BooksIQDividend is declared out of CURRENT profits (after depreciation), ACCUMULATED profits, or both. Transfer to reserves is OPTIONAL. Dividend must be deposited in a separate bank account within 5 days and PAID within 30 DAYS; unpaid amounts go to an Unpaid Dividend Account, and amounts unclaimed for 7 YEARS go to the IEPF.
Key points
- §123 permits dividend to be declared/paid for a financial year ONLY out of: (a) the PROFITS of the company for that year after providing for DEPRECIATION;
- (b) the profits of PREVIOUS years (accumulated, after depreciation);
- or (c) money provided by Central/State Government for dividend under a guarantee.
- Transfer of a percentage of profits to RESERVES is at the company's DISCRETION (the earlier mandatory transfer was removed by the 2013 Act).
- The Board may declare INTERIM dividend out of surplus / current-year profits.
- Dividend must be DEPOSITED in a separate scheduled-bank account within 5 DAYS of declaration and PAID within 30 DAYS.
- Amounts unpaid/unclaimed are transferred to a special UNPAID DIVIDEND ACCOUNT within 7 days after the 30-day period;
- any amount remaining unclaimed for 7 YEARS (with the related shares) is transferred to the INVESTOR EDUCATION AND PROTECTION FUND (IEPF).
- A company that has DEFAULTED on repayment of deposits cannot declare dividend.
Reference: §123 Companies Act 2013
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