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

Kaveri Foods Ltd has an unclaimed dividend account. The dividend declared for the year 2018-19 remained unpaid in the account and was never claimed by Mrs. Iyer, a shareholder. Seven years have now passed from the date the amount was transferred to the Unpaid Dividend Account. What must the company do?

The company must transfer the amount to the Investor Education and Protection Fund once it has remained in the Unpaid Dividend Account for seven years from the date of transfer. It cannot retain it in reserves or redistribute it. The shareholder may later claim from the Fund.

  1. ATransfer the amount to the Investor Education and Protection FundCorrect
  2. BTransfer the amount to the company's general reserve
  3. CKeep the amount in the Unpaid Dividend Account until the shareholder claims it
  4. DDistribute it among the other shareholders as additional dividend

Explanation

Money lying in the Unpaid Dividend Account for seven years from the date of transfer must be moved to the Investor Education and Protection Fund. Moving it to reserves would amount to the company keeping money owed to shareholders, which the Act does not allow. The shareholder can still claim it later from the IEPF authority.

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