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Declaration of dividend

Shridhi Jain (Company Secretary) (1678 Points)

21 August 2010

Kindly tell me the rules n procedures for declaration of dividend by private limited company. Is a separate account is opened for depositing dividend amount? Is there any need to deposit the dividend amount to a separate bank a/c? Wat are the accounting adjustments to be made and to be considered for declaring dividend?

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vivek (CS) (751 Points)
Replied 21 August 2010

Section 205 is equally applicable on Pvt. companies. First of all if you are having profit in the year and you can declare dividend. You will have to transfer part of profit to your reserves as per COMPANIES (TRANSFER OF PROFITS TO RESERVES) RULES, 1975; then company will declare dividend (assuming Final Dividend) in AGM and you will have to ensure that within 5 Days of declaration the amount have been deposited in seperate bank account witha scheduled bank. Pay DDT (Dividend Distribution Tax). Dispatch Dividend warrant within 30 days of declaration. I am producing below a checklist:-

CHECK FOR PAYMENT OF DIVIDEND

1 Letter to Physical Shareholders and Foreign Holders for Banking details

2 Finalise the Banker for payment of dividend

3 To obtain from Registrar and Share transfer agents the tentative number of shareholders to whom dividend warrants shall be required to be posted.

4 Strike order for printing of Dividend warrants/ ECS confirmation note including envelopes.

5 Proof reading of the Dividend warrants (be approved by Registrars and Bankers)

6 Intimation to stock exchange about the date of payment of dividend

7 Intimation to Stock Exchanges about the closure of the Transfer Books

8 To publish the Book Closure date/Record date in newspapers

9. To co-ordinate with Registrar and Share Transfer agents for downloading the Database of members as on the Book Closure Date.

10 Complete formalities for opening of the bank account

11 Book Closure

12 To co-ordinate with Registrar and Share Transfer Agents for printing of Dividend Warrants and verification of Dividend Register

13 To co-ordinate for printing of details of Shareholders in physical form who have opted ECS facility

14 Deposit the total amount of dividend in the bank account opened for the said purpose. (within 5 days of the date of AGM)

15 Deposit Dividend Tax with Income Tax

16 To give electronic credit of dividend to shareholders holding shares in demat form and/or physical shareholders who have opted ECS facility

17 To co-ordinate for physical dispatch of Dividend warrant/s to shareholders holding shares in physical form.

18 To co-ordinate for dispatch of confirmation note for credit of dividend to demat shareholders.

19 To co-ordinate with Registrar and Share Transfer agents for determination of number of cases where ECS upload has been rejected. To arrange to issue physical dividend warrants to such holders.

20 To ensure that the nomenclature of the dividend account is renamed to Unpaid dividend account after lapse of 30 days from the date of declaration of dividend.

21 To collect the dividend warrants from banks

22 To co-ordinate with Registrar and Share Transfer Agents for reconciliation of dividend warrant paid with warrants issued

Regards,