{"id":13569,"date":"2018-08-21T12:09:19","date_gmt":"2018-08-21T12:09:19","guid":{"rendered":"https:\/\/www.legalraasta.com\/blog\/?p=13569"},"modified":"2026-04-08T10:43:13","modified_gmt":"2026-04-08T05:13:13","slug":"dividend-declaration-as-per-companies-act-2013","status":"publish","type":"post","link":"https:\/\/www.legalraasta.com\/blog\/dividend-declaration-as-per-companies-act-2013\/","title":{"rendered":"Declaration of Dividend as per companies Act 2013"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_73 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.legalraasta.com\/blog\/dividend-declaration-as-per-companies-act-2013\/#What_is_Dividend\" title=\"What is Dividend\">What is Dividend<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.legalraasta.com\/blog\/dividend-declaration-as-per-companies-act-2013\/#Dividend_Declaration_as_per_companies_Act_2013\" title=\"Dividend Declaration as per companies Act 2013\">Dividend Declaration as per companies Act 2013<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.legalraasta.com\/blog\/dividend-declaration-as-per-companies-act-2013\/#The_process_of_Dividend_Declaration_as_per_companies_act_2013\" title=\"The process of Dividend Declaration as per companies act 2013\">The process of Dividend Declaration as per companies act 2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.legalraasta.com\/blog\/dividend-declaration-as-per-companies-act-2013\/#Important_notes\" title=\"Important notes\">Important notes<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.legalraasta.com\/blog\/dividend-declaration-as-per-companies-act-2013\/#Prohibition_on_Dividend_declaration_as_per_companies_act_2013\" title=\"Prohibition on Dividend declaration as per companies act 2013\">Prohibition on Dividend declaration as per companies act 2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.legalraasta.com\/blog\/dividend-declaration-as-per-companies-act-2013\/#Punishment_for_not_distributing_dividend_section_127\" title=\"Punishment for not distributing dividend (section 127)\">Punishment for not distributing dividend (section 127)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.legalraasta.com\/blog\/dividend-declaration-as-per-companies-act-2013\/#Some_Important_points\" title=\"Some Important points\">Some Important points<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"What_is_Dividend\"><\/span>What is Dividend<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Under section 2(35) of the <a href=\"https:\/\/www.legalraasta.com\/companies-act-2013\/\" target=\"_blank\" rel=\"noopener\">Companies Act, 2013 <\/a>defines the dividend as the specific portion of the profit given to the shareholders from the net profit of the company. For the distribution of dividend net profit is legally available at the company&#8217;s account. Divided is further described as a\u00a0return on the share capital subscribed for and paid to its shareholders by a company. Interim dividend is also included. The term dividend is derived from the Latin word &#8220;Dividendum&#8221; which means anything which is to be divided. This article focus on the dividend declaration as per companies act 2013.<\/p>\n<p>Companies Act Section 2 (35) prescribed interim dividend as below:<\/p>\n<ol>\n<li>Whether at a fixed rate or otherwise, a dividend shall be distributed to the holders of shares in a <a href=\"https:\/\/www.legalraasta.com\/private-limited-company-registration\/\" target=\"_blank\" rel=\"noopener\">company<\/a>.<\/li>\n<li>Whether it is Equity shares or preference shares, Dividend can be paid at both the cases.