Urgent please

It means if a company fails to pay dividend on preference share for a year shareholder will not have any right to claim  it in future.It is just the opposite of cumulative preference share where shareholders are entitled to receive a fixed dividend each accounting year.If then dont receive dividend in a year it cumulates and  shareholders are entitled to receive it in future.

In case no dividend is declared in any year because of absence of profit, the non-cumulative preference shareholders get nothing nor can they claim unpaid dividend in the subsequent years or years in respect of that year. In the case of cumulative preferenceshareholders, dividends which are not paid in any year are accumulated and are paid when the profits are available.

Basically, non-cumulative means the same thing that dividend would not be accumulated. I hope it is clear now.

Thanks Richa Ma’m I have one more query if could help in our pvt. Ltd. Company we took loan from our two directors of Rs. 1 crore and company’s authorized share capital currently is 80 Lac can we convert director loan into equity after increasing authorized share capital. If we can do so may I know the procedure for the same?

Originally posted by : CA RICHA BOTHRA
	It means if a company fails to pay dividend on preference share for a year shareholder will not have any right to claim  it in future.It is just the opposite of cumulative preference share where shareholders are entitled to receive a fixed dividend each accounting year.If then dont receive dividend in a year it cumulates and  shareholders are entitled to receive it in future.

But Ma’m if someone have non-cumulative preference share than he will not be entitle of any dividend by company. So what he will get from company in return of their investment?

IF the loan is bonafide then the company can issue shares in lieu of loan .It will be treated as allotment of shares for cash only.But before allotment of shares you have to increase the authorised capital of the Company by filing form 5 .

They are entitled to receive dividend each year. Only when company do not have sufficient profit in a year  and the company is not paying dividend then they cant claim for it in future.

Procedure

1.    First increase the auth capital by passing OR in GM u/s 94 and by filing form 5 with ROC. Effective date of AC increase date would be the date of passing OR in GM.

2.    After that you may convert the loan into equity by passing allotment resolution in board meeting and by filing form 2 with ROC.

RG

Cumulative or Non-cumulative : A non-cumulative or simple preference shares gives right to fixed percentage dividend of profit of each year. In case no dividend thereon is declared in any year because of absence of profit, the holders of preference shares get nothing nor can they claim unpaid dividend in the subsequent year or years in respect of that year. Cumulative preference shares however give the right to the preference shareholders to demand the unpaid dividend in any year during the subsequent year or years when the profits are available for distribution . In this case dividends which are not paid in any year are accumulated and are paid out when the profits are available.

Both types of Preference shares are entitled to divident but only in case od Cumulative preference share there is Right to Accumulation of Dividend and Not in Case of Non Cumulative Preference Shares.

AGREE WITH MR SANJAY....

CUMULATIVE MEANS....ACCUMULATION OF DIVIDIND OF LAST YEAR + CURRENT YEAR....

NON CUMULATIVE MEANS.....DIVIDEND OF CURRENT YEAR ONLY....

                                                      COMPANY NOT DECLARE DIVIDEND LAST YEAR DUE TO INSUFFICIENT OF PROFIT....

NOW COMPANY DECLARE PROFIT CURRENT YEAR,HAVING SUFFICIENT PROFIT...