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

Sagar Pharma Ltd has declared a dividend, and a cheque was posted to Ms. Deepa, but she never encashed it. The company also holds dividend of Rs 40,000 which remains unpaid in the Unpaid Dividend Account for 7 years from the date of transfer. What is the correct legal position?

The Rs 40,000 must be transferred to the Investor Education and Protection Fund once it has remained unpaid or unclaimed in the Unpaid Dividend Account for seven years from the date of transfer. The company has no right to retain it or transfer it to reserves.

  1. AThe company may retain the Rs 40,000 permanently as unclaimed income
  2. BThe company must transfer the Rs 40,000 to the Investor Education and Protection Fund after the seven-year periodCorrect
  3. CThe company must distribute the Rs 40,000 equally among other members
  4. DThe company may transfer it to the General Reserve after the seven-year period

Explanation

Where dividend remains unpaid or unclaimed, it must be transferred within seven days of expiry of the 30-day payment period to the Unpaid Dividend Account. Any money remaining unpaid or unclaimed for seven years from the date of transfer to that account must be transferred to the Investor Education and Protection Fund. The company cannot keep it or move it to reserves.

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