Interim dividend

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 February 2018 Can we pay Interim Dividend if there is profit in current year but there are brought forward business losses?

It is clear that the final divend can not be paid. But my query is regarding INTERIM DIVIDEND as mentioned above.

Please inform, if available provided section No.

Arpit

Arpit (Expert)
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16 February 2018 interim dividend can be paid. Read Section 123(3)

Querist : Anonymous

Querist : Anonymous (Querist)

16 February 2018 But if the brought forward losses (for ex. Rs. 100) are higher than the current year profit (For ex Rs. 90), than also can we paid interim dividend?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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01 August 2024 Yes, you can pay interim dividend even if there are brought forward business losses, provided certain conditions are met. The rules regarding interim dividend are set out in the Companies Act, 2013. Here’s a detailed explanation:

### **Legal Framework for Paying Interim Dividend**

**1. **Interim Dividend Payment:**
- **Section 123(3) of the Companies Act, 2013:** The board of directors may declare an interim dividend out of the profits of the company, which is calculated up to the end of the quarter in which the interim dividend is declared.
- **Provision for Payment:** According to this section, the interim dividend can be paid from the profits of the current financial year up to the end of the quarter in which the interim dividend is declared. There is no explicit restriction in Section 123(3) that prevents the payment of interim dividends if there are brought forward losses.

**2. **Impact of Brought Forward Losses:**
- **Offset Against Profits:** If the brought forward losses exceed the current year's profit, the interim dividend cannot be paid if it results in a negative balance in the profit and loss account. The dividend must be paid from current profits, and the company should not pay dividends that exceed the available profits.

**3. **Final Dividend and Brought Forward Losses:**
- **Section 123(1):** While interim dividends can be paid from current profits, the final dividend cannot be declared if there are accumulated losses that exceed the profits of the current year. The final dividend must be paid only if there are sufficient profits to cover the accumulated losses.

### **Key Points to Remember:**

1. **Available Profits:** Ensure that the interim dividend is paid only from the current year's profits and that it does not lead to a negative balance in the profit and loss account.

2. **Directors' Responsibility:** The board of directors should carefully review the financials before declaring an interim dividend to ensure that the payment is sustainable and compliant with legal requirements.

3. **Financial Position:** A thorough assessment of the company's financial position should be conducted to ensure that the company remains solvent after paying the interim dividend.

### **Summary:**

- **Interim Dividend Payment:** Allowed if there are current year profits.
- **Brought Forward Losses:** If they exceed current year profits, the payment of interim dividend may not be advisable or feasible.
- **Final Dividend:** Cannot be declared if accumulated losses exceed the profits for the year.

Consult with a company secretary or financial advisor to ensure compliance with all legal requirements and to assess the financial implications before declaring any dividend.