Chapter 9 DECLARATION OF DIVIDEND

Chapter 9 : DECLRATION OF DIVIDEND

1. Where a dividend is declared by a company and remains unpaid for …………….days, the company shall
transfer the amount to unpaid dividend account within another ………….days.
9.1
a. 30, 30 b. 60, 30 c. 30, 7 d. 60, 7

2. The balance of reserve after withdrawal for dividend shall not fall below…………% of its paid up share capital
as appearing in the latest audited financial statement.
a. 5 b. 10 c. 15 d. 20

3. When the dividend is declared at the annual general meeting of the company, it is known as…………
a. Final dividend b. Interim dividend c. Dividend to equity d. dividend to
shareholders preference shareholders

4. Dividend can be declared out of

a. Securities premium reserve b. Capital reserve c. General reserve d. All of the above

5. For declaration of dividend out of accumulated profits, the total amount to be drawn from such
accumulated profits shall not exceed………………… of the sum of its paid up share capital and free reserves as
appearing in the latest audited financial statement.
a. 2% b. 5% c. 10% d. 20%

6. Investor Education and Protection Fund(IEPF) shall be utilized for

a. refund of unclaimed b. promotion of investors c. Protection of the interests d. All of the above
and unpaid amounts awareness of investors

7. Dividend is payable to………….

a. Registered b. Order of registered c. Banker of shareholder d. Any of the above
shareholder shareholders

8. Dividend shall be declared or paid by a company for any financial year only…………..
a. Out of the profits b. Out of the profits of the c. Out of money provided by the Central d. All of the
of the company for company for any previous Government or a state Government for above
that year financial year or years the payment of dividend by the company

9. For declaration of Dividend out of accumulated profits, the rate of dividend declared shall not exceed the
average of the rates at which dividend was declared by it in the…….years immediately preceding that year.
a. 2 b. 3 c. 5 d. 7

10. When the Board of directors declare dividend between two annual general meetings of the company,
such dividend is known as………..
a. Final dividend b. Interim dividend c. dividend to equity d. dividend Preference shareholders
shareholders

11. Dividend on these shares is payable even out of future profit if current year’s profits are insufficient for
the purpose.
a. Equity shares b. Bonus Equity shares c. cumulative preference shares d. Non-cumulative
preference shares

© CA Darshan D. Khare
 Chapter 9 DECLARATION OF DIVIDEND

9.2 12. A ………. Is a payment made by a company to its shareholders, usually as a distribution of profits.
a. Bonus b. Dividend c. Right shares d. ESOP

13. Any money transferred to the Unpaid dividend Account of a company in pursuance of this section which
remains unpaid or unclaimed for a period of………years from the date of such transfer shall be transferred by
the company along with interest accrued to INV
a. 5 b. 7 c. 8 d. 10

14. The amount of the dividend, including interim dividend, shall be deposited in a scheduled bank in a
separate account within….days from the date of declaration of such dividend.
a. 3 b. 5 c. 7 d. 10

15. The company shall be liable to pay simple interest at the rate of ……. % p.a. during the period for which
default in payment of dividend continues.
a. 12 b. 15 c. 18 d. 21

16. ………. Are prohibited from paying any dividend to its members.
a. Private Companies b. Public Companies c. Nidhi Company d. Section 8 Companies

17. If a company fails to pay declared dividend within 30 days, every director of the company shall, if he is
knowingly a party to the default, be punishable with imprisonment which may extend to……..years.
a. b. 2 c. 5 d. 7

18. Dividends can be paid in the form of ………….

a. Cash b. Bonus shares c. Right shares d. all of the above

© CA Darshan D. Khare
 Chapter 9 DECLARATION OF DIVIDEND

Answer

1. c (Hint: Where a dividend has been declared by a 2. c 3. a 4. c (Hint: Dividend shall

9.3
company but has not been paid or claimed within 30 days be declared or paid by a
from the date of the declaration to any shareholder company only from its
entitled to the payment of the dividend, the company free reserve. No other
shall, within 7 days from the date of expiry of the said reserve can be utilized
period of 30 days, transfer the total amount of dividend for the purpose of
which remains unpaid or unclaimed to a special account declaration of such
to be opened by the company in that behalf in any dividend.)
scheduled bank to be called the unpaid dividend
account.)
5. c 6. d (Hint: Section 125 of 7. d (Hint: 8. d (Hint: Dividend shall be declared or paid
the companies Act, 2013, Dividend shall by a company for any financial year only –
deals with the Investor be payable (a) Out of the profits of the company for
Education and Protection only to the that year arrived at after providing for
Fund (IEPF). This fund registered depreciation in accordance with the
shall be utilized for shareholder provision of section 123(2), or
refund of unclaimed and of the share (b) Out of the profits of the company for any
unpaid amounts, or to his order previous financial year or years arrived at
promotion of investor’s or to his after providing for depreciation in
awareness and banker.) accordance with the provisions of that sub
protection of the section and remaining undistributed, or
interests of investor’s (c) out of both (a) and (b); or
etc. In accordance with (d) out of money provided by the Central
provisions of section 125 Government or a state Government for the
of the Companies Act, payment of dividend by the company in
2013) pursuance of a guarantee given by that
Government.)
9. b (Hint: The rate of dividend 10. b 11. c (Hint: A cumulative preference share is one 12. b
declared shall not exceed the that carries the right to a fixed amount of
average of the rates at which dividend or dividend at a fixed rate. Such a
dividend was declared by it in dividend is payable even out of future profit
the 3 years immediately if current year’s profits are insufficient for
preceding that year: Rate of the purpose. This means that dividend on
Dividend these shares accumulates unless it is paid in
<(RD1+RD2+RD3)/3Where, full and, therefore, the shares are called
RD1, RD2, RD3 are rates at cumulative preference share )
which dividend was declared by
it in the 3 years immediately
preceding that year. However
this rule will not apply if a
company has not declared any
dividend in each of the 3
preceding financial years.)
13. b (Hint: Any money transferred to the 14. b 15. c (Hint: Section 16. d(Hint:
Unpaid dividend Account of a company in 127 of the According to
pursuance of this section which remains Companies Act, Section 8(1), the
unpaid or unclaimed for a period of 7 years 2013.) companies
from the date of such transfer shall be having license
transferred by the company along with under section 8

© CA Darshan D. Khare
 Chapter 9 DECLARATION OF DIVIDEND

9.4 interest accrued, if any, thereon to the fund of the Act are
established under section 125(1) and the prohibited from
company shall send a statement in the paying any
prescribed form of the details of such dividend to its
transfer to the authority which administers members. Their
the said fund and that authority shall issue profits are
a receipt to the company as evidence of intended to be
such transfer.) applied only in
promoting the
objects of the
company.)
17. b (Hint: Where a dividend has been declared by a 18. a(Hint: Dividends are payable in cash.
company but has not been paid or the warrant in Dividends that are payable to the
respect thereof has not been posted within 30 days shareholder in cash may be paid by
from the date of declaration to any shareholder cheque or warrant or in any electronic
entitled to the payment of the dividend, every mode.)
director of the company shall, if he is knowingly a
party to the default, be punishable with
imprisonment which may extend to two years.)

© CA Darshan D. Khare