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

Vikram Auto Ltd has fully paid equity shares and some partly paid shares on which Rs 6 per share is paid on a Rs 10 share. In the absence of any contrary provision in the Articles, how must dividend be declared on the partly paid shares?

Where the Articles are silent, dividend on partly paid shares is paid in proportion to the amount paid up on them during the relevant period. So a Rs 10 share with Rs 6 paid receives dividend computed on Rs 6, not on the full nominal value.

  1. ADividend is paid on the full nominal value of Rs 10 irrespective of the amount paid
  2. BDividend is paid in proportion to the amount paid up on each share during any portion of the period in respect of which dividend is paidCorrect
  3. CNo dividend is payable on partly paid shares until they are fully paid
  4. DDividend is paid only on the amount called, not on the amount actually paid

Explanation

Under the Companies Act, where the Articles do not provide otherwise, dividend is declared and paid according to the amounts paid or credited as paid on the shares during any portion of the period for which the dividend is paid. Hence the Rs 6 paid-up share receives dividend on Rs 6, not on Rs 10. Option A ignores the paid-up amount and option C denies a right the law gives.

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