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Under section 2(35) of the Companies Act, 2013 defines the dividend as the specific portion of the profit given to the shareholders from the net profit of the company. For the distribution of dividend net profit is legally available at the company’s account. Divided is further described as a return on the share capital subscribed for and paid to its shareholders by a company. Interim dividend is also included. The term dividend is derived from the Latin word “Dividendum” which means anything which is to be divided. This article focus on the dividend declaration as per companies act 2013.
Companies Act Section 2 (35) prescribed interim dividend as below:
Sections under CA, 2013 | What Matters deals |
---|---|
2(35) | Definition of Dividend |
51 | Payment of dividend |
91 | Declaration of book closure/record date and publication of notice of record date |
123 | Payment of dividend -sources, transfer of profits to reserve, etc |
123(5) | dividend shall be paid to registered shareholders and beneficial owners under CSDL/NSDL |
126(6) | restriction on payment of dividend on equity shares on failure to comply with deposits |
124 | Unpaid dividend to be transferred to special dividend account |
126 | Right of dividend etc |
127 | Payment of dividend must be made within 30 days of its declaration. |
The process in which the Board of directors makes a decision and declares a dividend for the payment to the stockholders by which the retained earnings account of the company get reduced by the amount of the declared dividend.
*The retained earnings account is an account which holds equity of the company that shows the net balance earnings.
Notice of dividend shall be given: Notice of dividend declared shall be given to the persons entitled to share in it (as per the Clause 87 of Model Articles of Company limited by shares as contained in Table-F of schedule-I of 2013 Act)
4. It must be paid within 30 days once the dividend is declared.
{As per Clause 80 of Model Articles of Company Limited by shares as Contained in Table-F of Schedule-I of the 2013 Act}
If a company declare dividend but fails to pay or the warrant in respect thereof has not been posted within thirty days from the date of declaration to the shareholders then every director of the company shall be punishable with the imprisonment of two years and fined not less than one thousand rupees from the day of default continues. During the period for which such default continues, the company shall be liable to pay simple interest at the rate of 18%p.a.
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