Procedure for Declaration of Interim Dividend

Aakanksha Singhal

Aakanksha Singhal

Published on: Oct 1, 2020

Khushboo Sharma

Updated on: Sep 30, 2023

★★★★★(11 Rating)

20223

Introduction

Dividend includes any interim dividend.

The Board of Directors of a company may declare interim dividend during any financial year or at any time during the period from closure of financial year till holding of the annual general meeting out of

• the surplus in the profit and loss account or out of profits of the financial year for which such interim dividend is sought to be declared or
• profits generated in the financial year till the quarter preceding the date of declaration of the interim dividend.

Applicable Provisions:

1. Section 123 of Companies Act, 2013
2. Regulation 29, 30, 42, 44 and 46 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

Mandatory Requirements

In case the company has incurred loss during the current financial year up to the end of the quarter immediately preceding the date of declaration of interim dividend, such interim dividend shall not be declared at a rate higher than the average dividends declared by the company during the immediately preceding three financial years.

Following Procedure is to be followed

1. Convene a Meeting of Board of Directors [As per section 173 & SS-1]
   • Listed Companies shall give prior intimation to Stock Exchange about the Board Meeting in which recommendation of interim dividend is to be considered, at least 2 working days in advance, excluding the date intimation and date of meeting. [Regulation 29 of the SEBI (LODR) Regulations, 2015]
   • Listed Companies shall close the trading window as per their Code of Conduct and shall give prior intimation about this to the Stock Exchange. [SEBI (PIT) Regulation, 2015]
   • Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
   • Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
   • Hold a meeting of Board of Directors of the Company and pass the necessary Board Resolution
     • to consider declaration of interim dividend to Shareholders along with the source of payment.
     • to consider and decide the book closure period or record date.
     • to open a separate Bank Account in a Scheduled Bank for making payment of Interim Dividend to the Shareholders and for keeping unpaid Dividend.
   • Listed Company shall submit the disclosure of Board Meeting as soon as reasonably possible and but not later than the following:
     • thirty minutes from the closure of the meeting of the board of directors in which the decision pertaining to the event or information has been taken
     • twelve hours from the occurrence of the event or information, in case the event or information is emanating from within the listed entity
     • twenty four hours from the occurrence of the event or information, in case the event or information is not emanating from within the listed entity, from the end of the Board Meeting and post the same on the website of the Company within 2 working days. [Regulation 30 & 46(3) of the SEBI (LODR) Regulations, 2015]
   • Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation and Signing of Minutes of Board Meeting]
2. Intimation to Stock Exchange about Book Closure [Regulation 42 of the SEBI (LODR) Regulation, 2015] Listed Companies shall give advance notice of at least 7 working days (excluding the date of intimation and book closure) to the Stock Exchange about record date and specifying the purpose of record date.
3. Publishing Advertisement in Newspaper for Book Closure
   • Companies shall give 7 days’ advance notice about Book Closure by way of advertisement at least once in a vernacular newspaper in the principal vernacular language of district and having a wide circulation in the place where registered office of the company is situated and at least once in English language in an English newspaper circulating in that district and having wide circulation in the place where registered office of the company is situated.
   • Private Companies shall serve notice on all members of the company not less than 7 days prior to closure of the register of members or debenture holders or other security holders.
   • Company shall publish this notice on the website of the company.
4. Preparation of List of Eligible Shareholders
   Company shall prepare the list of shareholders who are eligible to receive the interim dividend.
5. Opening of Bank Account and Payment of Dividend
   • Company shall open a separate Bank Account in a Scheduled Bank for payment of interim dividend and credit the said bank account with the total amount of interim dividend payable within 5 days of declaration of dividend.
   • Company shall make payment of interim dividend by way of cheque or warrant or in any electronic mode to the shareholder entitled to receive the interim dividend within 30 days from the date of declaration of interim dividend.
   • Listed Companies shall use an electronic mode to make the payment but where it is not possible to use the electronic facility then “payable-at-par” warrants or cheques may be issued and the same shall be sent by speed post if the dividend amount exceeds Rs. 1,500/-.
   • If any share is in the name of IEPF authority then company shall remit the amount into the specific account of the IEPF authority maintained in PNB and the details shall be furnished in Form IEPF 7 to the IEPF authority within 30 days from the date of remittance.
6. Unpaid Dividend Account
   Where a dividend has been declared by a company but has not been paid or claimed within thirty days from the date of the declaration to any shareholder entitled to the payment of the dividend, the company shall, within seven days from the date of expiry of the said period of thirty days, transfer the total amount of dividend which remains unpaid or unclaimed to a special account to be opened by the company in that behalf in any scheduled bank to be called the Unpaid Dividend Account.
   The company shall, within a period of ninety days of making any transfer of an amount under sub-section (1) to the Unpaid Dividend Account, prepare a statement containing the names, their last known addresses and the unpaid dividend to be paid to each person and place it on the web-site of the company.