Whether Dividend can be paid in kind

DIVESH GOYAL Mob: +918130757966 Practicing Company Secretary csdiveshgoyal@gmail.com GOYAL DIVESH& ASSOCIATES Twitter: @DiveshGoyal04 WhatsApp: 813075796 6 FB: csdiveshgoyal@gmail.com Gmail Id: csdiveshgoyal@gmail.com This blog post is not a professional advice but jus t a knowledge sharing initiative for mutual discuss ion. 1 Whether Dividend can be paid in kind I. Whether Dividend can be paid in kind? Provision: As per Section 123(5) of Companies Act, 2013 Divide nd not be payable except in cash. Dividend: Section 2(35) of the Companies Act, 2013 simply sta tes that "Dividend Includes Any Interim Dividend" . Thus, the definition of dividend under the Compan ies Act is an inclusive definition. Note: It is clearly prohibits distribution of dividend in kind under Companies Act, 2013. Hon'ble High Court of Bombay had decided following issues in case of Indian Seamless Enterprises Ltd., Two questions were answered in the case of Seamless Enterprises Limited: (i) Whether gift of shares to shareholders would be considered as payment of dividend in kind? (ii) Whether a company can gift shares to its shareholders by Scheme of arrangement? A. A.A. A. Whether gift of Whether gift of Whether gift of Whether gift of goods goodsgoods goods to shareholders would be considered as payment of dividend in kind? to shareholders would be considered as payment of d ividend in kind? to shareholders would be considered as payment of d ividend in kind? to shareholders would be considered as payment of d ividend in kind? No, Gift of goods to shareholder would not be consi dered as payment of dividend in kind. Even the definition provided in the Section 2(35) o f the Companies Act, 2013 is an inclusive definition and hence the distribution of property o f a company to its shareholders is amount to payment of dividend. BUT, “Subsection 5 of secti on 123 of the Act, prohibits payment of dividend in any manner otherwise than by cash.” Therefore, Company gift of Goods to shareholders wi ll not consider as Dividend. Series Series Series Series- -- - 124 124124 124 DIVESH GOYAL Mob: +918130757966 Practicing Company Secretary csdiveshgoyal@gmail.com GOYAL DIVESH& ASSOCIATES Twitter: @DiveshGoyal04 WhatsApp: 813075796 6 FB: csdiveshgoyal@gmail.com Gmail Id: csdiveshgoyal@gmail.com This blog post is not a professional advice but jus t a knowledge sharing initiative for mutual discuss ion. 2 B. B.B. B. Whether a company can gift shares to its shareholde rs by Scheme of arrangement? Whether a company can gift shares to its shareholde rs by Scheme of arrangement? Whether a company can gift shares to its shareholde rs by Scheme of arrangement? Whether a company can gift shares to its shareholde rs by Scheme of arrangement?