FAQs on Dividend

1. Whether Section 8 Company can pay dividend?

Companies licensed under Section 8 of the Companies Act, 2013 or corresponding provisions of any previous enactment thereof are prohibited by their constitution from paying any Dividend to its Members.

2. Who is having power to Declare 'Interim Dividend'?

Power to Issue 'Interim Dividend' vested with Board of Directors.

3. Who is having power to Declare 'Final Dividend'?

'Final Dividend' means the Dividend recommended by the Board of Directors and declared by the Members at an Annual General Meeting

4. Sources of Payment of Dividend

Out of Profit:

• Dividend shall be paid out of the profits of the financial year for which such Dividend is sought to be declared and/or
• out of profits for any previous financial year(s) which remains undistributed after providing for depreciation in accordance with the provisions of the Act
• Dividend may also be declared out of money provided by the Central Government or a State Government in pursuance of a guarantee given by such Government for this purpose

5. Which Reserves can't use for payment of Dividend?

Dividend shall not be declared

• out of the Securities Premium Account or
• the Capital Redemption Reserve or
• Revaluation Reserve or
• Amalgamation Reserve or
• out of profits on re-issue of forfeited shares or
• out of profits earned prior to incorporation of the company.

6. Source to Declare Interim Dividend?

• out of the surplus in the profit & loss account and/or
• out of profits of the financial year in which such Dividend is sought to be declared.

7. If there is default in re-payment of deposit or payment of interest. Whether Dividend can be declared?

A company shall not declare Dividend on its equity shares in case of non-compliance of provisions relating to the acceptance of deposits under the Act, till such time the deposits accepted have been repaid with interest in
accordance with the terms and conditions of the agreement entered with the depositors

8. Period of Declaration of Interim Dividend

The Board of Directors of a company may declare Interim Dividend during any financial year or at any time during the period from closure of financial year till holding of the Annual General Meeting.

9. Whether Member can declare Dividend in General Meeting without recommendation of Board of Directors?

The Dividend has been recommended by the Board, Members in Annual General Meeting cannot on their own declare any Dividend

10. Whether distribution of discount coupons to Shareholders can consider as dividend?

Distribution of discount coupons to all the Shareholders shall not be treated as deemed Dividend.

11. Whether dividend can be pay to any other person?

The Dividend may also be paid to other person on the order of the Member or to his banker

12. Whether it is mandatory to deposit dividend in Separate Bank Account.

Dividend shall be deposited in a separate bank account within five days from the date of declaration. Even in Private Limited Companies also.

13. What is time period for payment of Dividend?

Dividend shall be paid within thirty days of declaration

14. Whether Dividend can be paid in Kind?

• Dividend shall be paid in cash and not in kind
• Dividend payable in cash may be paid through payable at par cheque or warrant or in any electronic mode of payment approved by the Reserve Bank of India

15. Whether dividend can be revocate after declaration?

Dividend, once declared, becomes a debt and shall not be revoked.