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

Kaveri Industries Ltd has an unpaid dividend account holding Rs 8,00,000 of dividends declared in 2017-18 that shareholders never claimed. The company secretary asks what must be done with this amount. What is the correct legal position?

Money lying in the unpaid dividend account for seven years from the date of its transfer there must be moved to the Investor Education and Protection Fund. The company cannot retain it or add it to reserves, and the relevant period is seven years.

  1. AThe amount may be added to the company's free reserves after five years
  2. BThe amount must be transferred to the Investor Education and Protection Fund after seven years from the date of transfer to the unpaid dividend accountCorrect
  3. CThe company may keep the amount indefinitely because the shareholders are still owed the money
  4. DThe amount must be transferred to the Central Government's consolidated fund after three years

Explanation

Dividend remaining unpaid or unclaimed for seven years from the date of transfer to the Unpaid Dividend Account must be transferred to the Investor Education and Protection Fund. The company cannot appropriate it into reserves, and the period is seven years, not three.

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