DIVISIBLE PROFITS AND DIVIDENDS

DIVISIBLE PROFITS AND DIVIDENDS
COMPANIES (DECLARATION AND PAYMENT OF DIVIDEND) RULES, 2014
A company can declare dividend in case of absence or inadequacy of profits for a financial year
out of the accumulated profits of the previous years. But for such a declaration, the following
conditions are to be fulfilled simultaneously :1. Rate of Dividend
The rate of dividend declared shall not exceed the average of the rates at which dividend was
declared by it in the 3 years immediately preceding that year.
It may be noted that the aforesaid provision shall not apply to a company, which has not declared
any dividend in each of the three preceding financial year.
2. Total amount to be drawn
The total amount to be drawn from the accumulated profits shall not exceed an amount equal to
one – tenth of the sum of its paid – up capital and free reserves and the amount so drawn shall
first be utilised to set off the losses incurred in the financial year before any dividend is declared.
3. Balance of Reserves
The balance of reserves after such withdrawal shall not fall below 15% of its paid – up share
capital.
4. Set-off of Previous Losses and Unabsorbed Depreciation
A company shall not declare dividend unless carried over previous losses and depreciation not
provided in previous year or years are set off against profit of the company of the current year.
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DIVISIBLE PROFITS AND DIVIDENDS
SANGEET KEDIA [F.C.S., LL.B.]