The directors of a private company declared and paid an interim dividend of
Rs.5/= per equity share having face value of Rs.10/- each. However, when the
resolution was put up for confirmation by shareholders , the resolution could
not be carried through. Can PayWell claim back the interim dividend already
paid to the shareholders?
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Interim Dividend
Replies (3)
Ordinarily a dividend once declared cannot be revoked. The only exceptions to this rule are:
1) When declaration of dividend is ultra vires.
2) When the company ceases to be a going concern.
Interim dividend is declared by the board from out of surplus in P&L and profits of current F.Y. No express power in articles is required.
Assuming that the declaration is not ultra vires i.e. company is having adequate profits and surplus, dividend cannot be revoked.
Moreover, in your case dividend declared is paid too. Act does not talk about the refund of dividend already paid by company.
Hence in my opinion, compny cannot claim refund of dividend paid by them.
1) When declaration of dividend is ultra vires.
2) When the company ceases to be a going concern.
Interim dividend is declared by the board from out of surplus in P&L and profits of current F.Y. No express power in articles is required.
Assuming that the declaration is not ultra vires i.e. company is having adequate profits and surplus, dividend cannot be revoked.
Moreover, in your case dividend declared is paid too. Act does not talk about the refund of dividend already paid by company.
Hence in my opinion, compny cannot claim refund of dividend paid by them.
I agree with Harshal's opinion.
Sec.123(3) empowers Board to declare interim dividend. As per Sec.102(2)(ii) Declaration of dividend is ordinary business in AGM. However, in case of interim dividend AGM is required to note the same and not to approve. Hence AGM cannot reject the payment already made by the Board, if it is otherwise in order.
In case of final dividend AGM has right to reduce or reject proposed dividend.
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