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Proposed Amendments in COMPANIES (DECLARATION AND PAYMENT OF DIVIDEND) RULES 2014

News and Press Release - Dated:- 2-2-2016 - Declaration of Dividend 8.1 The second proviso to sub-section (1) of Section 123 of the Act provides that, where, owing to inadequacy or absence of profits in any financial year, any company proposes to declare dividend out of the accumulated profits earned by it in previous years and transferred by it to the reserves, such declaration of dividend shall not be made except in accordance with the Rules prescribed by the Central Government. Rule 3 of Comp .....

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carried forward balance of profit and loss account) is a part of free reserves but it does not represent an amount 'transferred' to reserves. It has been suggested that to avoid any legal challenges in application, the requirements of the Rule and the section should be harmonized appropriately. 8.2 The Committee feels that Rules should use the same language as was provided in the Act. Thus, Rule 3 should provide for conditions only in situations where, in case of inadequacy of profits, .....

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