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Published : September 18, 2017 | Author : lexcomply
Category : Company Law | Total Views : 227 | Unrated

  
lexcomply
LexComply is a one-stop compliance management solution for practicing professionals and organization. It generates and send alerts for due date based, Ongoing and Event based compliances to the concerned official proactively. It serves as centralized repository of acts, rules, forms and other allied documents to make compliance efficient. It automates reminders, status reports, updates, task and compliance proof management. It also enables professionals to conduct Audit, Research,Due Diligence, Compliance Training and give opinion.
 

In accordance with the provisions of sub-section (3) of section 123,the Board of Directors 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.

Key Considerations:
1. A company may, if so authorised by its articles, pay dividends in proportion to the amount paid up on each share.[Section 51]

2. Interim dividend must be declared 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.[Section 123(3)]

3. 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. [Provison to Section 123(3)]

The following procedure is to be followed for Declaration and Payment of Interim Dividend by the Board of Directors [Section123 to 127and Companies (Declaration and Payment of Dividend) Rules, 2014] :-

1. Issue not less than 7 days’ notice of Board meeting, or a shorter notice in case of urgent business, in writing to every director of the company at his address registered with the company and call a Board Meeting to consider the position of accounts to ascertain that whether there is sufficient profits to declare interim dividend. Also follow the procedure prescribed for issuing and signing of notice of Board Meeting.

2. Hold a meeting of Board of Directors and consider in detail all the matters with regard to the declaration and payments of an Interim Dividend including:

(a) Ascertain whether financial position of the Company allows the payment of Interim dividend out of profits available for distribution (after providing depreciation)[Section 123(1)(a)] ;

(b) Percentage of profits to be transferred to reserves. [Proviso to Section 123(1)]

(c) quantum of dividend;

(d) closure of register of members for payment of interim dividend or fixation of record date;

(e) opening of separate bank account;

(f) printing of dividend warrants;

(g) authority for signing the dividend warrants;

(h) Pass a suitable Board Resolution for declaration and payment of interim dividend and approving the above said details.

3. Prepare and circulate draft minutes within 15 days from the date of the conclusion of the Board Meeting, by hand/speed post/registered post/courier/e-mail to all the Directors for their comments. Also follow the procedure prescribed for preparing, circulation, signing and compiling of Board Minutes.(Secretarial Standards-1)

4. Close the register of members and the share transfer registers of the company, as decided by the Board.

5. Hold a meeting of board of directors for approving a registration of transfer/transmission of the shares of the company, if any, which have been lodged with the company prior to the commencement of book closure/record date.

6. Prepare dividend list from the Register of members/beneficial owners, on and from the last date of closure of books or as on record date in respect of each shareholders containing the following details.




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