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

Himalaya Textiles Ltd declared a final dividend at its annual general meeting held on 10 August. The company did not pay the dividend to a shareholder, Mr. Rao, within the period allowed by the Companies Act, 2013, and no restriction under law prevented payment. Which statement correctly states the legal position?

A declared dividend must be paid within 30 days of declaration. If the company defaults, it must pay simple interest at 18% per annum for the period of default, so the first option is correct. The other periods and rates are not what the Act prescribes.

  1. ADividend must be paid within 30 days of declaration, and failing this the company must pay simple interest at 18% per annum during the period of defaultCorrect
  2. BDividend must be paid within 60 days of declaration, and the company must pay interest at 18% per annum during the default period
  3. CDividend must be paid within 30 days of declaration, and failing this the company must pay interest at 12% per annum from the date of declaration
  4. DDividend may be paid at any time before the next annual general meeting, with no interest payable

Explanation

The Act requires the dividend to be paid within 30 days of declaration. If it is not paid in that period, the company must pay simple interest at 18% per annum during the period of default. The 60-day option and the 12% rate are incorrect, and there is no freedom to delay until the next AGM.

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