<\/li>\n<\/ol>\n<p>&nbsp;<\/p>\n<div class=\"table-1\">\n<table width=\"100%\">\n<thead>\n<tr>\n<th align=\"left\">\n<p>Sections under CA,<\/p>\n<p>2013<\/p>\n<\/th>\n<th align=\"left\">\u00a0What Matters deals<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td align=\"left\">2(35)<\/td>\n<td align=\"left\">Definition of Dividend<\/td>\n<\/tr>\n<tr>\n<td align=\"left\">51<\/td>\n<td align=\"left\">Payment of dividend<\/td>\n<\/tr>\n<tr>\n<td align=\"left\">91<\/td>\n<td align=\"left\">Declaration of book closure\/record date and publication of notice of record date<\/td>\n<\/tr>\n<tr>\n<td align=\"left\">123<\/td>\n<td align=\"left\">Payment of dividend -sources, transfer of profits to reserve, etc<\/td>\n<\/tr>\n<tr>\n<td align=\"left\">123(5)<\/td>\n<td align=\"left\">dividend shall be paid to registered shareholders and beneficial owners under CSDL\/NSDL<\/td>\n<\/tr>\n<tr>\n<td align=\"left\">126(6)<\/td>\n<td align=\"left\">restriction on payment of dividend on equity shares on failure to comply with deposits<\/td>\n<\/tr>\n<tr>\n<td align=\"left\">124<\/td>\n<td align=\"left\">Unpaid dividend to be transferred\u00a0to special dividend account<\/td>\n<\/tr>\n<tr>\n<td align=\"left\">126<\/td>\n<td align=\"left\">Right of dividend etc<\/td>\n<\/tr>\n<tr>\n<td align=\"left\">127<\/td>\n<td align=\"left\">Payment of dividend must be made within 30 days of its declaration.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Dividend_Declaration_as_per_companies_Act_2013\"><\/span>Dividend Declaration as per companies Act 2013<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The process in which the <a href=\"https:\/\/www.legalraasta.com\/types-of-directors\/\" target=\"_blank\" rel=\"noopener\">Board of directors<\/a> makes a decision and declares a dividend for the payment\u00a0to the stockholders by which the retained earnings account of the company get reduced by the amount of the declared dividend.<\/p>\n<p>*The <strong>retained earnings account<\/strong> is an account which holds equity of the company that shows the net balance earnings.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Notice of dividend shall be given<\/strong>: Notice of dividend declared shall be given to the persons entitled to share in it (as per the Clause 87 of Model Articles of <a href=\"https:\/\/www.legalraasta.com\/private-limited-company-registration\/\" target=\"_blank\" rel=\"noopener\">Company limited<\/a> by shares as contained in Table-F of schedule-I of 2013\u00a0Act)<\/p>\n<h3><span class=\"ez-toc-section\" id=\"The_process_of_Dividend_Declaration_as_per_companies_act_2013\"><\/span>The process of Dividend Declaration as per companies act 2013<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>Company shall recommend in General Meeting the amount of dividend which it can decide in Board Meeting.<\/li>\n<li>The resolution for Dividend in the Notice of General Meeting shall be mentioned by the company<\/li>\n<li>General Meeting will hold by the company:<\/li>\n<\/ol>\n<ul>\n<li>Declaration of the dividend is Ordinary Business.<\/li>\n<li>Ordinary Resolution for\u00a0the declaration\u00a0of\u00a0a dividend\u00a0will be passed in the General Meeting.<\/li>\n<\/ul>\n<p>4.\u00a0 It must be paid within 30 days once\u00a0the dividend\u00a0is declared.<\/p>\n<p>{As per Clause 80 of Model Articles of <a href=\"https:\/\/www.legalraasta.com\/private-limited-company-registration\/\" target=\"_blank\" rel=\"noopener\">Company Limited<\/a> by shares as Contained in Table-F of Schedule-I of the 2013 Act}<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Important_notes\"><\/span>Important notes<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>Dividend declared in General Meeting can\u2019t exceed the dividend recommended by the Board.<\/li>\n<li>Dividend declared in General Meeting by\u00a0the member\u00a0can be less than the dividend recommended by the Board.<\/li>\n<li>Dividend paid in General Meeting is Final Dividend.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"Prohibition_on_Dividend_declaration_as_per_companies_act_2013\"><\/span>Prohibition on Dividend declaration as per companies act 2013<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>if a company having default\u00a0section 73 and 74 related to deposit and repayment of deposit or interest then it may or may not declare a dividend.<\/li>\n<li>if a company fails to comply with the acceptance of deposits and repayment of deposits then it cannot declare a dividend.