Declaration of Interim Dividend

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pauravit

Practising Company Secretary

36 Points Joined March 2010

Kindly, guide me in the following case......

There is a Public Limited (Closely held) Company having paid up capital as Rs.10,77,200
Profit as on (Opening) 01/04/2009 – Rs. 58,00,000
Profit as on 25/03/2010 – Rs.1,25,00,000 (After providing for depreciation)
The Company has not declared any dividend in previous years.

The Directors want to declare an interim dividend of Rs.105 per share (as against a share of Rs. 10/- ).

1. Can they declare such a huge amount as interim Dividend after transferring 10% of profit to General Reserve?
2. After declaration of dividend if Directors default in its payment of interim dividend, then what are the consequences?
3. Can Company pay dividend tax out of previous years profit? (Interim Dividend should not be declared out of reserves – as per secretarial standards.)

4.can A shareholder request/ direct the company to pay his own dividend to someone else? if yes, How?

Replies (4)

Ankur Garg

Company Secretary and Compliance Officer

114788 Points Joined January 2009

Hello,

Keeping in view the profits posted by the company an outflow of Rs. 105 per share as interim dividend is too much. (You have not mentioned the total outflow in rupees). Payment of interim dividend is not a compulsion and a decision of directors based on healthy financial conditions of the company.

As far as your second point is concerned Section 2(14A) provides that the dividend includes interim dividend, therefore, once it has been declared and communicated, it shall become a debt for a company and cannot be revoked by the Board of directors after its declaration.

Articles authorization is necessary for payment of dividend

Unless there is a suitable provision in the articles for authorization for payment of dividend, the Board will not be able to recommend dividend for the approval of members. Similarly, unless there is a provision in the articles authorizing the Board to approve for payment of interim dividend, the Board cannot take any action in respect of payment of interim dividend.

If the articles do not contain the provisions for authority to pay dividend, it should be suitably amended before taking any decision by the Board of directors of the company.

Best Regards

Ankur Garg

Company Secretary and Compliance Officer

114788 Points Joined January 2009

Regarding point number 3 am not sure.

Regarding point number 4 I’d like to say that yes a shareholder can request/ direct the company to pay his own dividend to someone else. Kindly check:

Section 206 Dividend not to be paid except to registered shareholders or to their order ro to their bankers.

Also find attached a useful file containing dividend provisions.

Best Regards

shah

internee

26 Points Joined March 2011

interim dividend

Q.1

Hi is it must to specify the period for interim dividend?

can it be declared for a short term lets say 50 days?

for example if the interim dividend is declared on 18 Angust, can we say interim dividend for period ended 17 August or 50 days etc?

Q2.

If we declare interim dividend on 24 August for the quarter ended 30th June, can we claim this earning for the period after 30th June till 24 August? I mean this will be earning for just that quarter or it will cover the whole period till declarartion. Just want to know as need to claim earning for a specific period.

Q3.

Can interim dividend be declared before the ending period? For example 'An interim dividend is declared on 24Dec for the period of ending 31 Dec of the same year.

Thanks

lalitha

audit executive

62 Points Joined November 2007

Can anyone help me out in the following situation

A company declared interim dividend assuming profit but ended with a loss. Previous years were also loss. Now what will be the consequence of not paying the dividend and the liability of the Directors in the said situation?

Tks