Monday, January 7, 2013

Check list interim dividend - Private limited company

Query – Sagar CS

Interim dividend - private limited company

can any one share the Check list for Declaration and payment of Interim Dividend in a Private Companyor a Material which gives steps to be followed for Declaration and Payment of Dividend in a Private Company

Answer – Sanjeev Kumar

1. Verify from your Articles of Association that they authorise the directors to declare interim dividend, if not, then alter the Articles of Association. [Procedure for alteration of Articles of Association]

2. Convene Board Meeting after giving notice to all the directors [Section 286] to discuss besides others the following matters.• To declared interim dividend.• To decide the record date. [Agenda]

3. Inform the Stock Exchange with which shares of the company are listed about the date of this meeting prior to the board meeting. [Clause 19 of the Standard Listing Agreement]

4. If case the shares of the company are listed on a Stock Exchange, the following must be done:-• Inform the said Stock Exchange within 15 minutes of the board Meeting, by letter or fax of all dividends declared;• Give intimation to the Stock Exchange about the period of record date atleast 21 days in advance. [Clause 15 & 16 of the Standard Listing Agreement]• Issue simultaneously the dividend warrants which shall be encashable at par at all the branches of your company’s bankers.• The dividend warrants should reach the shareholders on or before the date fixed for payment of dividend. [Clause 20 and 21 of the Standard Listing Agreement]

5. In case of joint holders, send the dividend warrant to the joint shareholders who is first named on the register of Members of your company or to such person and to such address as the shareholder or shareholders may in writing direct. [Section 205(5)(b)]

6. Open a separate bank account and credit the amount of dividend within 5 days from the date of declaration.

7. Make the payment or issue dividend warrants within thirty days from the date of declaration.

8. If the company fails to pay the dividend declared or fails to post the warrant in respect thereof within thirty days from the date of declaration, every director of the company if he is knowingly a party to the default will be punishable with simple imprisonment of 3 years and will also be liable to a fine of Rs. 1,000/- for every day during which the default continues and the company will be liable to pay simple interest@18% per annum during the period for which such default continues. [Section 207]

9. The amount of dividend must be rounded off to the nearest rupee.

10. Where instruments of transfer have been received by the company and the transfer of such shares has not been registered when the dividend warrants were posted, the amount of dividend must be kept in the special account called “Unpaid Dividend Account” unless the company is authorised by the registered holders of those shares in writing to pay the dividend to the transferees specified in the said instruments of transfer. [Section 206A]

11. Arrange to transfer the total amount of dividend, which remains unpaid or unclaimed within seventy days from the date of expiry of thirty days from the date of its declaration to a special account to be opened by your company in this behalf in any scheduled bank to be called “Unpaid Dividend Account of Company Ltd.”. [Section 205A(1)]

12. Further note that no offence as aforesaid will be deemed to have been committed by your company’s directors in the following cases:-• Where the dividend could not be paid by reason of the operation of any law;• Where a shareholder has given direction to the company regarding the payment of the dividend and those directions cannot be compiled with;• Where there is a dispute regarding the right to receive the dividend;• Where the dividend has been lawfully adjusted by the company against any sum due to it from the shareholder;Where for any other reason the failure to pay the dividend or to post the warrant within the period of thirty days from the date of declaration was not due to any default on the part of the company. [Section 207 Proviso]

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