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

Kaveri Industries Ltd. declared a dividend of Rs 20 lakh in March, but the dividend was not paid within the statutory period of 30 days because the board delayed the transfer. No dispute about the right to dividend exists and no instruction from the shareholders prevented payment. What is the legal consequence under the Companies Act, 2013?

If a declared dividend is not paid within 30 days without a valid reason, the company must pay simple interest at 18% per annum for the period of default, and directors in default are liable to punishment. The amount does not lapse and does not go to the IEPF immediately.

  1. ANothing, as the declared dividend lapses and the company may keep the sum for the next year
  2. BThe company must pay simple interest at 18% per annum during the period of default, and the directors in default are also liable to punishmentCorrect
  3. CThe dividend must be transferred to the Investor Education and Protection Fund immediately
  4. DThe company must pay compound interest at 12% per annum and no director is liable

Explanation

Where a declared dividend is not paid within 30 days, the company must pay simple interest at 18% per annum for the default period, and directors responsible face imprisonment and the company a fine. Transfer to IEPF happens only after the amount stays in the Unpaid Dividend Account for seven years, so option 3 is wrong. The dividend does not lapse.

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