Companies (Declaration and Payment of Dividend) Rules, 2014


[First Notification No. GSR 241(E) dt. 31 Mar 2014 as amended by, GSR 397 (E) dt. 12 Jun 2014, GSR 121 (E) dt. 24 Feb 2015, GSR 441 (E) dt. 29 May 2015]

Note: This Master Notification contains consolidation of rules and amendment to the rules as indicated above. This consolidation is relevant up to the latest date of amendment to the rules and relevant at the time of its preparation only. It is intended as a way to assist professionals and you may refer to the source pronouncement / documents on which this Master Notification is based. Whilst every effort has been made to ensure the accuracy of the information contained in this Master Notification, this cannot be guaranteed and any such reliance is solely at the user’s risk.


Rule 1 Short Title and Commencement
Rule 2 Definitions
Rule 3 Declaration of Dividend out of Reserves

In exercise of the powers conferred under sub-section (1) of section 123 read with section 469 of the Companies Act, 2013 (18 of 2013) and in supersession of the Companies (Central Government’s) General Rules and Forms, 1956 and other Rules prescribed under the Companies Act, 1956 on matters covered under these rules, except as respects things done or omitted to be done before such suppression, the Central Government hereby makes the following rules, namely –

Rule 1 – Short Title and Commencement

1.    These rules may be called the Companies (Declaration and Payment of Dividend) Rules, 2014

2.    They shall come into force on the 1st day of April, 2014

Rule 2 – Definitions

(1)  In these rules, unless the context otherwise requires –

a)    Act means the Companies Act, 2013

b)    Section means section of the Act

(2)  Words and expressions used in these rules but not defined and defined in the Act or in the Companies (Specification of Definitions Details) Rules, 2014, shall have the same meanings respectively assigned to them in the Act or in the said Rules.

Rule 3 – Declaration of dividend out of reserves

In the event of inadequacy or absence of profits in any year, a company may declare dividend out of free reserves subject to the fulfillment of the following conditions, namely –

(1)          The rate of dividend declared shall not exceed the average of the rates at which dividend was declared by it in the 3 years immediately preceding that year.

Provided that this sub-rule shall not apply to a company, which has not declared any dividend in each of the 3 preceding financial year.

(2)          The total amount to be drawn from such accumulated profits shall not exceed 1/10th of the sum of its paid-up share capital and free reserves as appearing in the latest audited financial statement.

(3)          The amount so drawn shall first be utilized to set off the losses incurred in the financial year in which dividend is declared before any dividend in respect of equity shares is declared.

(4)          The balance of reserves after such withdrawal shall not fall below 15% of its paid up share capital as appearing in the latest audited financial statement.


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