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CS Executive · Company Law and Practice · Distribution of Profits

Shri Ramesh holds shares of Lotus Agro Ltd as a registered shareholder and asks that his dividend be sent directly to his bank by electronic transfer. The company has no default under the provisions on deposits. Which statement about payment of dividend under section 123 is correct?

Dividend payable in cash may be paid by cheque, warrant or any electronic mode to the shareholder entitled to it. It goes to the registered shareholder, his order or his banker; bonus share capitalisation is separate and not a mode of paying dividend.

  1. ADividend may be paid by cheque, warrant or any electronic mode to the entitled shareholderCorrect
  2. BDividend can be paid only in physical cash to the registered shareholder
  3. CDividend may be paid by issuing bonus shares in lieu of cash dividend under section 123(5)
  4. DDividend may be paid to any beneficial owner without regard to the register

Explanation

Section 123(5) says dividend is payable only in cash to the registered shareholder, his order or banker, but the second proviso allows payment by cheque, warrant or any electronic mode. Capitalisation to issue bonus shares is not a dividend payment; the first proviso only says the sub-section does not prohibit it.

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