UNCLAIMED DIVIDEND & IEPF (S. 124 & 125)

Sources Out of Which Dividend Can Be Paid:

According to Section 123, no dividend can be declared or paid by the company for any financial year except out of,

1. Current profits dividends may be paid out of profits for the company for the current year after providing depreciation as per schedule 2in computing profits any amount representing unrealized gains, revaluation of assets, liability on the measurement of assets, or liability at fair value shall be excluded.

2. Out of past reserves

According to section 2(43), past reserves mean such reserves which as per the latest audited balance sheet of a company are available for distribution as dividends. Whenever the dividends are declared out of the surplus the rate of dividend declared shall not exceed the average rates at which dividend was declared in the 3 years immediately preceding that year.

3. Out of the money provided by the central government or state government 

For the payment of dividend by the company (funds, grants, or guarantees) + dividend shall not be paid out of the company in any case. According to section 2(35) dividend means and includes an interim dividend. A part of profit may be distributed before the financial statements and accounts are finally declared in the annual general meeting thus dividend paid between two AGMs is known as interim dividend.  

According to S. 124 where the dividend has been declared by a co. but hasn’t been claimed within 30 days from the date of declaration by shareholders entitled to such payment of dividend. The company shall within 7 days from the date of expiry of the said period of 30 days. The company transfers the total amount of dividend which remains unpaid within the said period of 30 days to a special account opened by the co. in a scheduled bank to be called an unpaid dividend account.

The company shall within 90 days of making any transfer of the amount to the unpaid dividend A/c prepare a statement containing the name of the shareholder, their address, the amount of dividend unclaimed & such other details as required and publish it on the website of the company, or any other website recommended & approved by the central government.

If any default is made in transferring the amount the company shall create interest at the rate of 12% per annum from the date of default. According to s. 124, if the amount transferred to the unclaimed dividend amount remains unclaimed for 7 years from the date of such transfer then it shall be transferred by the company to refund established under s. 125.

Section 125- a purpose for which the investor education & protection fund IEPF can be used:

The central government should constitute by notification, the authority for administration consisting of a chairperson, CEO & 6 other members. The authority shall administer the fund in consultation with the auditor general of India for the following purposes-

1. To refund amount concerning unclaimed dividend 

2. Promotion & awareness for investors education & protection 

3. Reimbursement of legal expenses incurred during class-action suits

4. Any other purpose incidental to & prescribed by the central govt. time to time.

 This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.