!

Companies act doubt

Zoya Khan (ABC) (800 Points)

15 March 2015

As per Companies (Declaration and Payment of Dividend) Rules, 2014,Rule 3(1) states that:

"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: Provided that this sub-rule shall not apply to a company, which has not declared any dividend in each of the three preceding financial year."

From plain reading it seems that if the company has declared dividend in less than 3 previous years,the rate shall be taken of the average of the 2 years or 1 year,as the case may be or this sub-rule will not apply at all? Please clarify.

Reply
Follow
Share

2 Replies

CA JITENDER CHAUHAN (PRACTISING CHARTERED ACCOUNTANT) (56 Points)
Replied 16 March 2015

if less than 3 year then take the average of 2 year or 1 year

CA JITENDER CHAUHAN (PRACTISING CHARTERED ACCOUNTANT) (56 Points)
Replied 16 March 2015

Also consider it

Declaration of dividend out of reserves.- In the event of adequacy or absence of profits in any year, a company may declare dividend out of surplus subject to the fulfillment of the following conditions, namely:-

(1) 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:

Provided that this sub-rule shall not apply to a company, which has not declared any dividend in each of the three preceding financial year.

(2) The total amount to be drawn from such accumulated profits shall not exceed one-tenth of the sum of its paid-up share capital and free reserves as appearing in the latest audited financial statement.

(3) 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.

(4) The balance of reserves after such withdrawal shall not fall below fifteen per cent of its paid up share capital as appearing in the latest audited financial statement.

(5) No company shall declare dividend unless carried over previous losses and depreciation not provided in previous year are set off against profit of the company of the current year the loss or depreciation, whichever is less, in previous years is set off against the profit of the company for the year for which dividend is declared or paid.

4. Statement of amounts to be credited to investor education and protection fund shall be filed in Form DIV 5.

1 Like