Seek Urgent help from the experts

I desperately need urgent advise on the following two Issues.

1. We are 3 Brothers holding 15% stake in a private limited company and the company for the last 7 years has been transferring all the profits to the general reserve without paying any dividends at all. Can we Demand that all at least 75% of the reserves be issued as dividends.

2) we are literally being blackmailed into selling our shares for a very meager amount and if we go legally the process would be very lengthy so can we settle and then sue them for an unfair settlement?

3) They have been holding on to our unsecured interest free loans too stating that the bank has a right over these and these are treated as Quasi Capital though nothing is provided in the AOA Or MOU. Kindly help. Regards Asif

Read more at: /forum/private-ltd-company-226797.asp#.UJpasHXMjhw

Dear Mohd.

Sec205 of the companies Act provides for the payment of dividend only out of profit earned by the company .Morever, the Articles Of Associaton Of the Company should provide for the payment of such dividend. Howver, it should be noted that payment of dividend is not compulsory for any company.

In your case, payment of dividend out of reserves rule 1975 would apply given the fact that your company hasnt decared dividend despite earning profit which has been transferred to reserves. What you need to ensure is that the provisions of rule 2 applies and that after the payment of dividend the balance of reserve does not fall below 15% of the paid up capital.

Regards

Tanveer Md Masood

calcutta