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

Sundaram Textiles Ltd. has a registered unpaid dividend of Rs 4,00,000 declared for FY 2015-16, held in its Unpaid Dividend Account. The shareholders never claimed it. The company's finance head asks what must be done with amounts remaining unpaid or unclaimed for seven years from the date of transfer to the Unpaid Dividend Account. Which is the correct legal position?

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 from the date of transfer. It cannot write it back to income, redistribute it, or hold it indefinitely.

  1. AThe company may write it back to its profit and loss account as other income
  2. BThe company must transfer it to the Investor Education and Protection FundCorrect
  3. CThe company may distribute it as additional dividend to other shareholders
  4. DThe company may retain it in the Unpaid Dividend Account indefinitely

Explanation

Under the Companies Act, 2013, money lying in the Unpaid Dividend Account for seven years from the date of transfer must be transferred by the company to the Investor Education and Protection Fund. Writing it back or redistributing it is not permitted, and indefinite retention contradicts the seven-year rule.

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