Dividend and dividend act

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  • © Altacit Global 2009 Email: info@altacit.com
  • Dividend and dividend act

    1. 1. CHENNAI3rd Floor, ‘Creative Enclave’,148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, DIVIDEND AND DIVIDEND ACT Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE BB1, Park Avenue, # 48, Race Course Road, Coimbatore - 641018. Tel: +91 - 422 – 6552921 SHELLEY E. Trademark Department EMAIL info@altacit.com WEBSITE www.altacit.com
    2. 2. INTRODUCTION CHENNAI3rd Floor, ‘Creative Enclave’,148-150, Luz Church Road, Mylapore, • Dividend is the return on the investment made in the Chennai - 600 004. Tel: +91 - 44 - 2498 4821 shares (equity or preference) and is paid out of the BANGALORE Suite 920, Level 9, profits of the company. Raheja Towers, 26-27, M G Road, Bangalore - 560 001. • The shareholders being the owners of the company are Tel: +91 - 80 - 6546 2400 entitled to get their share of profit in the form of COIMBATORE BB1, Park Avenue, # 48, Race Course Road, dividend. Coimbatore - 641018. Tel: +91 - 422 – 6552921 • While the rate of dividend in case of preference shares is fixed, the dividend on equity shares varies from year to year depending upon the profit for the year and the requirement to get back profits. • Dividend rate is used for valuation of share and is an EMAIL info@altacit.com indicator of performance of the company. WEBSITE www.altacit.com
    3. 3. DIVIDEND CHENNAI3rd Floor, ‘Creative Enclave’,148-150, Luz Church Road, Mylapore, Chennai - 600 004. • The term dividend refer to that part of divisible profits among its shareholders. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 • In other words, it is that portion of the company’s COIMBATORE BB1, Park Avenue, # 48, Race Course Road, profit which is distributed among its shareholders Coimbatore - 641018. Tel: +91 - 422 – 6552921 as a percentage of per value share or at a fixed rate per share according to the decision of its board of directors. EMAIL info@altacit.com WEBSITE www.altacit.com
    4. 4. DIFFERENT TYPES OF DIVIDEND CHENNAI3rd Floor, ‘Creative Enclave’,148-150, Luz Church Road, Mylapore, Chennai - 600 004. • Cash Dividend • Stock Dividend Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. • Bond Dividend Tel: +91 - 80 - 6546 2400 COIMBATORE • Property Dividend BB1, Park Avenue, • Composite Dividend # 48, Race Course Road, Coimbatore - 641018. Tel: +91 - 422 – 6552921 • Optional Dividend • Interim Dividend • Special Dividend EMAIL info@altacit.com WEBSITE www.altacit.com
    5. 5. DIVIDEND POLICY CHENNAI3rd Floor, ‘Creative Enclave’,148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 • Dividend Policy is a very significant BANGALORE Suite 920, Level 9, financial decision. • It determines the divisions of earnings Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE between payments to shareholders and retained earnings. BB1, Park Avenue, # 48, Race Course Road, Coimbatore - 641018. Tel: +91 - 422 – 6552921 • If the value of firm is a function of its dividend- pay- ratio, the dividend policy will affect directly the firms cost of capital. EMAIL info@altacit.com WEBSITE www.altacit.com
    6. 6. LEGAL REGIME CHENNAI3rd Floor, ‘Creative Enclave’,148-150, Luz Church Road, • Section 205 of the Companies Act: Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 – Section 205 of the Act regulates the declaration BANGALORE Suite 920, Level 9, and distribution of dividend. Raheja Towers, 26-27, M G Road, Bangalore - 560 001. – All the companies which have share capital other Tel: +91 - 80 - 6546 2400 than section 25 companies and make profit are COIMBATORE BB1, Park Avenue, bound by law to declare and distribute dividends. # 48, Race Course Road, Coimbatore - 641018. Tel: +91 - 422 – 6552921 – As per Section 205 of the Companies Act, 1956, a dividend (including interim dividend) can be paid out of current profits or profits accumulated of earlier years. – However, depreciation for the entire year has to EMAIL be provided before a dividend is declared or paid. info@altacit.com WEBSITE www.altacit.com
    7. 7. CONT. CHENNAI3rd Floor, ‘Creative Enclave’,148-150, Luz Church Road, Mylapore, Chennai - 600 004. • For this purpose, the Board needs to approve the provisional financial results (unaudited) and a Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, working of the profits available for distribution as 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 dividend, post providing for depreciation for the COIMBATORE full year and amount required to be transferred to BB1, Park Avenue, # 48, Race Course Road, Coimbatore - 641018. reserves as per the Companies. Tel: +91 - 422 – 6552921 • Sections 205 A, B and C deal with some other aspects of distribution of dividend such as establishment of Investor Education and Protection EMAIL info@altacit.com Fund, Payment of unpaid and unclaimed dividend WEBSITE etc. www.altacit.com
