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

Neelkanth Industries Ltd declared a dividend of Rs 5 per share. Its shareholder Mrs Meera Joshi, a resident individual, has not received the dividend because the company failed to pay it within the statutory period without any valid ground. What consequence follows under the Companies Act, 2013?

If a company fails to pay a declared dividend within 30 days, it must pay simple interest at 18 percent per annum for the period of default, and directors knowingly in default are punishable. The shareholder does not lose the right to the dividend.

  1. AMrs Joshi loses the right to the dividend after 30 days
  2. BThe company is liable to pay simple interest at 18% per annum during the period of default, and directors in default are punishableCorrect
  3. CThe company may pay the dividend at any later time without any liability
  4. DThe dividend is automatically converted into equity shares of the company

Explanation

Where a dividend is not paid within 30 days of declaration, the company must pay simple interest at 18% per annum for the period of default, and every director knowingly in default faces imprisonment and fine. The shareholder's right to the dividend continues, so loss of right is wrong. Late payment without liability and automatic conversion into shares have no basis in the Act.

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