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Declaration of Dividend

CA Suraj Prasad Shaw (Chartered Accountant) (504 Points)

05 July 2011

Experts please help.

Whether it is manadatory to pay dividend within 30 days from date of AGM?

What are the consequences if it is not paid during the above time period?

Please explain the procedure to pay dividend to shareholders.

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13 Replies

Kunal (Risk Analyst) (299 Points)
Replied 05 July 2011

yes it is mandatory to pay dividend within 30 days from its declaration... Within 5 days of declaration of dividend it shall be deposited in a seperate bank account....after depositing the same it can only be used for paying out dividend. Dividend once declared cannot be revoked xcpt under special cirumstances. Non payment of dividend within 30 days attracts penalty u/s 207.

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Kunal (Risk Analyst) (299 Points)
Replied 05 July 2011

dividend can either be paid thru a cheque, cash or dividend warrant. It cannot be paid by anyother means.

CA Suraj Prasad Shaw (Chartered Accountant) (504 Points)
Replied 05 July 2011

Originally posted by : roopak
	yes it is mandatory to pay dividend within 30 days from its declaration... Within 5 days of declaration of dividend it shall be deposited in a seperate bank account....after depositing the same it can only be used for paying out dividend. Dividend once declared cannot be revoked xcpt under special cirumstances. Non payment of dividend within 30 days attracts penalty u/s 207.

Thanks...............

Dheeraj (Learner) (1100 Points)
Replied 05 July 2011

Agreed with ROOPAK

If company fails to comply with any of rules, the company and every officer of the company in default, shall be punishable with fine which may extend to five hundred rupees, and, where the contravention is a continuing one, with further fine which may extend to fifty rupees for every day, after the first, during which such contravention continues.

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SkDash (CS (Member) CWA (Final)) (909 Points)
Replied 05 July 2011

Roopak-ur two answers are contradictory. 1. Dividend amt to be deposited in a separet bank account within 5 days and 2. Dividend can be paid in cash.

How dividend payment by cash is possible ? Can a company simply withdraw cash and pay it to shareholders ?

whether bank can allow for withdrawal of cash simply on company's request ?

If the Co withdraws cash and didnot pay, then what will be the consequences ? If this is possible, what the purpose of opening a separte bank account ?

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(Guest)

Dividend by cash not permissible

Law has clearly said Dividend amount needs to be deposited in the Bank within 5 Days, so ur first option of cash cancelled and about Section 205(3), Here Cash means liquid asset and not the Gifts or other things as dividend.

Kunal (Risk Analyst) (299 Points)
Replied 05 July 2011

well i suppose its mandatory to keep d money in separate bank account so that at the time of payment co. do not come up wid an xcuse of lack of funds for dividend. N at the time of payment of dividend co. can withdarw the money and pay it to the shareholders in cash...But practically speaking payment i most cases infact in almost everycase is made by cheque... The cash thing is wat is mentioned in CO. LAW book reputed authors. If anyone has some more knowledge please share....!

(Guest)

Comment on “Excuse by Company for not having fund”

Boy, If company doesn’t have fund in its hand, then It will not declare dividend. Because declaration of dividend is not compulsory and Dividend amount is to be decided by the Board, who are aware of the Financials of the company.

So, No company across the Globe can use that excuse.

Sumiti Jain (FP) (1364 Points)
Replied 05 July 2011

Agreed wid Roopak & ankur shah

Kunal (Risk Analyst) (299 Points)
Replied 05 July 2011

hi ankur.. Tell me one thing dude... Suppose co. have funds in hand and declares divided...it dosent keep funds in separate bank account n utilises it for some capital investment...n when it comes to payment of dividend it cud nt proceed ahead cz of shortage of funds... Now so dat such a scenario dosent take place it is necessary to keep the funds in separate bank account... And as i said in my earlier post this is my personal opinion wat i suppose is correct... If u hv some odr view...plz go ahead..n share it...will help me too...!

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(Guest)

Boy, In your example you forgot to add the condition that Directors of the company are having the Memory loss problem like Amir Khan in Ghajini and they forgot that they need to deposit dividend in 5 Days in separate bank account.

If you will add this condition then your case will be much more stronger. Capital Investment decisions are serious in nature, they are not decided over night. You are good at studying but not in practical terms.

periasamy (DGM Finance) (91 Points)
Replied 08 July 2011

If dividend is paid within 5 days directly to the shareholders either by DD or cash, the necessity of seperate account is necessary. Pls expers confirm.