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

Meghna Pharma Ltd declared a final dividend at its AGM on 10 September. The dividend warrant was not posted to shareholder Mr Iyer and the amount remained unpaid. The company wants to know the time limit for payment and the consequence of default. What is the correct position?

A declared dividend must be paid within 30 days of declaration. If the company fails, it must pay simple interest at 18 percent per annum for the period of default, and the directors in default are also liable. The dividend does not lapse or get forfeited.

  1. APayment must be made within 30 days of declaration, and on default the company must pay simple interest at 18% per annum during the default periodCorrect
  2. BPayment must be made within 60 days of declaration, and no interest is payable on default
  3. CPayment must be made within 30 days, and on default the dividend lapses to the company
  4. DPayment must be made within 90 days of the financial year end, with interest at 12%

Explanation

Dividend must be paid within 30 days of declaration. If the company defaults, directors in default are liable and the company must pay simple interest at 18% per annum during the period of default. The dividend does not lapse.

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