DIVIDEND DECLARATION CHECK LIST FOR A LISTED COMPANY

[Shweta agrawal]

Hello Everyone,

Can anybody provide me the checklist for dividend declaration.

--

Thanks & regards
Shweta Agrawal
Company Secretary

[Shweta agrawal]

[kasturi ksheerasagar]

 

Profits available for Dividend Distribution:

 

Pursuant to the provisions of Section 205 of the Companies Act, 1956 dividend can be declared for any financial year,

1.          out of the profits of the company ( arrived at  after providing for depreciation) of the year in which dividend is to be declared

Or

2.          out of the accumulated profits of the company of any previous financial year(s), which is not transferred to  General Reserve

Or

3.          out of the General Reserve of the Company.

 

Process:

For declaring dividend out of the accumulated profits of the previous years, following points are to be adhered to,

Ø      There is no restriction on utilization of the accumulated profits for declaring dividends and the entire accumulated profits can be declared as dividends. 

 

Ø      Section 205-A (3) restriction applies only when the dividend is declared from earlier year profits and transferred to General Reserves.

 

The Overall flow will be as follows:

 

Actual Profit after Deprecation and Tax/Deferred Tax (asset/liability) for the year ended 30th June 2003	X X X
Add: Brought forward profit as per Profit and Loss account upto 30th June 2002	Y Y Y
Balance profit fully available for distribution as dividend (Distributable Profit)	Z Z Z
Less: Proposed Dividend for the year ended 30th June 2003	AAA
Less: Dividend Tax	BBB
Less: Transfer to General Reserves**	CCC
Balance carried in Profit and Loss account to Balance sheet	DDD

 

** Transfer to Reserve:

î         In accordance with Companies (Transfer to Reserves) Rules, 1975 every company declaring a dividend should transfer a % of its profits to General Reserve, which is mandatory.

î         Amount to be transferred to General Reserve is based on the % of dividend proposed to be declared and details of % to be transferred are given below:

 

Dividend Proposed	Transfer to Reserves
Exceeds 10% but not 12.5%of Paid up capital	Not less than 2.5% of the current profits
Exceeds 12.5% but not 15% of Paid up capital	Not less than 5% of the current profits
Exceeds 15% but not 20% of Paid up capital	Not less than 7.5% of the current profits
Exceeds 20% of Paid up capital	Not less than 10% of the current profits

 

î         However the management can transfer a higher percentage of the profits to reserve at their own discretion.

 

Procedure:

 

î         Dividend is to be paid within thirty days from the date of declaration i.e. from the date of AGM.

 

î         A separate Bank account should to be opened within 5 days of AGM and the total dividend should be deposited into this account within five days from the date of declaration of dividend (i.e. from the date of AGM).

 

Dividend Tax:

 

î         In accordance with the provisions of Income Tax a Dividend Tax at the rate of Twelve and Half percent Plus surcharge Two and Half percent has to be paid to the credit of Central Government within 14 days of the following.

î         Declaration of any dividend or

î         Distribution of any dividend or

î         Payment of any dividend

 

Whichever is earliest. 

 

 

 

--

--

Thanks & regards
Shweta Agrawal
Company Secretary

--
************************************************
Mail your comments, feedback and suggestions on CSMysore to Moderator: datta...@gmail.com and Manager: vivekhe...@gmail.com
 
Find eNewsletters of ICSI Mysore at: www.icsi.edu/NewsEvents/enewsletters/tabid/1757/Default.aspx

--