Q.State the meaning of dividend and explain who has the authority to declare

Dividend is the shareholders' share of distributable profit, and the authority to declare it differs sharply between the interim and final forms.

The Board acts alone for an interim dividend since it is declared mid-year, before an AGM is even due; a final dividend needs the shareholders' own approval because it follows the completed year-end accounts.

Meaning of dividend: Dividend is the portion of a company's distributable profit that it decides to distribute among its shareholders, in proportion to their shareholding, as a return on the capital they have invested. Under Section 2(35) of the Companies Act, 2013, the term 'dividend' includes any interim dividend.

1. Authority to declare an interim dividend: the Board of Directors has the authority to declare an interim dividend, at any time between two AGMs, out of the surplus in the profit and loss account and the profits of the current or previous financial year(s) remaining undistributed, after providing for depreciation (Section 123(3)).
2. Authority to declare a final dividend: the shareholders, at the Annual General Meeting, have the authority to declare the final dividend, acting on the rate the Board of Directors has recommended. The shareholders may approve the recommended rate or reduce it, but they cannot declare a higher rate than the Board has recommended.
   ✓Final answer

   Dividend is the shareholders' share of distributable profit. (i) An interim dividend is declared by the Board of Directors, mid-year, between two AGMs. (ii) A final dividend is declared by the shareholders at the AGM, on the Board's recommendation, and cannot exceed the rate the Board has recommended.