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Dividend of unlisted company

anoop (g.m accounts) (214 Points)

22 May 2019

Can a unlisted company pay dividends on pro rata basis for the shares issued during the year, if yes please inform section /notification /circular no. where it is written

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7 Replies

Shrikant (Associate) (350 Points)
Replied 24 May 2019

what do you mean by pro-rata basis?

anoop (g.m accounts) (214 Points)
Replied 25 May 2019

Means if a share has been issued during middle of the year say on 01.10 .2018 so whether dividend if declared by company whether the shareholder will get dividend equvailent to six months

Shrikant (Associate) (350 Points)
Replied 03 June 2019

The dividend you have mentioned here is interim dividend. As per my understanding, there is no concept of dividend on pro-rata basis. Company decide the eligible shareholder on record date and pay them the dividend as per the percentage as approved by the board.

vivek (CS) (751 Points)
Replied 03 June 2019

You will have to pay dividend as declared to all the shareholder on record date

anoop (g.m accounts) (214 Points)
Replied 04 June 2019

Thanks but you have not understood my question.we had issued some right issue of say 50000 shares in July 2018. when we declare dividend in AGM say in August 2019 for the year 2018-19 and suppose dividend rate is 50 percent. Will I give/ calculate dividend from July 18 to March 2019 on the right issue of 50000 shares issued in July I. e for 9 months or for whole year. our company is a unlisted public company

vivek (CS) (751 Points)
Replied 04 June 2019

As per my understanding; you will have to calculate for whole year.

Section 51 permits Companies to pay dividends proportionately, i.e. in proportion to the amount paid-up on each share when all shares are not uniformly paid up, i.e. pro rata. Pro rata means in proportion or proportionately, according to a certain rate. The Board of Directors of a company may decide to pay dividends on pro rata basis if all the equity shares of the company are not equally paid- up. (This might not be your case)

The permission given by this section is, however, conditional upon the Company’s Articles of Association (AOA) expressly authorizing the Company in this regard.

CS M Pota (Company Secreatary) (3180 Points)
Replied 05 June 2019

The Companies Act. 2013 provides for the payment of dividend on the Pro rata on the basis of payment made on the shares issued. However, the Companies Act is silent on the payment of dividend on the Pro rata basis on the basis of period for which the share held.

Here if we take an example for better understanding, A Ltd., has Equity capital of 1000 equity shares each of Rs.10/- so its paid up equity share value is Rs.10000/- as on 1^St April 2018.Now A Ltd issues 100 shares each of Rs.10/- on 1^st October 2018 which are fully paid up at the time of issue. A Ltd., declares Dividend for the financial Year 2018-19 at its AGM held on 15^th May 2019 @ of Rs.25 per share. A Ltd. will pay dividend @ Rs.25 per share for the full year on 1000 equity shares and Rs.25 for 100 equity shares A Ltd will pay dividend for 6 Months ( from 1^st October 2018 to 31^st March 2019).

Now, the Companies Act provides for pro rata dividend on the basis of amount paid on the shares which means the main base of the payment of dividend is amount received on the share issued so, here in case of payment of dividend on pro rata basis on the basis of period of payment of amount on share also linked with payment not by the portion of money received but through the period when the money is received on the shares issued.

Though the Companies Act is silent but this is a practical and acceptable way to pay dividend for the period from which the payment on share is received in other word Pro rata on the basis of period.

If you see share application Form for the issue of share which particularly come middle of the year it is clearly mentioned in the Form/Offer documents that share issued during the year will be entitled to dividend on pro rata basis i.e. only for part of the year for which new shares were held.

So in MY VIEW, if the shares are issued during the year payment of dividend for the year during which the shares are issued can be paid pro rata basis ie for only part of the year for which new shares are/were held.