Declaration of final dividend - before closure of accounts

[Adoni Raghavendra]

Dear All, Whether a 'Private Limited Company' can declare final dividend before the closure/finalisation of accounts related to the period during on which dividend declared? Is it allowed/applicable in/as per the company's Act 1956. If not, what are the consequences to be faced by the company as per the law?

[Rama Krishana]

Section 205 of the companies act 1956 is the relevant provision - there is no restriction on declaring dividend before finalization of accounts for the current year. Final Dividend needs to be approved by the AGM only. Board can declare interim dividend, final dividend can be approved and declared by the AGM or EGM only. Adjustment on account of Depreciation and accumulated loss needs to be made first.

AI Summary

Dividend declaration: final dividend requires AGM approval while boards may declare interim dividends; adjust depreciation and losses first. No express prohibition exists on declaring a dividend before finalisation of the current year's accounts; a final dividend must be approved at a general meeting while the board may declare an interim dividend. Necessary adjustments for depreciation and accumulated losses must be made prior to distribution.