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Non payment of dividend to preference share holders e

Krushna (ACS) (119 Points)

04 February 2011

Hi,

Can anybody please guide me that is it compulsory to pay divident on preference shares when the company is making profits. as per the company law.

Regards

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2 Replies

SANTOSH SHAH (Company Secretary) (754 Points)
Replied 05 February 2011

Originally posted by : Krushna
	Hi, Can anybody please guide me that is it compulsory to pay divident on preference shares when the company is making profits. as per the company law. Regards

Hi Krushna,

To my knowledge, its the Company's Decision (Board) to declare dividend or not .

In normal circumstances, company do share profits as dividends to Shareholders.

If company gives any dividend, the Preference Shareholders are entitled to receive the dividend prior to the

Equity Share holders as they have preferential right over the Eq.Shareholders.

This is becoz the Eq share holders have voting right at the meeting, but the same is not for the Pref.Share holders.

If the Co is not willing to give dividend this year, and proposes to share it next year, in such case the accumulated profits of this year and next year can be given as dividend to Pref.Share holders.

Experts /Members, your views appreciated.

regards

Santosh Shah

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Sudhir Garg (Service) (236 Points)
Replied 05 February 2011

I understand that payment of dividend on preference shares are not required to be made every year. But dividend becomes due / accrues / accumulate thereon each year which ultimately empower them to vote under section 87.

I understand that logic behind this is, preference shareholder has nothing to get benefitted otherwise. They are not entitled to vote or these shares are also not traded on stock exchange.

Other member views are solicited.

Regards- Sudhir