TaxTMI 
TaxTMI 
DIVIDEND
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion of profits in the form of bonus shares is not Dividend. Companies licensed under Section 8 of the Companies Act, 2013 or corresponding provisions of any previous enactment thereof are prohibited by their constitution from paying any Dividend to its Members. SCOPE This Standard prescribes a set of principles in relation to the declaration and payment of Dividend and matters related thereto. The principles set out herein relate to declaration and payment of Dividend on equity as well as preference share capital in accordance with the provisions of the Act and are in respect of Dividend as it relates to a going concern. These are equally applicable to Final as well as Interim Dividend unless otherwise stated. The principles enunciated in this Standard are in conformity with the provisions of the Act. In addition, the provisions of the Securities Contracts (Regulation) Act, 1956 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 are applicable to listed companies. Any specific provision relating to Dividend in the Income-tax Act, 1961 or under any other statute shall also be applicable. If due to subsequent changes in the Act or other a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed above and, where the context requires or admits, includes a Preference Shareholder. Words and expressions used and not defined herein shall have the meaning respectively assigned to them under the Act or other applicable laws. SECRETARIAL STANDARDS 1. Ascertainment of amount available for payment/distribution as Dividend. 1.1 Out of profits 1.1.1 Dividend shall be paid out of the profits of the financial year for which such Dividend is sought to be declared and/or out of profits for any previous financial year(s) which remains undistributed after providing for depreciation in accordance with the provisions of the Act. Dividend may also be declared out of money provided by the Central Government or a State Government in pursuance of a guarantee given by such Government for this purpose. Dividend shall not be declared unless carried over previous losses and depreciation not provided in the previous year(s) are set off against the profit of the company for the current year. The company may, before declaration of Dividend, transfer such percentage of profits for that financial year, as it may consider appropriate, to its reserves. Dividen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....during any financial year or at any time during the period from closure of financial year till holding of the Annual General Meeting. While declaring the Interim Dividend, the Board shall consider the financial results for the period for which Interim Dividend is to be declared and should be satisfied that the financial position of the company justifies and supports the declaration of such Dividend. The financial results shall take into account - (a) depreciation for the full year, (b) tax on profits of the company including deferred tax for full year, (c) other anticipated losses for the financial year, (d) Dividend that would be required to be paid at the fixed rate on preference shares. (e) the losses incurred, if any, during the current financial year upto the end of the quarter, immediately preceding the date of declaration of Interim Dividend. Further, in case of clause (e) above, Interim Dividend shall not be declared at a rate higher than average Dividend declared during the immediately preceding three financial years. 1.1.5 Where a company has issued equity shares with differential rights as t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2. Declaration of Dividend 2.1 Dividend shall be declared only on the recommendation of the Board, made at a meeting of the Board. Unless the Dividend has been recommended by the Board, Members in Annual General Meeting cannot on their own declare any Dividend. Where a company has an Audit Committee, this Committee shall consider the annual financial statements before submission to the Board. Dividend shall be recommended by the Board after consideration and approval of said financial statements. All requisite approvals shall be obtained before declaration of Dividend. Dividend shall not be declared subject to any condition such as the approval of financial institutions/ banks or foreign collaborators or compliance with any other contractual obligation. 2.2 Dividend shall be declared only at an Annual General Meeting. Dividend shall relate to a financial year and shall be declared by the Members at the Annual General Meeting of the company after adoption of the financial statements of the company. Members may declare a lower rate of Dividend than the rate recommended by the Board but have no power to increase the amount or rate of Divi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h shares in accordance with the terms of issue. If there are two or more classes of preference shares, the holders of the class which has priority are entitled to their preference Dividend before any Dividend is paid in respect of the other class, if the terms of issue so provide. However, if the terms of issue are silent, Dividend shall be distributed on pro-rata basis. In the case of Interim Dividend, while Preference Shareholders need not necessarily be paid Dividend before Interim Dividend is paid to equity Shareholders, the Board should take into account such sum as would be necessary to pay Dividend to the Preference Shareholders before consideration of Interim Dividend. 3.3 Arrears of Dividend on cumulative preference shares shall be paid before payment of any Dividend on equity shares. Preference shares may be cumulative or non-cumulative. Dividend in arrears on cumulative preference shares can be paid in a later year where there are profits to justify such payment. In the case of non-cumulative preference shares, if no Dividend is paid in a year, there is no right to receive the same in future years. After paying the Dividend on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ompany. 