Meaning: -The dividend
once declared in an annual general meeting, it becomes debt from that date. The
provisions regarding payment of dividend are embodied in sections 80, 93, 205, 206 and 207 of the Companies Act, 1956.
Rules
and Procedure Regarding Payment of Dividend: -
1.
Convening the
board meeting after finalization of accounts: -The secretary
convenes a board meeting to consider the amount of dividend.
2.
Resolution by the
Board: -The board after
considering the amount of divisible profit recommends a rate of dividend by
passing a resolution.
3.
Notice to stock
exchange for closure of transfer books: -The secretary
gives notice to the stock exchange stating the date of closure of the company's
transfer books for the purpose of declaration of dividend.
4.
Ensuring the
various provisions of the Act complied with: -
a) The secretary has to ensure that the required
percentage is transferred to reserves account.
b) The secretary has also to ensure that the company
does the compliance of Sec. 80 (A) according to which a dividend cannot be
declared by the company which could not redeem redeemable preference shares
within a stipulated period.
5.
Convening annual
general meeting: -The secretary has to
convene the annual General Meeting and to make sure that the matter of declaration
of dividend is included in agenda. An ordinary resolution is passed for
declaring the dividend recommended by the board.
6.
Preparation of Dividend
List: -After the declaration
of dividend the secretary has to prepare dividend list. It shows the name and
address of each member, his shareholdings on that date, the gross dividend due,
the income tax to be deducted at source and the net amount dividend payable.
7.
Posting of
dividend warrants: - The secretary has to arrange to post Dividend
Notices and warrants on the registered addresses of the shareholders within
30days of declaration of dividend.
In case of joint
holders the dividend notice is given to the person whose name appears first in
Register of Members.
8.
Public notice to
share warrant holder: -The secretary has
to publish the declaration of payment of dividend in newspaper for share
warrant holders. The dividend is paid to share warrant holders through dividend
coupons attached to the share warrants. The share warrant holders present the
coupons to company's bankers.
