23 April 2022
There are 2 questions: 1) ICAI Module states that express power of Articles is required to declare Interim Dividend whereas Companies Act itself provided the power is Sec 123 (3) and does not mention any such requirement. 2) ICAI Module states that Interim Dividend can be revoked by consent of all shareholders but Companies Act is silent. However Companies Act states that all provisions of Dividend shall apply to Interim Dividend by virtue of Definition Clause. Therefore since Final Dividend cannot be revoked it shall mutatis mutandis be interpreted that Interim Dividend also cannot be revoked.
So is ICAI Material incorrect in this respect, or is this interpretation defective. Kindly clarify
23 April 2022
1 Interim dividend paid with the approval of board of directors. Hence provisions in articles is required. 2 As interim dividend declared with the approval of board of directors it can be revoked whereas final dividend declared in AGM which can't be revoked.
23 April 2022
@CA R Seetharaman - sir can you kindly provide reference for this. If Act itself has given express authority to Board of Directors why will seperate authority be required in articles?
Also with regards to revocation of Interim Dividend, Act has expressly stated that Dividend once declared cannot be revoked and further as per Definition Clause - Dividend includes Interim Dividend. So if Interim Dividend can be revoked where are the examples for it?
Are you sure that you are not answering on basis of knowledge of previous company law.
24 April 2022
Dividend Provisions Dr Anil Kumar1 Associate Professor SRCC
Procedure to declare Interim Dividend (i) Articles of Association must authorise the directors to declare interim dividend. (ii) Meeting of Board of Directors is to be called to declare interim dividend and decide the record date. (iii) Board of Director in their meeting has to pass a resolution declaring the interim dividend. (iv) Open a separate bank account and credit the amount of dividend within 5 days from the date of declaration of dividend.
Revocation of Declared Dividend Dividend declared with the approval of the shareholders creates a debt due to the shareholders. Generally, dividend declared cannot be revoked except with the approval of the shareholders in the event: – of the intervening circumstances after the declaration, such as the outbreak of a war, massive fire destroying the properties of the company, imposition of hard taxes, or other causes diminishing the assets of the company. – where a dividend has been declared illegally or violating the requirements of the law, the board of directors would be justified in revoking the dividend.
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