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    DIVIDEND TO CERTAIN CLASS ONLY

    Posted By : ARUN GANDHI / Published on : 20-Jul-2022 05:27 AM / View : 374 / Comment : 1

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    Dear Members,

    Can dividends be declared to a certain class of shareholders only?
    Read more on : only class certain dividend

    • Yes, a company can declare dividends to a certain class of shareholders only, subject to the provisions of the Companies Act, 2013 and the company's Articles of Association.

      The Companies Act, 2013 provides that a company may declare dividends only out of profits or the accumulated profits earned by the company in previous years, subject to certain conditions. The Act also states that a company may declare different dividends for different classes of shares if such differentiation is authorized by the company's Articles of Association.

      The Articles of Association of a company define the rules and regulations for the company's management and operation. It may contain provisions for the rights and privileges of different classes of shares, including the right to receive dividends. If the Articles of Association authorize the company to declare different dividends for different classes of shares, then the company can declare dividends to a certain class of shareholders only.

      For example, a company may have two classes of shares - ordinary shares and preference shares. The preference shareholders may have the right to receive a fixed dividend before any dividend is paid to the ordinary shareholders. In such a case, the company can declare dividends to the preference shareholders first and then to the ordinary shareholders, subject to the availability of profits or accumulated profits.

      In summary, a company can declare dividends to a certain class of shareholders only if such differentiation is authorized by the company's Articles of Association. However, the company must ensure compliance with the provisions of the Companies Act, 2013 while declaring dividends.

      13-04-2023 / 11:26:10 AM
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