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CA Intermediate · Corporate and Other Laws · Declaration and Payment of Dividend

Arvind Pharma Ltd has an interim dividend of Rs 2 per share declared by its board during FY 2025-26 out of the profits of the period. The company wants to know its legal position regarding the declared interim dividend. Which statement is correct under the Companies Act, 2013?

The Board of Directors has the power to declare interim dividend at any time during a financial year, and also between the close of the financial year and the annual general meeting. It does not need members' approval, and once declared it becomes a debt of the company payable to shareholders.

  1. AThe board may declare interim dividend during any financial year, or at any time during the period from the closure of the financial year till the AGMCorrect
  2. BInterim dividend can be declared only by the members in a general meeting
  3. CInterim dividend can be declared only after the AGM of that year
  4. DInterim dividend, once declared, may be withdrawn by the board before payment

Explanation

The Board may declare interim dividend during any financial year or at any time during the period from the closure of the financial year till the holding of the AGM, out of surplus in the profit and loss account and profits of the financial year up to the quarter preceding the declaration. Members declare final dividend, not interim. Once declared, interim dividend becomes a debt and cannot be withdrawn.

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