(^342) Financial Management
directors. Hence, the board of directors should in a formal meeting resolve to pay
the dividend.
- Shareholder Approval: The resolution of the board of directors to pay the
dividend has to be approved by the shareholders in the annual general meeting.
However, their approval is not required in the case of declaration of interim dividend.
Further, it should be noted that the shareholders in the annual general meeting
have neither the power to declare the dividends (if the Board of Directors do not
recommend it) nor to increase the amount or dividend. However, they can reduce
the amount of the proposed dividend. - Record Date: The dividend is payable to shareholders whose names appear in
the register of members as on the record date. - Dividend Payment: Once a dividend declaration has been made, dividend warrant
must be posted within 30 days. Within a period of 7 days, after the expiry of 30
days, unpaid dividends must be transferred to a special account opened with a
scheduled bank.
In case the company fails to transfer the unpaid dividend to the 'unpaid dividend
account' within 37 days of the declaration of dividend, an interest of 12 per cent
per annum on the unpaid amount is to be paid by the company. The interest so
accruing is to be paid to the shareholders in the proportion of the dividend amount
remaining unpaid to them.
The dividend will be paid to the registered shareholder or to his order or to his
banker or in case a share warrant has been issued to the bearer of such a share
warrant. In the case of joint-holders, the dividends should be paid to the first joint-
holder.
Further, as per the notification issued by the Department of Company Affairs, the
payment of dividend to the shareholders involving the fraction of 50 paise and
above be rounded off to the rupee and the fraction of less than 50 paise may be
ignored.
In the case of dematerialized shares (i.e., the shares held in electronic form), the
corporate firms are required to collect the list of members holdings shares in the
depository and pay them the dividend. - Unpaid dividend: If the money transferred to the 'unpaid dividend account' in
the scheduled bank remains unpaid / unclaimed for a period of 7 years from the
date of such transfer, the company is required to transfer the same to the 'Investor,
Education and Protection Fund' established for the purpose.