According to section 208 of the companies act,1956 interest can be paid to the shareholder out of capital where there is long gestation period and subject to the following condition.
1.payment is authorised by the articles or by special resolution of shareholders in general meeting;
2.payment is approved by the central government;
3.it is paid only for the period determined by the central government not exceeding 6 months after the half year in which the PROJECT has been completed;
4.the rate shall not exceed 12% p.a. or such other rate as may be prescribed by the government;
5.the payment of interest shall not operate as a reduction of the amount paid up on the shares in respect of which it is paid.
Explain me please point no.3 & 5.
Thank you everyone whosoever replies me.
CAclubindia
