Save Rs 499. Go Ad-Free with CAclubindia Pro for 2 Full Years. Subscribe Now!

Dividend by gov company

Final 335 views 1 replies

Vinod Vyas

Analyst

258 Points Posted on 16 April 2016

If a company wants to declare dividend out of accumulated profits/reserves, such dividend shall not be made except in accordance with such rules as may be prescribed in this behalf. As per the exemption these rules shall not apply to a Gov Company. So, does it means that Gov company can't declare dividend out of accumulated profit ??

Replies (1)

rahul

none

91 Points Posted on 16 April 2016

Yes as per notification dated 05/06/2015, companies that are wholly owned by CG/SG will not be able to declare dividends out of free reserves.

Proviso 2 to Sec 123 states that companies can declare dividends out of free reserves in accordance with the conditions laid down in Rule 3 (Dividend Rules). After the amendment this proviso is not applicable to 100% owned govt companies.

However, I am not sure about whether these (100% owened govt) companies can declare dividends out of accumulated profits which were not transfered to any reserve, i.e. balance in P&L account which has been carried from previous years.

Since the amendment only related to the proviso regarding reserves, I think these companies can still declare dividends of out balances carried in P&L account which was not transfered to any other reserve.