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THE COMPANIES BILL, 1997 PART VI MANAGEMENT AND ADMINISTRATION CHAPTER I : SECTIONS 159-165
Dividends and manner and time of payment thereof 159 Dividend to be paid only out of profits. –
(3) For the purpose of sub-section (1), depreciation shall be provided either- (a) at the rates specified in Schedule III; or (b) on any other basis approved by the Central Government which has the effect of writing off by way of depreciation ninety-five per cent of the original cost to the company of each such depreciable asset on the expiry of the specified period; or (c) as regards any other depreciable asset for which no rate of depreciation has been laid down by this Act or any rules made thereunder, on such basis as may be approved by the Central Government by any general order published in the Official Gazette or by any special order in any particular case: Provided that if any asset is sold, discarded, demolished or destroyed for any reason before depreciation of such asset has been provided for in full, the excess, if any, of the written down value of such asset over its sale proceeds or, as the case may be, its scrap value, shall be written off in the financial year in which the asset is sold, discarded, demolished or destroyed. (3) Notwithstanding anything contained in sub-section (1), no dividend shall be declared or paid by a company for any financial year out of the profits of the company for that year arrived at after providing for depreciation in accordance with the provisions of sub-section (2), except after the transfer to the reserves of the company of such percentage of its profits for that year, not exceeding ten per cent, as may be prescribed: Provided that nothing in this sub-section shall be deemed to prohibit the voluntary transfer by a company of a higher percentage of its profits to the reserves in accordance with such rules as may be made by the Central Government in this behalf. (4) No dividend shall be payable except in cash: Provided that nothing in the sub-section shall be deemed to prohibit the capitalisation of profits or reserves of a company for the purpose of issuing fully paid-up bonus shares, or paying up any amount, for the time being unpaid, on any shares held by the members of the company. (5) No company shall give, or no shareholder shall demand or accept, any gift either at general meeting or otherwise in lieu of or in addition to the dividend payable under this section. (6) For the purposes of this section- (a) "specified period" in respect of any depreciable asset shall mean the number of years at the end of which at least ninety-five per cent of the original cost of that asset to the company will have been provided for by way of depreciation if depreciation were to be calculated in accordance with the provisions of section 256; (b) any dividend payable in cash may be paid by cheque or warrant sent through the post directed to the registered address of the shareholder entitled to the payment of the dividend, or in the case of joint shareholders, to the registered address of that one of the joint shareholders which is first named on the register of members, or to such person and to such address as the shareholders or the joint shareholders may in writing direct. (7) Where the provisions of sub-section (5) are contravened, the company and every officer of the company in default, and the shareholder concerned, shall be liable to fine which may extend to ten times the value of the gift given and demanded or accepted.
160 Unpaid dividend to be transferred to special dividend account. – (1) 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 within the said period of thirty days, to a special account to be opened by the company in that behalf in any scheduled bank, to be called "Unpaid Dividend Account of ...........Company Limited/Company (Private) Limited". (2) Every company that has transferred the amount to the account referred to in sub-section (1) shall, along with notice of annual general meeting (following immediately after such transfer and thereafter every annual meeting until such dividend is claimed), give notice to every shareholder who has not been paid or has not claimed the dividend stating therein the amount of dividend he is entitled to claim from it. Explanation.-In this sub-section, the expression "dividend which remains unpaid" means any dividend the warrant in respect thereof has not been encashed or which has otherwise not been paid or claimed. (3) Where, owing to inadequacy or absence of profits in any year, any company proposes to declare dividend out of the accumulated profits earned by the company in previous years and transferred by it to the reserves, such declaration of dividend shall not be made except in accordance with a special resolution passed by the shareholders in an annual meeting. (4) If default is made in transferring the total amount referred to in sub-section (1) or any part thereof to the unpaid dividend account of the concerned company, the company shall pay, from the date of such default, interest on so much of the amount as has not been transferred to the said account, at such rate as may be prescribed and the interest accruing on such amount shall enure to the benefit of the members of the company, in proportion to the amount remaining unpaid to them. (5) If a company fails to comply with any of the requirements of this section, the company and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the failure continues.
