The Hindu Business Line : Plea to remove discrepancy in dividend payment clause

The PHD Chamber of Commerce and Industry has urged the Government to remove discrepancy in the clause on proposals for payment of dividendby companies in the concept paper for revamped Company Law.

In a representation to the Ministry of Company Affairs, the chamber has suggested that the proposal to seek approval of the general meeting for declaration and payment of dividend by companies should be done away with.

The concept paper provides that the dividend, interim or final, once declared should neither be revoked nor modified.

There may be a situation where the company may declare dividend, but the same does not have the approval of the shareholders at the general meeting.

Similarly, where in a company there are both Indian and foreign shareholders, dividend could be declared by the directors appointed by one set of shareholders at the board meeting.

Thereafter, even if the other set of shareholders which may be in majority, do not approve the payment of the dividend declared at the next general meeting, the company would be bound to pay the dividend.

"In view of the proposed condition laid down by the concept paper, it is not clear as to why the final approval of general meeting should be made necessary once the board of directors has declared interim dividend," the chamber stated.

Already under the Companies Act, the board of directors is empowered to declare the interim dividend and it is not subject to final approval at the general meeting.

Whereas according to the concept paper, the board of directors can declare interim dividend during any financial year only subject to final approval by general meeting at the end of the financial year.

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