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

Sagar Pharma Ltd has an unpaid dividend account holding Rs 4,00,000 for dividend declared for a past year. Seven years have passed from the date the amount was transferred to the Unpaid Dividend Account, and no shareholder has claimed it. What must the company do?

The company must transfer the amount to the Investor Education and Protection Fund once it has remained in the Unpaid Dividend Account for seven years. It cannot keep it, move it to reserves or redistribute it, though the owner can later claim from the Fund.

  1. ATransfer the amount to the Investor Education and Protection FundCorrect
  2. BTransfer the amount to the company's general reserve
  3. CDistribute it among the existing shareholders as a special dividend
  4. DContinue to hold it in the Unpaid Dividend Account indefinitely

Explanation

Money lying in the Unpaid Dividend Account for seven years from the date of transfer must be transferred to the Investor Education and Protection Fund. Shares in respect of which dividend remained unpaid or unclaimed for seven consecutive years are also transferred to IEPF. The company cannot retain the amount in reserves or redistribute it.

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