161 Payment of unpaid or unclaimed dividend. – Any money transferred to the General Revenue Account of the Central Government under sub-section (5), of section 205A of Companies Act, 1956 as it stood immediately before the commencement of this Act and remaining unpaid or unclaimed on such commencement may be paid to the persons to whom the money is due on a claim made by them and the same shall be dealt with as if such transfer to the General Revenue Account had not been made, the order, if any, for payment of the claim being treated as an order for refund of revenue and the said claim shall be dealt with in accordance with section 205B of Companies Act, 1956 as it stood immediately before such commencement.
162 Dividend not to be paid except to registered shareholders or to their order or to their bankers. – (1) No dividend shall be paid by a company in respect of any share therein, except - (a) to the registered holder of such share or to his order or to his bankers; or (b) in case a share warrant has been issued in respect of the share in pursuance of section 101, to the bearer of such warrant or to his bankers. (2) Nothing contained in sub-section (1) shall be deemed to require the bankers of a registered shareholder to make a separate application to the company for payment of the dividend.
163 Right to dividend, rights shares, and bonus shares to be held in abeyance pending registration of transfer of shares. – Where any instrument of transfer of shares has been delivered to any company for registration and the transfer of such shares has not been registered by the company, it shall, notwithstanding anything contained in any other provision of this Act,- (a) transfer the dividend in relation to such shares to the special account referred to in section 160 unless the company is authorised by the registered holder of such share in writing to pay such dividend to the transferee specified in such instrument of transfer; and (b) keep in abeyance any issue of fully paid-up bonus shares in pursuance of the proviso to sub-section (4) of section 159. (c) allot in relation to any offer of rights shares under clause (a) of sub-section (1) of section 73, such entitled rights to any director or officer of the company who shall dispose of such rights and holds sale proceeds thereof for distribution to the person who is finally entitled to such shares.
164 Penalty for failure to distribute dividends within thirty days. – Where a dividend has been declared by a company but has not been paid, or the warrant in respect thereof has not been posted, within thirty days from the date of the declaration, to any shareholders entitled to the payment of the dividend, every director of the company shall, if he is knowingly a party to the default, be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine which may extend to fifty thousand rupees. Provided that no offence shall be deemed to have been committed under this section in the following cases, namely:- (a) where the dividend could not be paid by reason of the operation of any law; (b) where a shareholder has given directions to the company regarding the payment of the dividend and those directions cannot be complied with; (c) where there is a dispute regarding the right to receive the dividend; (d) where the dividend has been lawfully adjusted by the company against any sum due to it from the shareholder; or (e) where, for any other reason, the failure to pay the dividend or to post the warrants within the period aforesaid was not due to any default on the part of the company.
Payments of interest out of capital 165 Power of company to pay interest out of capital in certain cases.— (1) Where any shares in a company are issued for the purpose of raising money to defray the expenses of the construction of any work or building, or the provision of any plant, which cannot be made profitable for a lengthy period, the company may- (a) pay interest on so much of that share capital as is for the time being paid- up, for the period and subject to the conditions and restrictions mentioned in sub-sections (2) to (7); and (b) charge the sum so paid by way of interest, to capital as part of the cost of construction of the work or building, or the provision of the plant. (2) No such payment shall be made unless it is authorised by the articles or by a special resolution. (3) No such payment, whether authorised by the articles or by special resolution, shall be made without the previous sanction of the Central Government. (4) The grant of such sanction shall be conclusive evidence, for the purposes of this section, that the shares of the company, in respect of which such sanction is given, have been issued for a purpose specified in this section. (5) Before sanctioning any such payment, the Central Government may, at the expense of the company, appoint a person to inquire into and report to the Central Government on the circumstances of the case; and may, before making the appointment, require the company to give security for the payment of the costs of the inquiry. (6) The payment of interest shall be made only for such period as may be determined by the Central Government; and that period shall in no case extend beyond the close of the half-year next after the half-year during which the work or building has been actually completed or the plant provided. (7) The rate of interest shall, in no case, exceed four per cent per annum or such other rate as the Central Government may, by notification, direct.
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