• Declaration of dividend and Transfer to reserves (Section 123)

• Dividend can be declared for any FY out of the profits of the company for that FY or previous FY(s) after providing for depreciation
• A company may voluntarily transfer a portion of its profits to reserves as considered appropriate. Mandatory transfer to reserves is not required.
• A company shall not declare dividend unless carried over previous losses and depreciation not provided in previous years are set off against profit of the company for the current year.

• Declaration of dividend in case of inadequate or absence of profits are subject to the following conditions:

• The rate of dividend declared shall not exceed average rate in past three years
• Amount withdrawn from accumulated profits shall not exceed 1/10th of paid up share capital and free Reserves
• Amount so drawn shall first be utilised to set off against losses before any dividend is declared
• Balance of reserves after such withdrawal shall not fall below 15% of its paid up share capital
• If a company has carried forward losses and unabsorbed depreciation of earlier years and it earns profit during the year for which dividend is proposed to be declared, then the company shall first set off against profit for the year, lower of carried forward losses and or unabsorbed depreciation not provided in previous year/s. The balance profit may be considered for declaration of dividend.

• Depreciation shall be provided in accordance with the provisions of Schedule II

• Unpaid Dividend Account (Section 124)

• When the dividend is unpaid or unclaimed within 30 days from declaration of dividend to any shareholder, it shall be transferred within seven days of expiration of said period to Unpaid Dividend Account
• Statement containing the names, last known address and the unpaid dividend to be paid to each person – within 90 days of transfer of amount under Unpaid Dividend Account shall be placed on the website of the company.
• Interest at the rate of 12% is charged on default made in transferring the amount to the Unpaid Dividend Account.
• Money transferred to Unpaid Dividend Account which remains unpaid or unclaimed for a period of 7 years with interest accrued on same shall be transferred to Investor Education and Protection Fund established u/s 125. Statement of details of such transfer shall be filed in Form DIV-5.
• All shares in respect of which dividend has not been paid or claimed for seven consecutive years or more shall be transferred in the name of Investor Education and Protection Fund along with a statement containing such details as may be prescribed.