Bilateral Borrowing

➢Bilateral loans are funds provided to a

borrower by one lender.
➢The opposite of syndicated loans
➢Bilateral loans are a less complicated.
➢However the lender risk is much higher
than with syndicated loans.
Dividend and Dividend Distribution
Policies
 DEFINATION AND MEANING OF
DIVIDEND
➢The portion of the profit received by the
shareholders from the company’s net
profits, which is legally available for
distribution among the members
 Dividend
➢Profit and ascertainment of divisible
profits;
➢Declaration and payment of dividend;
➢Treatment of unpaid and unclaimed
dividend;
➢Transfer of unpaid and unclaimed dividend
to Investor Education and Protection Fund.
Mid-Cap Stocks Going Ex-Dividend
• While generally not as stable and with shorter
streaks of consecutive dividend hikes, many
mid-cap stocks characteristics that make them
desirable for portfolio diversification

Mid Cap vs. Large Cap Debate

 SRJAN v. SRIDHAR….
• Would you prefer Dividend, Profit
retention, Buy Back or Bonus Shares?
• Why?
DIFFERENCE BETWEEN DIVIDEND AND INTEREST
➢ While dividend is paid on preference and equity
shares, interest is paid on debentures and long term
and short term loans/borrowings including fixed
deposits.
➢ Interest is a debt which like all debts is paid out of the
company’s assets generally.
➢ A dividend however becomes a debt only after it
has been declared by the company.
➢ Dividend cannot be paid out of the assets of the
company, generally it can be declared only out of the
profit available for the purpose.

➢ Explain: Interest is a charge on profits while

dividend is an appropriation of profits.
 TYPES OF DIVIDEND
➢Final dividend
➢Interim dividend
– Board is authorized to declare interim dividend
▪ Payment of dividend to be authorised by the
articles
 Declaration of interim dividend
➢Section 123(3) of the Companies Act,
2013
➢Board of Directors of a company may
declare interim dividend during any
financial year out of the surplus in the
Profit and Loss Account as well as
profit of the financial year in which the
interim dividend is sought to be declared.
 Tara
➢ Final dividend vs. Interim dividend
➢ Why interim Dividend and its effect on
market capitalization?

News:

Granules India Ltd. - Board declares

First Interim Dividend of 25 paise per
share of face value of Re. 1/- each
representing 25% of paid-up capital for
the financial year 2018-19
 Is Government's move to scrap
Dividend Distribution Tax sensible?
➢ Instead tax dividends only in the hands of the
investor
➢ At the rate applicable to the investor’s income
bracket
➢ It will encourage higher dividend distribution,
leaving money with shareholders and
➢ Help making India an attractive destination
for investment.
 SOURCES OF DECLARATION OF
DIVIDEND
➢ Section 123(1) of Companies Act 2013 provides
that no dividend shall be declared or paid by a
company for any financial year except:

(i) Out of the profits of the company for that year

arrived at after providing for depreciation in
accordance with the provisions of sub-section
(2), or

(i) Out of the profits of the company for any

previous financial year or years arrived at after
providing for depreciation
 Transfer of profits to reserves
➢A company may, before the declaration
of any dividend in any financial year,
transfer such percentage of its profits
for that financial year as it may
consider appropriate to the reserves of
the company.
No dividend can be declared and paid in excess of 10%
unless minimum amount prescribed as under is
transferred to Reserves.
% of current profits that need
Rate of dividend
to transfer to reserves

Exceeding Up To

10.0% 12.5% 2.5%

12.5% 15.0% 5.0%

15.0% 20.0% 7.5%

20.0% 10.0%

What's the Logic?

 Dividend In Case Of Absence Or
Inadequacy Of Profits
➢ Section 123(1)
➢ Owing to inadequacy or absence of profits in
any financial year
➢ A company can declare dividend out of
the accumulated profits earned by it in
previous years
➢ By transferring to the reserves
➢ But such declaration shall not be made
except in accordance with such rules as may
be prescribed.
 Rule 3 of Companies (Declaration and
Payment of Dividend) Rules, 2014
➢ In the event of inadequacy or absence of profits in any year, a
company may declare dividend out of surplus subject to the
fulfillment of the following conditions, namely:-
– The rate of dividend declared shall not exceed the average of the
rates at which dividend was declared by it in the three years
immediately preceding that year
– The total amount to be drawn from such accumulated profits
shall not exceed one-tenth of the sum of its paid-up share capital
and free reserves
– The amount so drawn shall first be utilized to set off the losses
incurred in the financial year in which
– dividend on Preference Shares is declared before any dividend in
respect of equity shares is declared.
– The balance of reserves after such withdrawal shall not fall below
fifteen per cent of its paid up share capital as appearing in the
latest audited financial statement.
 Dividend to be declared from free
reserves only
➢As per the provisions of the 2013 Act, in
case of inadequate or no profits, dividend
could be paid out of free reserves only
➢Free reserves means reserves which are
available for distribution as dividend as
per the latest audited balance sheet of a
company.
 Amount of Dividend to be Deposited
in Special Account of a Schedule Bank
➢Section 123(4) provides that the amount of
the dividend, including interim dividend,
shall be deposited in a scheduled bank
in a separate account within five days
from the date of declaration of such
dividend.
 Dividend only to Registered
Shareholder
➢Section 123(5)
 Mode of payment
➢Cash
➢Cheque
➢Warrant or
➢Electronic mode
Transfer of unpaid dividend to unpaid
Dividend Account (Section 124)
➢ Section 124(1)
➢ When a dividend has been declared by a company
but has not been paid or claimed within thirty
days from the date of the declaration
➢ Within seven days from the date of expiry of the
said period of thirty days, the same should be
transferred the total amount of dividend which
remains unpaid or unclaimed to a special
account to be opened by the company in that
behalf in any scheduled bank to be called the
Unpaid Dividend Account.
 Details of unpaid dividend to be
placed at the website
➢ Section 124 (2) provides that the company
shall, within a period of ninety days of
making any transfer of an amount to the
Unpaid Dividend Account,
➢ Prepare a statement containing the names,
last known addresses and the unpaid
dividend and place it on the website of the
company
➢ In such form, manner and other particulars as
may be prescribed.
TRANSFER TO INVESTOR EDUCATION
AND PROTECTION FUND
➢ Section 124 (5)
➢ Any money transferred to the Unpaid
Dividend Account of a company in
pursuance of this section which remains
unpaid or unclaimed for a period of seven
years from the date of such transfer shall be
transferred by the company along with
interest accrued, if any, thereon to Investor
Education and Protection Fund
Thank You for your cooperation