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Declaration of Dividend

Muralidharan (Self Employed) (1034 Points)

28 May 2009

A company has issued 32,50,000 - 1% Non-Cumulative Preference Shares. Since the company was reporting loss it has not declared any dividend for its preference shareholders. During the year ended 31.03.2009 the company has reported surplus and has also wiped off its entire accumulated losses. It is now proposed to declare and pay the 1% dividend to its preference members. Members kindly advise me STEP BY STEP procedures to be adopted by the company for declaring the dividend and paying the same.

with regards

Muralidharan

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5 Replies

Gargi Ranade (CS) (619 Points)
Replied 28 May 2009

will you please clarify whether you want to pay to resident or non-resident accordingly i will send you detail checklist

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Muralidharan (Self Employed) (1034 Points)
Replied 29 May 2009

Originally posted by :Gargi Ranade
"	will you please clarify whether you want to pay to resident or non-resident accordingly i will send you detail checklist	"

Sir, We are going to pay preference dividend to resident shareholders

with regards

Murali

Gargi Ranade (CS) (619 Points)
Replied 29 May 2009

Hi sir,

1. Arrange Board meeting pass resolution recommanding dividend and calling extra ordinary class meeting subject to point no.3

2. ensuer register of member is closed as per provision of section 154

3. If it is final dividend then ensure it is declared only in AGM

4.ensure that the amount of dividend has been deposited in separate bank account within five days from date of declaration of such dividend

5. ensure that dividend is paid out of accumalated profit only however ,provision regarding depriciation and reserves are not applicable for preference dividend

6. ensure corporate dividend tax has been deposited within 14 days of the declaration of dividend

7. ensure that dividend is paid within 30 days to the registered holders or to their order.

8. intimate stock exchange in case company is listed

9. If there are any complaint regarding non-payment of dividend ensure whether corrective action taken?

10. the dividend may be paid by cheque or through warrant to registered address of shareholder in case of joint holder to first holder's address

11.If it is interim dividend it needs to be regularise in the annual general meeting

Documents involved in payment of prefernce dividend minutes of Board meeting

2. Minutes of class meeting /AGM

3.register of members

4. maintainace of record of unpaid dividend

5. notice of closure of register

please also refer procedure mentioned in secretarial standard on dividend which you can get online through ICSI 's website .

Muralidharan (Self Employed) (1034 Points)
Replied 29 May 2009

Mr.Gargi Ranade I sincerely thankyou for your immediate and elaborate reply. Our company is not a listed entity. We have only one preference shareholder. Is it a must to open a separate dividend account or can we pay the dividend from our company's current account (since there is only one shareholder this doubt is raised by me). Further kindly clarify why class meeting to be convened. Is it necessary to convene class meeting and obtain approval of preference shareholders for declaring dividend.

(I thought that preference dividend can be recommended by the board in the meeting in which accounts for 31.3.2009 is being approved. Approval of equity members will be obtained at the forth coming AGM).

looking forward for your kind clarification.

thanking you and with regards

Muralidharan

Gargi Ranade (CS) (619 Points)
Replied 30 May 2009

Hi Sir,

In my Co. We have recently paid redemption dividend I also face same query like u , even we have only one pref. share holder but the only difference is our shareholder is non-resident hence we have followed compleatly diffrerent procedure as per RBI rules and section 205

our shareholder is also director of the Co. hence, after discussing matter with MD and other bosses we decided to go for board resolution only . and skeep class meeting on the grounds that we will regularise the matter in coming AGM.

Regarding Opening of separate bank Account I am not very sure but as told earlier we have followed different procedure and paid through our EEFC account

as per my knowledge its just procedural matter and paying through regular account may not create any complication as long as you are paying through accumalated profit .

I will also suggest you to go through the below mention link

https://www.icsi.edu/WebModules/Publications/SSONDIVIDEND(SS3).pdf

Regards ,

MS. Gargi