Company law

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 May 2018 Hi Team,

I was reading the chapter VIII of the companies Act 2013 which deals with Dividends. According to section 123(3) where there are inadequate profits or the company has incurred loss, the company can still declare dividends. However such dividend shall not be declared at a rate higher than the average dividends declared by the company during the immediately three financial years. However, this rule will not apply if a company has not declared dividend in each of the three preceding year.

Question: Does that mean where a company has not declared dividend in the prior three financial year? So example ABC Co ltd wants to declare dividend for the year 2017 Financial year. However, ABC limited losses in 2017 Financial year, it did not declare any dividend in 2016 year. Does that mean it will have the choice to declare any percentage of the dividend.

We are assuming other conditions for maintaining reserves etc is met.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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23 May 2018 Can it be understood as under.
Company incurred loss in current year. No dividend is declared in the preceding
three years. Company can't declare dividend in current year.

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Querist : Anonymous

Querist : Anonymous (Querist)

23 May 2018 Thanks for your reply, however companies Act, 2013 does not mention that. Let's say out of three preceding years Dividend was not declared in one year

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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23 May 2018 Then if no dividend is declared in preceding three years, company can pay dividend
at what ever % determined by the BOD and approved in AGM.

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