Companies (Transfer of Profits to Reserves) Rules, 1975 - Reg

[CS Shainshad Aduvanni]

Dear Members,

Companies (Transfer of Profits to Reserves) Rules, 1975 says that :

Rule  2 - Percentage of profits to be transferred to reserves.-

No dividend shall be declared or paid by a company forany financial year out of the profits of the company for that year arrived at after providing for depreciation in accordance with the provisions of sub-section (2) of section 205 of the Act, except after the transfer to the reserves of the company of a percentage of its profits for that year as specified below : -
(i)
Where the dividend proposed exceeds 10 per cent but not 12.5 per cent of the paid-up capital, the amount to be transferred to the reserves shall not be less than 2.5 per cent of the current profits ;
(ii)
Where the dividend proposed exceeds 12.5 per cent but does not exceed 15 per cent of the paid-up capital, the amount to be transferred to the reserves shall not be less than 5 per cent of the current profits ;
(iii)
Where the dividend proposed exceeds 15 per cent, but does not exceed 20 per cent of the paid-up capital, the amount to be transferred to the reserves shall not be less than 7.5 per cent of the current profits ; and
(iv)
Where the dividend proposed exceeds 20 per cent of the paid-up capital, the amount to be transferred to reserves shall not be less than 10 per cent of the current profits.

B

ut what if the dividend proposed is less than 10 per cent of the paid up capital. i.e. what per cent of the current profits we have to transfer to the reserves.

Can any body guide me.

Regards

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CS Shainshad Aduvanni
Company Secretary
Coimbatore

09841414439

[Sirish Sarma]

Dear Sir 

If the dividend proposed is less than 10 per cent of the paid up capital, no need to transfer any percentage of profit to the reserves.

Express mentioning of one thing excludes other things in law, so when the Act is saying only when it exceeds 10%, it implies no need to transfer to reserves if it is less than or equal to 10%

Regards

Sirish

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Sirish