Hi I want to know, How to declare dividend in absence of profits of any year?
0
0
Answer Now
Comment
Report
3
Answers
A Company, to declare and pay dividend to its shareholder, does not necessarily to have profit in
the financial year for which dividend is to be declared. Even though a company has suffered losses
in a year, it still can declare dividend.
The provisions relating to declaration of dividend in case of inadequacy or absence of profit (i.e.
loss) is prescribed under the 2nd & 3rd proviso of the section 123 of the Companies act 2013 and
Rule 3 of the Companies (Declaration and Payment of Dividend) Rules, 2014.
Provisions
In case the company inadequacy or absence of profits in any year, the company may declare
dividend after fulfillment of the following conditions.
Important Note โ Preparing for CA Final?
CAKART provides Indias top faculty each subject video classes and lectures โ online & in Pen Drive/ DVD โ at very cost effective rates. Get video classes from CAKART.in. Quality is much better than local tuition, so results are much better.
Watch Sample Video Now by clicking on the link(s) below โ
For any questions Request A Call Back
Where, owing to inadequacy or absence of profits in any year, any company proposes to declare dividend out of the accumulated profits earned by the company in previous years and transferred by it to the reserves, such declaration of dividend shall not be made except in accordance with such rules as may be made by the Central Government in this behalf, and, where any such declaration is not in accordance with such rules, such declaration shall not be made except with the previous approval of the Central Government.
Dear,
your query is that How to declare dividend in absence of profits of any year?
answer of your query is that A Company, to declare and pay dividend to its shareholder, does not necessarily to have profit in
the financial year for which dividend is to be declared. Even though a company has suffered losses
in a year, it still can declare dividend.
The provisions relating to declaration of dividend in case of inadequacy or absence of profit (i.e.
loss) is prescribed under the 2nd & 3rd proviso of the section 123 of the Companies act 2013 and
Rule 3 of the Companies (Declaration and Payment of Dividend) Rules, 2014.
Provisions
In case the company inadequacy or absence of profits in any year, the company may declare
dividend after fulfillment of the following conditions.
Dividend has to be declared /paid out of free reserves;
Rate of dividend - not exceed average of the rates at which dividend was declared by it
in the 3 years immediately preceding that year (this condition shall not apply to a
company, which has not declared any dividend in each of the three preceding financial
year);
Total amount to be drawn from such accumulated profits shall not exceed one-tenth of
the sum of its paid-up share capital and free reserves as appearing in the latest audited
financial statement;
The amount so drawn shall first be utilised to set off the losses incurred in the financial
year in which dividend is declared before any dividend in respect of equity shares is
declared;
Balance of reserves after such withdrawal shall not fall below 15% of the paid up share
capital (latest audited financial statement);
No company shall declare dividend unless carried over previous losses and
depreciation not provided in previous year are set off against profit of the company of
the current year the loss or depreciation, whichever is less, in previous years is set off
against the profit of the company for the year for which dividend is declared or paid.
Thanks & Regards,