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Dividend on Non-Cumulative Shares

Leonel (Service) (84 Points)

31 May 2008

In case of Non-Cumulative Pref. Shares , Is it obligatory on the part of the company to pay dividend in the current year if the company is having profits in the current year.

Kindly reply with justification.

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3 Replies

M.Sriram Shenoy (CA Final) (814 Points)
Replied 31 May 2008

When the company has earned profits, they have to pay dividend on preference shares, as they carry the preferential right.

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Leonel (Service) (84 Points)
Replied 31 May 2008

Hello Mr. Sriram,

Just would like to Add here that dividend is in the discretion to the Board. If Equity shareholder are not getting dividend , Do non - Cumulative preference Shareholder are entitled to dividend for the year in which company has earned profits.

Views are invited with justification.

Rashmi (Service) (23 Points)
Replied 21 November 2008

Hello,

In my opinion, As per section 205, section 80 and Section 85 of the companies Act 1956, company has to declare dividend to the preference shareholders in case of profit to the company because this is the feature of the preference shares to get the fixed percentage of dividend on the face value of shares and has a preferential right in case of dividend as compared to ordinary shares.