One of my client is a non-listed public company. The company has been making losses in the past few previous years and it has an accumulated loss in its Balance Sheet. This year the company has been able to make profit enough to cover the accumulated loss. But, the company's mgt. is keen to declare dividend during for the year ended 31st March, 2012. The quantitative details are below:
Accumulated Loss - Rs. 30,00,000.00
Current Year Profit - Rs. 50,00,000.00
Dividend Proposed - Rs. 30,00,000.00
Now, my question is after set off of losses the surplus of the company would be only Rs. 20,00,000.00 but the mgt. has decided to propose dividend of Rs. 30,00,000.00. It has no other accumulated reserves. Can the company do so?? The mgt. after consulting some experts is claiming that they can declare dividend this year even though they are short of Rs. 10,00,000.00. What is your opinion in this scenario?????
CAclubindia
