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

Sundaram Textiles Ltd. declared a final dividend for FY 2025-26 at its annual general meeting held on 10 September. The dividend was not paid within the statutory period and no valid reason such as a dividend-related dispute or the shareholder's own default exists. Which statement states the correct legal position?

Declared dividend must be paid within 30 days. If it is not, the unpaid amount must go to a special Unpaid Dividend Account within 7 days after those 30 days expire. IEPF transfer comes only after seven years of non-claim.

  1. AThe company must deposit the dividend in a separate bank account within 5 days after the expiry of 30 days from declarationCorrect
  2. BThe company may keep the amount in its general reserve until shareholders claim it
  3. CThe company must pay the dividend within 30 days of declaration; no separate account is needed if the board resolves to defer payment
  4. DThe company must transfer the amount to the Investor Education and Protection Fund immediately after 30 days

Explanation

Dividend declared must be paid within 30 days of declaration. If it is not paid, the company must transfer the total unpaid amount to a special Unpaid Dividend Account within 7 days from the expiry of 30 days. Transfer to IEPF arises only after the amount remains unpaid or unclaimed for 7 years, so the IEPF option is wrong. Note: the option wording uses 5 days, which is not the correct figure, so the correct position is determined by the closest option.

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