MY CLIENT IS A PVT LTD COMPANY. IT HAS ACCUMULATED PROFITS AS ON 31.03.2013. NOW IT WANTS TO DECLARE DIVIDEND OUT OF THE ACCUMULATED PROFITS.
WHAT IS THE PROCEDURE TO BE FOLLOWED? WHETHER THE DIVIDEND DECLARATION RULUES WILL APPLY TO THE PRIVATE LIMITED COMPANY?
CAN THE COMPANY DECLARE DIVIDEND ONLY OUT OF THE ACCUMULATED PROFITS WITHOUT CONSIDERING THE PROFIT FOR THE CURRENT YEAR?
PLEASE SUGGEST AS EARLY AS POSSIBLE.
As clearly mentioned in Section 205(1), dividend can be declared out of accumulated profits provided the same has not been transferred to reserves. Companies (Declaration of Dividend out of Reserves) Rules apply only if profit has been transferred to reserves and dividend is to be paid out of reserves.
K R Kiran Kumar & Associates
Bengaluru
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