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

Kaveri Infra Ltd declared a final dividend at its AGM on 10 July. The dividend warrant was not posted to shareholder Mr Raman within the time limit prescribed by the Act, though no dispute or lawful reason existed for the delay. What is the prescribed period for paying the declared dividend, and what is the legal position?

A declared dividend must be paid within thirty days of declaration. Unless a lawful exception applies, such as a dispute over entitlement or a shareholder's direction, delay is a default, making the company liable to pay interest and attracting penal consequences.

  1. AWithin 30 days of declaration; the company is in default unless a lawful exception such as a dispute or shareholder's direction appliesCorrect
  2. BWithin 90 days of declaration; the company is in default only after the financial year ends
  3. CWithin 60 days of declaration; no consequences arise if interest is later paid
  4. DWithin 30 days of the end of the financial year, regardless of declaration date

Explanation

Dividend must be paid within 30 days from the date of declaration. The Act provides limited exceptions, such as a dispute about the right to receive it or a shareholder's direction as to payment. With none applicable, the company defaults and is liable to pay simple interest at 18% per annum during the period of default. Option with 60 or 90 days misstates the period.

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