Write a short note on Interim Dividend.

Interim Dividend.

A dividend declared in between two Annual General Meetings of the company by the Board of Directors is known as ‘Interim Dividend’. Section 2(35) provides that dividend includes any ‘Interim Dividend’. In this way, interim dividend has been legally recognized as a part of, final dividend. The provisions regarding interim dividend contained in Section 123 (3) are as follows:

The Board of Directors of a company may declare interim dividend during any financial year out of the surplus in the Statement of Profit
& Loss and out of profits of the financial year in which such interim dividend is sought to be declared.

In case of loss during the current financial year up to the end of the quarter immediately preceding the date of declaration of interim
dividend, such interim dividend shall not be declared at a rate higher than the average dividends declared by the company during the immediately preceding three financial years.

The amount of interim dividend shall also be deposited in a separate bank account within 5 days from the date of declaration.

The amount of interim dividend so deposited shall be used only for paying the interim dividend.

The provisions which apply to the payment of final dividend, also apply to any interim dividend.

The payment of interim dividend does not require the approval of the general meeting since members have no say in the matter of such

Interim dividend, like final dividend, shall constitute a debt, once it is declared and shall not be recoverable. Therefore, before declaring an interim dividend, the directors must satisfy themselves that the financial position of the company allows the payment of such dividend out of its attributable profits. Interim dividend should be declared only when the company has made substantial profits during a portion of the year and there exists good future prospects in the remaining part of the year.

Compare items
  • Total (0)