<\/li>\n<\/ol>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Punishment_for_not_distributing_dividend_section_127\"><\/span>Punishment for not distributing dividend (section 127)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>If a company declare dividend but fails to pay or the warrant in respect thereof has not been posted within thirty days from the date of declaration to the shareholders then every director of the company shall be punishable with the imprisonment of two years and fined not less than one thousand rupees from the day of default continues. During the period for which such default continues, the <a href=\"https:\/\/www.legalraasta.com\/private-limited-company-registration\/\" target=\"_blank\" rel=\"noopener\">company<\/a> shall be liable to pay simple interest at the rate of 18%p.a.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Some_Important_points\"><\/span>Some Important points<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>it is the responsibility of the Board to declare the dividend and transfer the amount to the reserve.<\/li>\n<li>in respect of dividend, the bonafide decision of board cannot be challenged.<\/li>\n<li>the dividend should be declared at the unconditional basis and must be paid within 30 days.<\/li>\n<li>The dividend on equity shares can be distributed only after dividend on preference shares is declared.<\/li>\n<li>The amount of the dividend, including interim dividend, shall be deposited in a\u00a0scheduled\u00a0bank in\u00a0a separate\u00a0account within 5 days from the date of declaration of such dividend.<\/li>\n<\/ul>\n<p>For further complete information regarding <a href=\"https:\/\/www.legalraasta.com\/companies-act-2013\/\" target=\"_blank\" rel=\"noopener\">companies act 2013,<\/a> <a href=\"https:\/\/www.legalraasta.com\/blog\/what-is-companies-act-section-2-68\/\" target=\"_blank\" rel=\"noopener\">section 2(68)<\/a>, <a href=\"https:\/\/www.legalraasta.com\/section-8-company-india\/\" target=\"_blank\" rel=\"noopener\">section 8<\/a>, <a href=\"https:\/\/www.legalraasta.com\/private-limited-company-registration\/\" target=\"_blank\" rel=\"noopener\">Company registration <\/a>visit our website: <a href=\"https:\/\/www.legalraasta.com\/\" target=\"_blank\" rel=\"noopener\">Legal Raasta<\/a><\/p>\n<p>You can also send your query on Email: contact@legalraasta.com and ring us on 8750048585.<\/p>\n<blockquote>\n<p>Related Articles:<\/p>\n<p><a href=\"https:\/\/www.legalraasta.com\/types-of-directors\/\" target=\"_blank\" rel=\"noopener\"><span 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data-sheets-userformat=\"{&quot;2&quot;:8403901,&quot;3&quot;:[null,0],&quot;5&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;6&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;7&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;8&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;10&quot;:2,&quot;11&quot;:0,&quot;12&quot;:0,&quot;14&quot;:[null,2,0],&quot;15&quot;:&quot;Calibri, 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For the distribution of dividend net profit is legally available at the company&#8217;s account. Divided is further described as a\u00a0return on the share capital [&hellip;]<\/p>\n","protected":false},"author":15,"featured_media":13598,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[556],"tags":[133,215,212,216,217,214,213],"class_list":["post-13569","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-company-articles","tag-companies-act-2013","tag-companies-act-section-2-35","tag-dividend-declaration","tag-process-of-dividend-declaration","tag-prohibition-on-dividend","tag-sections-under-companies-act","tag-what-is-dividend"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Dividend declaration as per companies act 2013 | Legal Raasta |<\/title>\n<meta name=\"description\" content=\"The Latin word &quot;Dividendum&quot; means anything which is to be divided. This article focus on the dividend declaration as per companies act 2013.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalraasta.com\/blog\/dividend-declaration-as-per-companies-act-2013\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Dividend declaration as per companies act 2013 | Legal Raasta |\" \/>\n<meta property=\"og:description\" content=\"The Latin word &quot;Dividendum&quot; means anything which is to be divided. 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