(1) No shall be declared or paid by a company for any financial year except—
(a) out of the profits of the for that year arrived at after providing for depreciation in accordance with the provisions of sub-section (2), or out of the profits of the company for any previous or years arrived at after providing for depreciation in accordance with the provisions of that sub-section and remaining undistributed, or out of both or ;
in computing profits any amount representing unrealised gains, notional gains or revaluation of assets and any change in carrying amount of an asset or of a liability on measurement of the asset or the liability at fair value shall be excluded; or
(b) out of money provided by the Central Government or a State Government for the payment of dividend by the company in pursuance of a guarantee given by that Government:
Provided that a company may, before the declaration of any dividend in any financial year, transfer such percentage of its profits for that financial year as it may consider appropriate to the reserves of the company:
Provided further that where, owing to inadequacy or absence of profits in any financial year, proposes to declare dividend out of the accumulated profits earned by it in previous years and t ransferred by the company to the reserves , such declaration of dividend shall not be made except in accordance with in this behalf:
Provided also that no dividend shall be declared or paid by a company from its reserves other than .
(2) For the purposes of clause (a) of sub-section (1), depreciation shall be provided in accordance with the provisions of
(3) The of a company may declare interim dividend during any financial year out of the surplus in the profit and loss account and out of profits of the financial year in which such interim dividend is sought to be declared:
Provided that in case the company has incurred loss during the current financial year up to the end of the quarter immediately preceding the date of declaration of interim dividend, such interim dividend shall not be declared at a rate higher than the average dividends declared by the company during the immediately preceding three financial years.
The of a company may declare interim dividend during any financial year or at any time during the period from closure of financial year till holding of the annual general meeting out of the surplus in the profit and loss account or out of profits of the financial year for which such interim dividend is sought to be declared or out of profits generated in the financial year till the quarter preceding the date of declaration of the interim dividend:
Provided that in case the company has incurred loss during the current financial year up to the end of the quarter immediately preceding the date of declaration of interim dividend, such interim dividend shall not be declared at a rate higher than the average dividends declared by the company during immediately preceding three financial years.
(4) The amount of the dividend, including interim dividend, in a in a separate account within five days from the date of declaration of such dividend.
(5) No dividend shall be paid by a in respect of any therein except to the registered shareholder of such share or to his order or to his banker and shall not be payable except in cash:
Provided that nothing in this sub-section shall be deemed to prohibit the capitalisation of profits or reserves of a company for the purpose of issuing fully paid-up bonus shares or paying up any amount for the time being unpaid on any shares held by the members of the company:
Provided further that any dividend payable in cash may be paid by cheque or warrant or in any electronic mode to the shareholder entitled to the payment of the dividend.
(6) A company which fails to comply with the provisions of sections 73 and 74 shall not, so long as such failure continues, declare any dividend on its equity shares.
2(35) Dividend includes any interim dividend 2(20) Company means a company incorporated under this Act or under any previous company law2(41) Financial Year, in relation to any company or body corporate, means the period ending on the 31st day of March every year, and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year, in respect whereof financial statement of the company or body corporate is made up:
Provided that on an application made by a company or body corporate, which is a holding company or a subsidiary or associate company of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that period is a year:
Provided further that a company or body corporate, existing on the commencement of this Act, shall, within a period of two years from such commencement, align its financial year as per the provisions of this clause
Provided also that in case of a Specified IFSC public company, which is a subsidiary of a foreign company, the financial year of the subsidiary may be same as the financial year of its holding company and approval of the Tribunal shall not be required.
Provided also that in case of a Specified IFSC private company, which is a subsidiary of a foreign company, the financial year of the subsidiary may be same as the financial year of its holding company and approval of the Tribunal shall not be required.
Substituted vide Companies (Amendment) Act, 2017 dated 03.01.2018 effective from 09.02.2018. To view the notification,Click Here
Inserted vide Companies (Amendment) Act, 2017 dated 03.01.2018, effective from 09.02.2018. To view the notification,Click Here
second proviso shall not apply to a Government Company in which the entire paid up share capital is held by the Central Government, or by any State Government or Governments or by the Central Government and one or more State Governments vide notification no. G.S.R. 463(E) dated 5th June, 2015.
(The exceptions, modifications and adaptations provided above shall be applicable only to those Government Companies which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)
To view the notification,Click Here
Substituted vide Companies (Amendment) Act, 2017 dated 03.01.2018 effective from 09.02.2018. To view the notification,Click Here
Refer rule 3 of the Companies (Declaration and Payment of Dividend) Rules, 2014. To view the rule,Click Here
2(44) Free Reserves means such reserves which, as per the latest audited balance sheet of a company, are available for distribution as dividend:
(i) any amount representing unrealised gains, notional gains or revaluation of assets, whether shown as a reserve or otherwise, or
(ii) any change in carrying amount of an asset or of a liability recognized in equity, including surplus in profit and loss account on measurement of the asset or the liability at fair value, shall not be treated as free reserves
Fourth proviso inserted by the Companies (Amendment) Act, 2015 (21 of 2015), notified on 26th May, 2015, with effect from 29th May 2015 vide notification S.O. 1440(E). To view the notification,Click Here
To view the schedule,Click Here2(10) Board of Directors, in relation to a company, means the collective body of the directors of the company
Substituted vide Companies (Amendment) Act, 2017 dated 03.01.2018, effective from 09.02.2018. To view the notification,Click Here
2(10) Board of Directors, in relation to a company, means the collective body of the directors of the company
sub-section (4) shall not apply to a Government Company in which the entire paid up share capital is held by the Central Government, or by any State Government or Governments or by the Central Government and one or more State Governments vide notification no. G.S.R. 463(E) dated 5th June, 2015.
(The exceptions, modifications and adaptations provided above shall be applicable only to those Government Companies which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)
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2(80) Scheduled bank means the scheduled bank as defined in clause (e) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934)
Section 123 (5) shall apply to nidhi companies, subject to the modification that any dividend payable in cash may be paid by crediting the same to the account of the member, if the dividend is not claimed within 30 days from the date of declaration of the dividend vide notification no. G.S.R. 465(E) dated 5th June 2015. To view the notification,Click Here
2(84) Share means a share in the share capital of a company and includes stock3. Declaration of dividend out of reserves.-
In the event of inadequacy or absence of profits in any year, a company may declare dividend out of free reserves subject to the fulfillment of the following conditions, namely:—
(1) The rate of dividend declared shall not exceed the average of the rates at which dividend was declared by it in the three years immediately preceding that year:
Provided that this sub-rule shall not apply to a company, which has not declared any dividend in each of the three preceding financial year.
(2) The total amount to be drawn from such accumulated profits shall not exceed one-tenth of the sum of its paid-up share capital and free reserves as appearing in the latest audited financial statement.
(3) The amount so drawn shall first be utilised to set off the losses incurred in the financial year in which dividend is declared before any dividend in respect of equity shares is declared.
(4) The balance of reserves after such withdrawal shall not fall below fifteen per cent of its paid up share capital as appearing in the latest audited financial statement.
Omitted vide the Companies (Declaration and Payment of Dividend) Second Amendment Rules, 2015 notification no. G.S.R. 441 (E) dated the 29th May, 2015. To view the notification,Click Here