30 August 2013
In the event of inadequacy or absence of profits in any year,
Dividend may be declared by a company for that year out of the accumulated profits earned by it in Previous years and transferred by it to the reserves, subject to the conditions that –
(i) The rate of the dividend declared shall not exceed the average of the rates at which dividend was declared by it in the five years immediately preceding that year or ten per cent of its paid-up capital, whichever is less;
(ii) The total account to be drawn from the accumulated profits earned in previous years and transferred to the reserves shall not exceed an amount equal to one tenth of the sum of its paid up capital and free reserves and the amount so drawn shall first be utilized to set off the losses incurred in the financial year before any dividend in respect of preference or equity shares is declared;
And
(iii) The balance of reserves after such withdrawal shall not fall below fifteen per cent of its paid-up share capital.
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