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Dividend declaration

Pvt ltd 387 views 1 replies

Krishna Prasad

Partner

260 Points Joined August 2009

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.

Replies (1)

P C Agrawal

Registered independent director Past Ch

8229 Points Joined March 2007

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.