In case of inadequacy of profits dividend has to be declared out of reserves subject to the conditio...........

Companies Act-Phase (I & II) Paymentofdividends

In case of inadequacy of profits, dividend has to be declared out of reserves subject to the condition that:

Total amount to be drawn by company from accumulated profit/reserves shall not exceed 1/10 of the sum of its Paid-up capital and Free Reserves as appearing in latest audited financial statements

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

The amount so drawn shall first be utilised to set off losses incurred in financial year.

All of the above

None of the above

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Explanation:

As per section 123 of Companies Act, 2013 , in case of inadequacy of profits, the company can declare dividend out of the reserves and accumulated profits as per Rule 3 of Companies (Declaration and Payment of Dividend) Rules, 2014 subject to the following conditions:

a) Total amount to be drawn by company from accumulated profit/reserves shall not exceed 1/10 of the sum of its Paid-up Capital and Free Reserves as appearing in latest audited financial statements,

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

c) The amount so drawn shall first be utilised to set off losses incurred in financial year.