5.2 Taxes as applicable on distribution of Dividend shall be paid by the company within the prescribed time. 5.3 Dividend shall be paid in cash and not in kind. Dividend payable in cash may be paid through payable at par cheque or warrant or in any electronic mode of payment approved by the Reserve Bank of India. To curb the practices of fraudulent encashment of Dividend, the company shall endeavour to pay Dividend directly to the bank accounts of the Members through any one of the electronic modes specified by the Reserve Bank of India viz. electronic clearing services (local, regional or national), direct credit, real time gross settlement, national electronic funds transfer etc. Where Dividend is remitted through electronic mode, the company shall send to the Member, a statement in writing showing the amount of Dividend paid. Where payment of Dividend is not possible through any electronic mode, such Dividend shall be paid by way of cheque payable at par or Dividend warrant. The cheque or warrant shall be sent to the registered address of the Member and, in the case of joint holders, to the registered address of the M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he company, a duplicate warrant may be issued by the company after verifying the encashment status. Particulars of every duplicate Dividend cheque or warrant issued as aforesaid shall be entered in a Register of Duplicate Dividend Warrants kept for the purpose, indicating the name of the person to whom the instrument is issued, the number and amount of the instrument in lieu of which the duplicate instrument is issued and the number & date of issue of such duplicate instrument. 5.6 The Dividend cheque or warrant shall be accompanied by a statement in writing showing the amount of Dividend paid, Folio no./DP ID and Client ID nos., number of shares held by the concerned Member as on the record date, amount paid up on each share and the financial year to which the Dividend pertains. 5.7 Dividend shall be paid proportionately on the paid-up value of shares. Unless the Articles provide otherwise, Dividend shall be paid in proportion to the amount paid-up on the shares and for the portion of the period of the financial year in respect of which it is paid. If any shares are issued in between the financial year on the terms that they shall rank for Divid....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... this purpose. Such statement shall remain on the website(s) till such time the unpaid or unclaimed Dividend is transferred to the Investor Education and Protection Fund (the Fund) and be updated by the company at regular intervals. Any person claiming to be entitled to any amount transferred to the Unpaid Dividend Account may apply to the company for payment of such amount. In case of a Nidhi company, 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. 6.2 Any amount in the Unpaid Dividend Account of the company which remains unpaid or unclaimed for a period of seven years from the date of transfer of such amount to the Unpaid Dividend Account, along with interest accrued, if any, shall be transferred to the Investor Education and Protection Fund. Any transfer to the Fund shall be made within thirty days from the expiry of seven years from the date of transfer of unpaid or unclaimed Dividend to the Unpaid Dividend Account. With respect to transfer of unpaid or unclaimed Dividend to the Fund, the company sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 6.4 Any interest earned on the Unpaid Dividend Account shall also be transferred to the Investor Education and Protection Fund. If the Unpaid Dividend Account is kept as a fixed deposit or in any account on which interest is earned, the interest earned shall also be transferred to the Fund. 6.5 All shares in respect of which Dividend has not been paid or claimed for seven consecutive years or more shall be transferred by the company in the name of Investor Education and Protection Fund. In case any Dividend is paid or claimed for any year during the said period of seven consecutive years, such shares shall not be transferred to the Fund. Before transfer of such shares to the Fund, the company shall send individual notice to the concerned Members at least three months in advance at his latest available address registered with the company giving details of the Members and the shares due for transfer to the Fund. Such details shall also be uploaded on the website of the company, if any. A notice shall also be simultaneously published in leading newspapers in English and regional language having wide circulation in the place where t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Annual Report of the company shall disclose the total amount lying in the Unpaid Dividend Account of the company in respect of the last seven years and when such unpaid Dividend is due for transfer to the Fund. The amount of Dividend, if any, transferred by the company to the Investor Education and Protection Fund during the year shall also be disclosed. 10. Additional Compliances for Listed Company In addition to the above, a Listed Company shall ensure compliance with the requirements covered under Annexure 'A'. EFFECTIVE DATE This Standard shall come into effect from 1st January, 2018. Annexure 'A' Additional compliances applicable to Listed Companies A Listed Company shall conform to the following: (i) The equity shares allotted by the company shall rank pari passu with the existing equity shares for the purpose of payment of Dividend, if the same are in existence as on the record date/ book closure. (ii) The company shall not issue shares in any manner which may confer on any person, superior rights as to voting or Dividend vis-à-vis the rights on equity shares that are already listed. (iii) The company shall give prior....