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Interim dividend

sonia (student) (37 Points)

02 March 2012

Dear All,

Pls clarify that whether Interim Dividend could be paid out of Accumulated profits or not ??

And what %age is required to be transferred to General Reserves ?

Thanks & Regards,

Sonia

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Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 04 March 2012

As per companies(Amendment) Act, 2000, the provisions relating to final Dividend declared are being made applicable at par to Interim dividend also. hence all the provision relating to Final dividend are applicable to Interim dividend also.

Hence Interim dividend can be paid out of accumulated profits. Following are the provision for trasnferring the profits to the reserves:

Declaration of Dividend out of Reserves.-

In the event of inadequacy or absence of profits in any year, dividend may be

declared by a company for that year out of the accumulated profits earned by it in

previous years and transferred by it to the reserves, subject to the conditions that-

(i) the rate of the dividend declared shall not exceed the average of the rates at

which dividend was declared by it in the five years immediately preceding that

year or ten per cent of its paid-up capital, whichever is less;

(ii) the total account to be drawn from the accumulated profits earned in previous

years and transferred to the reserves shall not exceed an amount equal to onetenth of the sum of its paid up capital and free reserves and the amount so

drawn shall first be utilised to set off the losses incurred in the financial year

before any dividend in respect of preference or equity shares is declared ; and

(iii) the balance of reserves after such drawal shall not fall below fifteen per cent of

its paid-up share capital.

Explanation.-

For the purposes of this rule, "profits earned by a company in previous years and

transferred by it to the reserves" shall mean the total amount of net profits after tax,

transferred to reserves as at the beginning of the year for which the dividend is to be

declared ; and in computing the said amount, the appropriations out of the amount

transferred from the Development Rebate Reserve (at the expiry of the period

specified under the Income-tax Act, 1961 (43 of 1961) shall be included and all

items of Capital Reserves including reserves created by revaluation of assets shall be

excluded

sonia (student) (37 Points)
Replied 18 April 2012

Thanks a lot sir.

Giridhar ji,

I would also like to know regarding Reconciliation of share capital audit report

under Regulation 55A of SEBI.

Kindly explain me point no. 19 of the report which states that ,

"REFERENCE OF PREVIOUS QUARTER WITH REGARDS TO EXCESS DEMATERIALIZED SHARES"

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