CMA Final · Corporate and Economic Laws · Dividends
Which of the following is the interest liability of a company that defaults in paying a declared dividend, as per Section 127?
The company is liable to pay simple interest at 18% per annum for the period during which the default continues. The rate is not 12%, which relates to a liquidator's retention, and the interest is simple rather than compound.
- ASimple interest at 12% per annum for the period of default
- BSimple interest at 18% per annum for the period of defaultCorrect
- CCompound interest at 18% per annum for the period of default
- DSimple interest at 15% per annum from the date of the AGM
Explanation
Section 127 makes the company liable to pay simple interest at eighteen per cent per annum during the period of default. Twelve per cent is the rate for a liquidator under Section 352(8), and the interest is simple, not compound.
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