In Companies Act (Declaration and Payment of Dividend) Rules, 2014, the conditions are mentioned as to how the dividends can be declared out of Reserves incase of inadequate profits or losses. In that sub-rule (5) is as follows, "No company shall declare dividend unless carried over previous losses and depreciation not provided in previous year or years are set off against profit of the company of the current year".
(1) Does it imply that previous losses are to be setted off against such inadequate profit? or
(2) Shall set-off be from amount of free reserves withdrawn reduced by current year loss? or
(3) Is it a general statement that previous year losses shall be setted off from current year profits and then check the inadequacy of profits or loss?
If the third interpretation is correct, why shall it come to this rules in the first place as it shall be a seperate rule or seperate sub-section?
Either conclusion or opinion will be appreciated.
Thanks is andvance.....
CAclubindia
