Comparison to be provided
The new law of Companies Act, 2013 has introduced certain changes to declaration and payment of dividend. Some of the key features related to Dividend are as follows:
Meaning of Dividend:
Dividend has origin from Latin word “dividendum”, which means a thing to be divided. ‘Dividend’ is a payment made by a company to its shareholders out of distributable profits.
Applicability:
- Public Company
- Private Company
- Private Company subsidiary of Public Company
Types of Dividend (see attached):
- Final Dividend
- Interim Dividend
- Dividend on Equity Shares
- Dividend on Preference Shares
Declaration of Dividend: (Section 123)
- Dividend shall be declared or paid by the company for any financial year out of the profits, out of money received from Central and State Government
- Transfer of any percentage of profits to reserve before declaration of dividend
- Depreciation shall be provided as per the Schedule II of the Companies Act, 2013
- Dividend can be declared out of free reserves only.
Payment of Dividend: (Section 123 and 124) (see attached)
- Dividend can be paid in cheque/warrant/electronic mode
- Act is silent on manner of payment of dividend to joint shareholders
- The company within 90days of transfer to unclaimed account, has to prepare a statement of unpaid dividend, with shareholders name and address and display the same on their website
- This displayed statement must be in PDF format, year wise with search facility and must be easily accessible free of charge
Penal Provisions:
General Penalty
- If any default is made in complying with Section 124, the company shall be punishable with fine ranging from INR 5 Lacs to INR 25 Lacs and every officer in default shall be punishable with fine ranging from INR 1 Lac to INR 5 Lacs
Specific Penalty for failure to Distribute Dividend (Section 127)
- If dividend has been declared but not paid, or warrants not posted within 30 days of declaration; every director who is knowingly party of the default shall be punishable with imprisonment upto 2 years and with fine of INR 1,000 per day during which default continues.
- Company will also pay simple interest @18% p.a.
You may get back to us for any more details on the declaration and payment of dividend, or for any other matter related to New Companies Act, 2013 at below mentioned contact details-
Malavika Bhatia | <malavika.bhatia@bluelotusstrategy.com> | M +91 98733 18440
Monika Bhardwaj | <monika.bhardwaj@bluelotusstrategy.com> |M +91 98915 60525
Very soon you’ll be able to view all our past mailers related to the New Companies Act, 2013 on our website: www.bluelotusstrategy.com
We will do our best to assist you with the compliance’s and removal of doubts / queries. However, please note that since the Act is new, certain clarifications are needed as there are lot many areas where operational issues are to be sorted out.
In case of queries that require clarification from Ministry of Corporate Affairs, we will come back to you after seeking necessary clarifications from the Ministry.
