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Dividend

Sushil Upadhyay (Manager-Accounts) (45 Points)

17 May 2017

We are Pvt Ltd Company and subsidiary of Foreign Company with two corporate shareholder. Our Shareholder want us to recommend dividend of Rs. 10.00 crore. Our Current year Profit is Rs. 7.00 crore. Paid up Capital is Rs. 11.70 crore and Reserve & Surplus is Rs. 22.70 crore. can u pl guide how much max dividend can be paid to shareholder. Regards Sushil

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sowmya (audit assistant) (228 Points)
Replied 17 May 2017

as per sec 123(1) if current year profits are insufficient for declaring dividend company can declare the same from accumulated reserves provided the AMT to be borrowed from reserves shall not exceed 1/10 the of the paid up capital and free reserves. also after borrowing the same from reserves the existing reserves shall not fall below 15% of paid up capital. respected experts correct me if IAM wrong

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Sudhir Todkar (CS Professional) (1021 Points)
Replied 23 May 2017

Follow rule 3 companies (Dividend) rules 2014.

In give case company wants to declare dividend more than profit. You can give dividend out of free reserves by complying rule 3.

Average Rate of dividend declare by company in last 3FY shall not be more than current year.
less than or =1/10 of Paid up capital + Free reserves.
After withdrawing Amount from free reserves Balance shall not fall below 15% of Paid up share capital
after setoff all losses of current year

Out of 4 steps of rule 3 need can declare dividend which ever is less. subject to setting off losses of current year if any..

Note: Company should not be default under section 73 & 74 otherwise Equity Shareholder will not be eligible to get dividend.

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