Do you wish to declare the final dividend?

dividend

Convene a board meeting after giving notice to all the directors of the company as per section 173 of the 2013 act and let your board of directors consider the amount of dividend to be recommended to the ensuring annual general meeting for declaration.

Beware that every officer of the company whose duty is to give notice of the board meeting as aforesaid and who fails to do so will be punishable with fine of Rs.25, 000.  This offense is compoundable by the regional director of any officer authorized by the central government.

It is pertinent to note that a company which fails to comply with the requirements of section 73 and 74 of the 2013 act in relation to acceptance and repayments of public deposits is restrained from declaring any dividend on its equity shares so long as the failure continues under the above sections.

If your company’s shares are listed then do the following:

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  • Give notice to stock exchanges in advance of at least 7 working days starting the date of closure of your company’s transfer books for purpose of declaration of dividend.
  • Notify to the recognized stock exchange at least 2 working days in advance the date of the board meeting at which the recommendation of a dividend is due to be considered.
  • Declare and disclose the dividend on per share basis only.

Before the declaration of dividend for any year, a company should transfer such percentage of its profits for that financial year as is considered as appropriate to the reserves of the company. In the 2013 act, the percentage of profits that has to be transferred to the reserves before the declaration has been left to the discretion of the company.

Forthwith inform the following to the recognized stock exchange with which the shares of your company are listed after the holding of the board meeting:

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  • All dividends recommended or declared;
  • The total turnover, gross profit or loss, provision for depreciation, tax provision and net profit for the year and the amount appropriated from reserves, capital profits, accumulated profits of past years or other special source to provide partly or wholly for the dividend even if this calls for qualification that such information is provisional or subject to audit.

Include in the agenda of the annual general meeting, the business of declaration of dividend.

Pass an ordinary resolution by a simple majority in the annual general meeting, declaring the dividend.

Open a separate bank account with a scheduled bank and credit the amount within 5 days from the date of declaration.

The dividend cannot be paid by a company in respect of any share therein except to the registered holder of such share or to his order or to his banker and would not be payable except in cash.

The payment by electronic mode or cheque or warrant to the shareholder entitled to the payment of the dividend will be construed as payment in cash.

Fix and notify the recognised stock exchange with which the shares of your company are listed at least twenty one days in advance of the date on and from which the dividend will be payable and issue simultaneously the warrants which shall be encashable at par at all the branches of your company’s bankers so as to reach the shareholders on or before the date fixed for payment.

Arrange to make payment within thirty days of declaration either in cash or by cheque warrant sent through the post directed at the registered address of the shareholders entitled to the payment of the dividend.

Where instruments of transfer have been received by the company in relation to some shares and the transfer of such shares has not been registered when the dividend warrants were posted. Keep that amount of dividend also in the special amount called “unpaid account” unless the company is authorized by the registered holders of those shares in writing to pay the dividend to the transferees specified in the said instruments of transfer.

Arrange to transfer the total amount of dividend, which remains unpaid or unclaimed within seven days from the date of expiry of thirty days from the date of its declaration to a special account to be opened by your company in this behalf in any scheduled bank to be called “unpaid dividend account of company ltd”.

See that the unpaid dividend includes the amount of dividend the warrants in respect of which have either not been encashed or which have otherwise not been paid or claimed.

If your company is a government company then do not transfer the unpaid dividends to the special account.

Note that if a company which has declared, but it has not paid or the warrant in respect thereof has not been posted within thirty days from the date of declaration to any shareholder, then every director of the company who is knowingly a party to the default will be punishable with simple imprisonment for a term of two years and will also be liable to a fine of Rs.1000 for every day during which such default continues and the company may be liable to pay simple interest  at the rate of 18% per annum during a period for which such default continues.

Further note that no offense as stated in the preceding paragraph will be deemed to have been committed by your company’s directors in the following cases:

 

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  • The dividend cannot be paid by reason of the operation of any law;
  • The shareholder has given a direction to the company which regards the payment of the dividend and those directions will not be complied with and the same can be communicated to him;
  • Where there is a dispute regarding the right to receive the dividend;
  • Where the dividend has been lawfully adjusted by the company against any sum due to it from the shareholder:
  • Where for any other reason the failure to pay the dividend or to pose the warrant within a period of thirty days from the date of a declaration was not due to any default on the part of the company.

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