XYZ Ltd Proposes to declare dividend out of accumulated profits earned by it in the previous years a...........

Companies Act-Phase (I & II) Paymentofdividends

XYZ Ltd. Proposes to declare dividend out of accumulated profits earned by it in the previous years and transferred to free reserves. The rate of dividend declared by it shall not exceed the average of the rates which dividend was declared by it in immediately preceding _______ financial years, and the total amount to be drawn from reserves shall not exceed_______ of the sum of its paid up share capital and free reserves as per latest audited financial statements.

3;1/5^th

5;1/5^th

3;1/10^th

5;1/10^th

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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:

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 rate of dividend declared by it shall not exceed the average of the rates which dividend was declared by it in immediately preceding 3 financial years
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 utilized to set off losses incurred in financial year.