    8. 8. Coming into operation of enactments CHENNAI3rd Floor, ‘Creative Enclave’,148-150, Luz Church Road, Mylapore, • Separate bank account needs to be opened and Chennai - 600 004. Tel: +91 - 44 - 2498 4821 the amount of dividend will have to be transferred BANGALORE Suite 920, Level 9, to that account. Dividend will have to be remitted Raheja Towers, 26-27, M G Road, within 30 days of declaration. Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE BB1, Park Avenue, # 48, Race Course Road, • The other procedure of record date/book closure, Coimbatore - 641018. Tel: +91 - 422 – 6552921 payment of tax on dividend within 7 days of declaration, etc. will have to be complied with.Dividend is also payable out of divisible profits or out of moneys provided by the Central or any State Government for the payment of dividend in EMAIL info@altacit.com pursuance of a guarantee given by that WEBSITE Government. www.altacit.com
    9. 9. MODE OF DECLARATION CHENNAI3rd Floor, ‘Creative Enclave’, • Dividend can be declared out of four sources.148-150, Luz Church Road, Mylapore, Chennai - 600 004. • Firstly It can be declared out of the profits of the company for that year arrived at after providing for Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, depreciation in accordance with the provisions of the 26-27, M G Road, Bangalore - 560 001. Act Tel: +91 - 80 - 6546 2400 COIMBATORE Or BB1, Park Avenue, # 48, Race Course Road, Coimbatore - 641018. • secondly, out of the profit of the company for any Tel: +91 - 422 – 6552921 previous financial year or years arrived at after providing for depreciation in accordance with those provisions and remaining undistributed or thirdly, out of both or lastly, out of the money provided by the Central Government or a State Government for the EMAIL info@altacit.com payment of dividend in pursuance of a guarantee WEBSITE given by that Government. www.altacit.com
    10. 10. PROHIBITION CHENNAI3rd Floor, ‘Creative Enclave’,148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, • A company which has failed to redeem the Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 irredeemable preference shares within the COIMBATORE stipulated time cannot declare dividend. BB1, Park Avenue, # 48, Race Course Road, Coimbatore - 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com
    11. 11. DECLARATION & DISTRIBUTION OF DIVIDEND CHENNAI3rd Floor, ‘Creative Enclave’, • The Steps involved in the process of declaration and distribution of dividend:148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 • Computation of Depreciation BANGALORE Suite 920, Level 9, Raheja Towers, – Depreciation shall be provided either at the rate 26-27, M G Road, Bangalore - 560 001. specified in Schedule XIV or any other basis approved by the Central Government. Tel: +91 - 80 - 6546 2400 COIMBATORE BB1, Park Avenue, # 48, Race Course Road, • Compulsory Transfer of Profits to Reserves Coimbatore - 641018. Tel: +91 - 422 – 6552921 – Before declaring the dividend, the some part of the profit has to compulsorily transferred to the Reserves of the Company. This amount is based on the proposed rate of dividend. – However voluntary transfer of higher percentage to EMAIL reserves is permitted subject to the conditions info@altacit.com stipulated in the Act. WEBSITE www.altacit.com
    12. 12. CNTN… CHENNAI3rd Floor, ‘Creative Enclave’, • Board Resolution148-150, Luz Church Road, Mylapore, – The most important step in the process is the Board Resolution Chennai - 600 004. Tel: +91 - 44 - 2498 4821 for declaration of dividends. Unless the Board recommends the BANGALORE payment of dividend, the same cannot be declared at an Annual Suite 920, Level 9, Raheja Towers, General Meeting. 26-27, M G Road, Bangalore - 560 001. • Annual General Meeting (“AGM”) Tel: +91 - 80 - 6546 2400 – The item pertaining to declaration of dividend should be COIMBATORE BB1, Park Avenue, included in the agenda of the notice for AGM which should be # 48, Race Course Road, Coimbatore - 641018. sent to members as well as the creditors. An ordinary resolution Tel: +91 - 422 – 6552921 is required for declaration of dividend. However shareholders cannot increase the amount of dividend recommended by the Board. • Time Limit for payment of Dividend – The dividend account should be opened with the company’s EMAIL bankers and the dividend amount payable should be transferred info@altacit.com to that account. Within 30 days of the AGM the dividend warrants WEBSITE should be sent to the shareholders. www.altacit.com
