Description
the concept of dividend, how company can pay dividend, rules relating to transfer of profits to reserves, dividend out of past reserves.
S. 205 A company may declare or pay dividend for any financial year, out of a) Profits of the company for that year arrived at after providing for depreciation; or b) Profits for any previous financial year/s arrived at after providing for depreciation; or c) Out of both (a) and (b); or d) Out of moneys provided by the Central Govt. or a State Govt. for the payment of dividend in pursuance of guarantee given by that Govt.
Non provision of depreciation If the company has not provided for depreciation for any previous financial year/s, it shall before declaring dividend for any financial year provide for such depreciation. Past Losses If the company has incurred any loss in previous financial year/s, then the amount of loss or amount equal to the amount provided for depreciation for that/those years, whichever is less shall be set off against the profits of the company for the year for which dividend is proposed to be declared or paid.
Rules relating to transfer of profits to reserves Before declaring dividend for any financial year a company shall transfer to reserves the following percentage of profits for that year – 1)If the rate of proposed dividend > 10% but =<12.5% at least 2.5% of the current year’s profit 2)If the rate of proposed dividend > 12.5% but =<15% at least 5% of the current year’s profit 3)If the rate of proposed dividend > 15% but =<20% -at least 7.5% of the current year’s profit 4)If the rate of proposed dividend > 20% -10% of the current year’s profit
Rules 1. Rate of dividend- average of the rates declared in preceding 5 years or 10%’ whichever is less 2. Maximum withdrawal from reserves- % of paid up capital and free reseves. 3. Balance in reserves after withdrawal shall not fall below 15% of paid up capital Note- Amount withdrawn shal be first utilised to set off the losses incurred in the year.
• 1. Any dividend remaining unpaid for days from the date of declaration to be transferred to a separate bank account within 7 days. • 2. Failure of above shall attract interest @ 12% which shall enure to the benefit of shareholders whose dividend remains unpaid. • 3. Any shareholder can claim within 7 years • 4. After 7 years amount to be transferred to ‘Investor education & Protection Fund’
S. 208 1. Where any shares are issued for raising money to defray the expenses of construction of any work or building or plant which cannot be made profitable for a lengthy period, the company may a. Pay interest on such share capital, and b. Charge such interest to capital as part of cost of construction
1. Payment authorised by articles or by a special resolution 2. Previous sanction of Central Govt. 3. Rate of interest – maximum 4% 4. Period for which interest can be paid- Upto close of the half year next after the half year during which the work is completed.
1. CoverageDirect loans, guarantees, provision of securities or investment in securities- any body corporate 2. Limits60% of paid up capital+free reserves or 100% of free reserves whichever is more
1. 2. 3. 4. 5.
A banking company Investment company A non subsidiary private company Investments in right shares Loans or guarantees by a holding company to 100% subsidiary company
doc_239305815.pptx
the concept of dividend, how company can pay dividend, rules relating to transfer of profits to reserves, dividend out of past reserves.
S. 205 A company may declare or pay dividend for any financial year, out of a) Profits of the company for that year arrived at after providing for depreciation; or b) Profits for any previous financial year/s arrived at after providing for depreciation; or c) Out of both (a) and (b); or d) Out of moneys provided by the Central Govt. or a State Govt. for the payment of dividend in pursuance of guarantee given by that Govt.
Non provision of depreciation If the company has not provided for depreciation for any previous financial year/s, it shall before declaring dividend for any financial year provide for such depreciation. Past Losses If the company has incurred any loss in previous financial year/s, then the amount of loss or amount equal to the amount provided for depreciation for that/those years, whichever is less shall be set off against the profits of the company for the year for which dividend is proposed to be declared or paid.
Rules relating to transfer of profits to reserves Before declaring dividend for any financial year a company shall transfer to reserves the following percentage of profits for that year – 1)If the rate of proposed dividend > 10% but =<12.5% at least 2.5% of the current year’s profit 2)If the rate of proposed dividend > 12.5% but =<15% at least 5% of the current year’s profit 3)If the rate of proposed dividend > 15% but =<20% -at least 7.5% of the current year’s profit 4)If the rate of proposed dividend > 20% -10% of the current year’s profit
Rules 1. Rate of dividend- average of the rates declared in preceding 5 years or 10%’ whichever is less 2. Maximum withdrawal from reserves- % of paid up capital and free reseves. 3. Balance in reserves after withdrawal shall not fall below 15% of paid up capital Note- Amount withdrawn shal be first utilised to set off the losses incurred in the year.
• 1. Any dividend remaining unpaid for days from the date of declaration to be transferred to a separate bank account within 7 days. • 2. Failure of above shall attract interest @ 12% which shall enure to the benefit of shareholders whose dividend remains unpaid. • 3. Any shareholder can claim within 7 years • 4. After 7 years amount to be transferred to ‘Investor education & Protection Fund’
S. 208 1. Where any shares are issued for raising money to defray the expenses of construction of any work or building or plant which cannot be made profitable for a lengthy period, the company may a. Pay interest on such share capital, and b. Charge such interest to capital as part of cost of construction
1. Payment authorised by articles or by a special resolution 2. Previous sanction of Central Govt. 3. Rate of interest – maximum 4% 4. Period for which interest can be paid- Upto close of the half year next after the half year during which the work is completed.
1. CoverageDirect loans, guarantees, provision of securities or investment in securities- any body corporate 2. Limits60% of paid up capital+free reserves or 100% of free reserves whichever is more
1. 2. 3. 4. 5.
A banking company Investment company A non subsidiary private company Investments in right shares Loans or guarantees by a holding company to 100% subsidiary company
doc_239305815.pptx