A company may distribute part of its profits during the two annual general meetings. That means, a company may declare dividends before the close of the accounting year and finalisation of accounts. Regulation 86 of Table ‘A’ of Schedule I to the Companies Act, 1956, provided that the Board may from
time to time pay to the members such interim dividend as appeared to be justified by the company. However, the definition of “dividend” has been amended by the Companies (Amendment) Act, 2000, whereby the interim dividend is part of dividends. With the further amendment of section 205, the
interim dividend has been brought completely at par with “dividends” declared in the normal course since it has been specified that provisions contained in sections 205, 205A, 205C, 206, 206A and 207 shall also apply to any interim dividend. The amended provisions read as under:
(1A) The Board of directors may declare interim dividend and the amount of dividend including interim dividend shall be deposited in a separate bank account within five days from the date of declaration of such dividend.
(1B) The amount of dividend including interim dividend so deposited under sub-section (1A) shall be used for payment of interim dividend.
(1C) The provisions contained in sections 205, 205A, 205C, 206, 206A and 207 shall, as far as may be, also apply to any interim dividend. Therefore, conditions and procedures laid down in section 205A, 205C, 206, 206A and 207 would have to be complied with while declaring interim dividends.
Right to dividend, Right Shares and Bonus Shares to be held in abeyance pending registration of transfers of shares – Section 206A inserted by the Companies (Amendment) Act, [1988] requires that where any instrument of transfer of shares has been delivered to any company for registration and a
transfer of such shares has not been registered by the company, the company shall transfer the dividend in relation to such shares to the special account referred to in section 205A. Further the company shall also keep in abeyance and offer to right shares and any issue of fully paid up bonus shares in respect of such shares which have not been registered by the company. However, the company may transfer the dividend in case it has been authorised by the registered holder of such shares in writing to pay such dividend to the transferee specified in such instrument of transfer. Penalty for failure to distribute dividend within the prescribed period, i.e., thirty day, has been made quite stiff by prescribing imprisonment for three year. Rupees one thousand everyday for which the default continues as also liability to pay simple interest at the rate of 18% p.a.
