There are no legal provisions regarding payment of dividend.

Ans. False

Reasons:

(1) Dividend is the return on share capital from the distributable profits of the company.

(2) Based on the rate of proposed dividend company is required to transfer a certain percentage to reserves as specified.

(3) E.g. Dividend of more than 20% of paid up capital entails a minimum of 10% of net profits to the transferred to reserves.

(4) Company may decide to transfer more than the stipulated rates voluntarily.

(5) Also, depreciation has to be provided for from current / previous years profits.

These provisions help the company to become financially found and solid.

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