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

Sundaram Textiles Ltd has a financial year ending 31 March. Its board wants to pay an interim dividend during the year. Under the Companies Act, 2013, which of the following is the correct legal position on interim dividend?

The Board may declare interim dividend during the financial year, or between the close of the financial year and the AGM. It does not need shareholder or Central Government approval; that is the route for final dividend, which members declare at the general meeting.

  1. ABoard may declare interim dividend during the financial year, or at any time during the period from closure of the financial year till the AGMCorrect
  2. BInterim dividend can be declared only by shareholders in a general meeting
  3. CInterim dividend can be declared only after the AGM of that year
  4. DInterim dividend needs prior approval of the Central Government

Explanation

The Board of Directors may declare interim dividend during any financial year, or at any time during the period from the closure of the financial year till the holding of the AGM, out of surplus in the profit and loss account and out of profits of the financial year in which it is declared. Shareholder approval is not needed, and no government approval is required. Declaration only by members is the rule for final dividend.

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