09 December 2010
DECLARATION OF DIVIDEND OUT OF RESERVES
1.
Where in any year there is a loss, or the profits are inadequate to declare a dividend, the dividend can be declared, out of the accumulated profits earned by the company in previous years and transferred to reserves, subject to certain rules. 2.
The following conditions have to be fulfilled before declaring dividend out of reserves : a.
Rate of dividend shall not exceed average of rates of dividend declared in preceding 5 years subject to a max. of 10%. For calculating average, the "no dividend" years have to be included and rate should be taken as NIL. b.
The total amount to be withdrawn out of reserves shall not exceed 10% of the aggregate of paid-up capital and free reserves and this amount shall first be utilised to set off the losses incurred in the financial year and the balance only may be utilised to distribute dividend as determined in (a) above. c.
The balance in the Reserves shall not fall below 15% of paid-up share capital after the amount withdrawn necessary for the purpose of dividend and set off of losses of the current year. 3.
The total amount of Reserves shall mean only free Reserves not including any Capital Reserve or Statutory Development Rebate Reserve. In other words, free Reserves will mean only distributable Reserve.
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