Q.Explain the procedure to be followed by a company for the payment of dividend, and state the duties of the Company Secretary in this regard.

Paying dividend is a multi-step process the Company Secretary drives from the Board's recommendation right through to the eventual IEPF transfer of any unclaimed amount.

Procedure for payment of dividend:

1. The Board of Directors examines the audited accounts and recommends a dividend rate, after ensuring depreciation has been provided and past losses set off.
2. The AGM notice states the recommended dividend and includes the resolution to declare it.
3. The company fixes a record date to identify the shareholders entitled to receive the dividend.
4. At the AGM, shareholders declare the dividend by ordinary resolution — they may reduce, but never increase, the Board's recommended rate.
5. Within 5 days of declaration, the company deposits the full amount in a separate scheduled-bank account (Section 123(4)).
6. Within 30 days of declaration, the company pays every entitled shareholder, by warrant, cheque, or electronic mode, deducting TDS where applicable.
7. Any amount unpaid/unclaimed at that point is transferred to the Unpaid Dividend Account within a further 7 days (Section 124), and a statement of unclaimed amounts is published on the company's website within 90 days.
8. Amounts (and shares) unclaimed for 7 consecutive years thereafter are transferred to the Investor Education and Protection Fund (Section 125).

Duties of the Company Secretary in this process:

• Advising the Board on the legal sources of dividend and confirming depreciation/loss set-off before any figure is recommended.
• Drafting the Board resolution, the AGM notice, and the declaration resolution.
• Fixing the record date and keeping the Register of Members accurate as on that date.
• Arranging the separate bank account and the deposit within 5 days. …