Class 12 SP Reply to Query on Low Dividend: Format & Solved Draft (Chapter 6)
Master the official format and scoring guidelines for the Class 12 Secretarial Practice (SP) letter on Replying to a Member's Query Regarding Low Rate of Dividend tailored for the Maharashtra State Board (HSC) Commerce examination. Under Chapter 6 (Correspondence with Members), drafting a courteous and convincing reply to an aggrieved shareholder questioning a reduced dividend rate is a classic test of secretarial tact in Question 7 (Letter Writing), carrying a direct weightage of 5 marks. Below, you will find the official board exam scenario, step-wise marking breakdown, statutory principles under the Companies Act, 2013, and a textbook-accurate solved model answer.
Secretarial Practice Golden Rule (Tact & Politeness): Shareholders are the owners and risk-bearers of the company. When dividend payouts fall, shareholders naturally register their dissatisfaction. The Company Secretary must respond promptly with empathy and politeness, giving valid commercial justifications (such as reserve transfers or plant expansion) while maintaining strict secrecy regarding unreleased corporate strategies.
HSC Board Examination Question Scenario
In the HSC examination, this question is typically framed as follows:
"Draft a letter to an equity shareholder replying to his / her query regarding the low rate of dividend declared by the company for the current financial year."
Official HSC Step-Wise Marking Breakdown (5 Marks)
Examiners evaluate secretarial correspondence based on structural completeness, diplomatic tone, and commercial justification:
| Component | Required Exam Content | Marks |
|---|---|---|
| Letterhead & Layout | Company Name, Registered Address, 21-digit CIN, Phone, Email, Website, Ref. No., and Date. | 1 Mark |
| Inside Address & Subject | Shareholder Name, Address, concise Subject Line, and formal Salutation. | 1 Mark |
| Body of the Letter | Acknowledgment of query letter, clear business reasons for reduced dividend, reassurance of future profitability, and goodwill. | 2 Marks |
| Sign-off & Subscription | Complimentary close ("Yours faithfully"), company name, and Company Secretary signature block. | 1 Mark |
| Total Marks | Question 7 (Attempt Any 2 Letters out of 3 = 10 Marks Total) | 5 Marks |
Solved Model Answer: Reply to Query on Low Rate of Dividend
SUNSHINE AGRO PRODUCTS LIMITED
Registered Office: 102, Commercial Chambers, Senapati Bapat Marg, Lower Parel, Mumbai - 400013.
CIN: L01110MH2011PLC214567
Phone: 022 - 2498 7755
Email: secretarial@sunshineagro.com
Website: www.sunshineagro.com
Ref. No.: SAPL/MEM-DIV/2026-27/55
Date: 20th November 2026
To,
Mr. Suresh L. Patil,
Flat No. 15, Shivneri Co-op Housing Society, Tilak Road,
Dadar (East), Mumbai - 400014.
Subject: Reply to your query regarding low rate of dividend.
Dear Sir,
This is with reference to your letter dated 5th November 2026, wherein you expressed concern and dissatisfaction regarding the recommendation of a lower dividend rate of 5% on equity shares for the financial year ended 31st March 2026, compared to 12% paid in the previous financial year.
The Board of Directors appreciates your genuine concern and has directed me to explain the commercial factors that necessitated this prudent decision:
- Unfavorable Market Conditions: During the financial year under review, unseasonal rains and global supply chain disruptions severely escalated raw material costs, resulting in compressed operational margins across the agro-processing sector.
- Transfer to General Reserve: In accordance with the company's long-term conservative financial policy, the Board decided to transfer ₹ 15 Crores to the General Reserve to fortify the company's financial resilience against unexpected economic contingencies.
- Ploughing Back of Profits for Expansion: A substantial portion of the net profit has been retained for funding the new automated cold storage and processing facility at Nashik. Financing this project through internal accruals rather than high-cost bank borrowings saves substantial interest expenses for the company.
The Board assures you that this retention of earnings is an investment in the company's future growth and competitive advantage. The expanded capacity will begin commercial operations in the upcoming quarter, which will significantly enhance revenues, capital appreciation, and future dividend distributions.
We trust the above explanation clarifies the situation and clarifies the management's long-term perspective. We thank you for your continued patience, trust, and cooperation.
Thanking you.
Yours faithfully,
For Sunshine Agro Products Limited
(Signature)
Mr. Sandeep G. Joshi
Company Secretary
Examiner's Secret: 3 Critical Points for Scoring Full Marks
- No Enclosure Line: This is a purely explanatory and courteous reply. Do NOT write an
Encl:line. Adding an attachment slip here demonstrates a lack of basic secretarial understanding.- Reference to Shareholder's Letter: Always begin the opening paragraph by referring to the date of the member's original letter of complaint (e.g., "With reference to your letter dated 5th November 2026...").
- Sound Financial Justification: Cite at least two realistic financial reasons—such as transfer of profits to general reserve, plant modernization, or economic downturn—to show corporate finance competence.
Frequently Asked Questions (HSC Board Exam FAQs)
1. Can a shareholder legally force a company to declare a higher dividend?
No. Under the Companies Act, 2013, the declaration of dividend is at the discretion of the Board of Directors. Shareholders can reduce the recommended dividend rate at the AGM, but they have no legal power to increase it.
2. What is meant by 'Ploughing Back of Profits'?
'Ploughing back of profits' (or self-financing) refers to retaining a portion of net earnings within the business instead of distributing it as dividends, utilizing these funds for modernization, expansion, or working capital.
3. Why must the secretary observe 'Secrecy' when drafting this letter?
While the secretary must satisfy the member's query convincingly, they must not divulge price-sensitive or confidential trade data (such as unannounced acquisitions or proprietary technology) that could harm the company's market competitiveness.