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CS Executive · Company Law and Practice · Distribution of Profits

Lotus Retail Ltd declares a dividend payable in cash. Which of the following modes of payment is consistent with section 123 of the Companies Act, 2013?

Dividend must be paid in cash to the registered shareholder, or to his order or banker, and may be paid by cheque, warrant or any electronic mode. Paying a beneficial owner who is not registered, or paying by promissory notes, is not permitted.

  1. APayment to the registered shareholder or to his order or banker, by cheque, warrant or electronic modeCorrect
  2. BPayment to the beneficial owner named in a declaration, even if he is not the registered shareholder
  3. CPayment by issuing the company's unsecured promissory notes to shareholders
  4. DPayment only in physical currency notes at the registered office

Explanation

Section 123(5) says dividend is paid only to the registered shareholder, or to his order or banker, and only in cash. Cash dividend may be paid by cheque, warrant or any electronic mode. Section 89(9) preserves the company's duty to pay its members, so the beneficial owner is not the payee.

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