The word dividend means the share of profit that falls in the share of each member of the company it is that portion of Corporate profit which has been set aside and declared by the company as liable to be distributed among the shareholders of the company or for the persons who run the company. Almost all the commercial corporate Enterprises undertake with the view or enter into the business with the view of earning profit for making a long-term profit for the company that profit which is distributed among the dividend of the company is termed as the dividend the power of the dividend is implied.

The word ‘dividend’ has been defined under Section 2(35) of the Companies Act, 2013. The word “Dividend” includes any interim dividend. It is an inclusive and not an exhaustive definition. According to the generally accepted definition, “dividend” means the profit of a company, which is not retained in the business and is distributed among the shareholders in proportion to the amount paid-up on the shares held by them. The dividend declared by a company by the resolution passed in their General Meeting the board of the directors determine the rate of dividend be declared and recommended in the meeting of the shareholder it is usually declared the dividend at Annual General Meeting there is nothing in the Act which prohibited the declaration of the dividend in General Meeting if for any reason it could not be declared in Annual General Meeting it could be declared in the general meeting

The payment of the dividend is bound by two fundamental principles which are followed by the company

1. the dividend must never payout of the capital. The payment cannot be made out of the capital which is earned by the company that leads to the breach of trust and the company may require the director to replace the capital.

2.dividend shall be paid only out of profit which is earned by the company.

The nature of dividend

The dividend may be fixed by annual percentage as in case of performance or it may be variable according to the prosperity of the company as in case of the equity share it should be noted that the members cannot insist on the company to declare a dividend for this is a matter which reset a description of the direction the right to claim dividend will only arrive after the dividend is declared by the company in General Meeting until and unless it is declared no shareholder has a right to claim against the respected company

The act allows the dividend to be paid out in the following three sources

• Profit of the company for the year for which dividend is to be paid
• Undistributed profit of the previous financial year are to be paid by the company as the dividend
• The money provided by central is the State Government for payment of dividend in pursuance of the guarantee by the government concerning section 123.