Forums
Back
Dividend
Corporate & Other Laws
Which of these is correct treatment of condition iv)
Answers (5)
3 Declaration of Dividend Out of Reserves In the event of inadequacy or absence of profits in any year, a company may declare dividend out of free reserves subject to the fulfillment of the following conditions, namely:- (1) The rate of dividend declared shall not exceed the average of the rates at which dividend was declared by it in the three years immediately preceding that year: Provided that this sub-rule shall not apply to a company, which has not declared any dividend in each of the three preceding financial year. (2) The total amount to be drawn from such accumulated profits shall not exceed one-tenth of the sum of its paid-up share capital and free reserves as appearing in the latest audited financial statement. (3) The amount so drawn shall first be utilised to set off the losses incurred in the financial year in which dividend is declared before any dividend in respect of equity shares is declared. (4) The balance of reserves after such withdrawal shall not fall below fifteen per cent of its paid up share capital as appearing in the latest audited financial statement.
Sir while checking condition 4. The amt withdrawn from reserves should be set off against loss. So while calculating reduction of reserves as per condition 4, should we set off loss and then check 15% condition Or the entire amt deducted as per condition 2 should be deducted from reserves and then check that 15% condition
Thread Starter
Sugam SMSir while checking condition 4. The amt withdrawn from reserves should be set off against loss. So while calculating reduction of reserves as per condition 4, should we set off loss and then check 15% condition Or the entire amt deducted as per condition 2 should be deducted from reserves and then check that 15% condition
You need to check the final amount in reserves + PL
Your Reply