Dividend Reserve Rules
SECTION 205
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SECTION 205 DIVIDEND TO BE PAID ONLY OUT OF PROFITS Dividend declared at extraordinary general meeting of company - Whether permissible The query has been raised whether a company is prohibited from declaring a further dividend at a general meeting of a company other than the annual general meeting after a dividend had already been declared at an annual general meeting. Such a situation could arise, for example, when after declaring a dividend at an annual general meeting, the company finds that it is required to declare a further amount as dividend in order to qualify for certain benefits under the Income-tax Act. The matter has been considered in the Company Law Board which has been advised that while there is no provision in the Companies Act prohibiting the declaration of a dividend at a general meeting other than the annual general meeting of the company (vide regulation 85 of Table A of Schedule I) unless otherwise provided in the articles of association, it is beyond the powers of a company to declare a further dividend after the declaration of dividend at the annual general meeting. In this connection attention is invited of all concerned, to the decision of the Calcutta High Court in the matter of Biswa Nath Pd. Khaitan v. New Central Jute Mills Ltd. (1961) 31 Comp. Cas. 125. Thus a company which could not declare a dividend at an annual general meeting may do so at a subsequent general meeting. On the other hand, where a company has declared a dividend at a general meeting neither the company nor its directors can declare a further dividend for the same year. * CIRCULAR NO.22[7/9/74-CL-ii], DATED 25.9.1975. Payment of interim dividend -Whether confirmation by shareholders has to be only in annual general meeting. Approval of dividend is the privilege of the general meeting and the board can pay interim dividend if so authorised by the articles of association subject to the regularisation of the interim dividend by the company
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SECTION 205 DIVIDEND TO BE PAID ONLY OUT OF PROFITS Dividend declared at extraordinary general meeting of company - Whether permissible The query has been raised whether a company is prohibited from declaring a further dividend at a general meeting of a company other than the annual general meeting after a dividend had already been declared at an annual general meeting. Such a situation could arise, for example, when after declaring a dividend at an annual general meeting, the company finds that it is required to declare a further amount as dividend in order to qualify for certain benefits under the Income-tax Act. The matter has been considered in the Company Law Board which has been advised that while there is no provision in the Companies Act prohibiting the declaration of a dividend at a general meeting other than the annual general meeting of the company (vide regulation 85 of Table A of Schedule I) unless otherwise provided in the articles of association, it is beyond the powers of a company to declare a further dividend after the declaration of dividend at the annual general meeting. In this connection attention is invited of all concerned, to the decision of the Calcutta High Court in the matter of Biswa Nath Pd. Khaitan v. New Central Jute Mills Ltd. (1961) 31 Comp. Cas. 125. Thus a company which could not declare a dividend at an annual general meeting may do so at a subsequent general meeting. On the other hand, where a company has declared a dividend at a general meeting neither the company nor its directors can declare a further dividend for the same year. * CIRCULAR NO.22[7/9/74-CL-ii], DATED 25.9.1975. Payment of interim dividend -Whether confirmation by shareholders has to be only in annual general meeting. Approval of dividend is the privilege of the general meeting and the board can pay interim dividend if so authorised by the articles of association subject to the regularisation of the interim dividend by the company