    13. 13. CNTN… CHENNAI3rd Floor, ‘Creative Enclave’, • Transfer to unpaid dividend account148-150, Luz Church Road, Mylapore, – Within 7 days from the date of expiry of 30 days Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, from the date of dividend declaration, the amount Raheja Towers, 26-27, M G Road, remaining unpaid or unclaimed should be Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 transferred to the ‘unpaid dividend account’ to be COIMBATORE BB1, Park Avenue, opened in a scheduled Bank. # 48, Race Course Road, Coimbatore - 641018. Tel: +91 - 422 – 6552921 – Dividend which remains unpaid or unclaimed for a period of 7 years shall be transferred to the Investor Education and Protection Fund within a period of 30 days of its becoming due for the EMAIL transfer. info@altacit.com WEBSITE www.altacit.com
    14. 14. CIRCUMSTANCES UNDER WHICH DIVIDEND NEED NOT BE PAID CHENNAI3rd Floor, ‘Creative Enclave’, • Where it could not be paid because of operation of any law;148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 • Where a shareholder has given direction to the BANGALORE Suite 920, Level 9, Raheja Towers, company regarding payment of dividend and those 26-27, M G Road, Bangalore - 560 001. directions could not be complied with; Tel: +91 - 80 - 6546 2400 COIMBATORE • Where there is a dispute regarding the right to BB1, Park Avenue, # 48, Race Course Road, receive the dividend; Coimbatore - 641018. Tel: +91 - 422 – 6552921 • Where the dividend has been lawfully adjusted by the company against any sum due from the shareholders; and • Where the dividend could not be paid not due to any EMAIL default on part of the company. info@altacit.com WEBSITE www.altacit.com
    15. 15. TAX LIMIT CHENNAI3rd Floor, ‘Creative Enclave’, • In addition to the income tax chargeable in respect of the148-150, Luz Church Road, Mylapore, total income of a company for any assessment year, any Chennai - 600 004. Tel: +91 - 44 - 2498 4821 amount declared, distributed or paid by such company by BANGALORE way of dividends (whether interim or otherwise) and also Suite 920, Level 9, Raheja Towers, 26-27, M G Road, whether paid out of current or accumulated profits is Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 charged with additional tax at the rate of 15 %. COIMBATORE BB1, Park Avenue, # 48, Race Course Road, Coimbatore - 641018. • The liability of payment of tax is on the principle officer of Tel: +91 - 422 – 6552921 the company. • The tax has to be paid within 14 days of declaration, distribution or payment of any dividend whichever is the earliest. The tax on distributed profit paid by the Company EMAIL info@altacit.com would be treated as the final payment of tax in respect of WEBSITE dividend. www.altacit.com
    16. 16. SPECIAL PROVISIONS RELATING TO LISTED COMPANY CHENNAI3rd Floor, ‘Creative Enclave’,148-150, Luz Church Road, Mylapore, Chennai - 600 004. • In addition to the steps mentioned above the listed Tel: +91 - 44 - 2498 4821 companies also have to advance intimation regarding BANGALORE Suite 920, Level 9, Raheja Towers, the venue of the Board Meeting to the stock exchange 26-27, M G Road, Bangalore - 560 001. where the securities are listed. Tel: +91 - 80 - 6546 2400 COIMBATORE BB1, Park Avenue, # 48, Race Course Road, Coimbatore - 641018. • Within 15 minutes of the closure of the Board meeting, Tel: +91 - 422 – 6552921 intimation is also to be sent to the stock exchange containing the particulars of dividend. Details regarding the general meeting for the declaration of dividend are also to be given to the Stock Exchange. EMAIL info@altacit.com WEBSITE www.altacit.com
    17. 17. CONCLUSION CHENNAI3rd Floor, ‘Creative Enclave’,148-150, Luz Church Road, Mylapore, Chennai - 600 004. These are the various steps which are usually involved in the declaration and distribution of dividend by a Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, company incorporated under the Act. 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE However depending upon the facts and the BB1, Park Avenue, # 48, Race Course Road, Coimbatore - 641018. memorandum and articles of the company there might Tel: +91 - 422 – 6552921 be some variation or addition to these steps. EMAIL info@altacit.com WEBSITE www.altacit.com
    18. 18. CHENNAI3rd Floor, ‘Creative Enclave’,148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, THANK YOU 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE BB1, Park Avenue, # 48, Race Course Road, Coimbatore - 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com

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