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Investor Education & Protection Fund

Investor Education and Protection Fund (IEPF) is for promotion of investors’ awareness and protection of the interests of investors. The objective of IEPF is to build a lawful and fair stock market to secure the interest of investors. Further, to empower investors by educating them in order to enable systematic and effective competitive market, ensuring guaranteed and safe investment avenues.


  • Chapter VIII Declaration and Payment of Dividend – Section 123 to 127
  • Companies (Declaration and Payment of Dividend) Rules, 2014
  • Companies (Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016


Section 123 – Declaration of Dividend

What should be considered before payment of dividend?

  • Depreciation and Losses to be set off from the Profits of the company (current year or previous year )before payment of Dividend
  • Excluding any amount representing unrealized or notional gains or revaluation of assets from the profits of the company
  • Company may transfer profit to Reserves of the company before declaration of Dividend

Can Dividend be paid out of Reserve of the Company?

  • Yes, Dividend can be paid out of the Free Reserves of the company
  • Even in case of inadequacy or absence of profits in any financial year subject to the fulfillment of conditions prescribed under the rules

Can a company pay Interim Dividend?

  • Yes, Company may pay interim dividend at any time during the closure of FY till holding of Annual General Meeting.
  • Company may declare interim dividend:
    • out of the surplus in the P/L account of the company or
    • out of profit of financial year for which the interim dividend is declared or
    • out of the profit in the financial year till the end of quarter preceding declaration of dividend
  • In case the company has incurred loss during the current financial year upto the end of quarter immediately preceding the date of declaration of Interim Dividend then the company,
    • shall not declare dividend at a rate higher than the average rate of dividend declared during immediately preceding 3 financial year

Do company need to open a separate Bank Account?

  • Yes, the Company needs to open a separate account in a Scheduled Bank.
  • Deposit the amount of dividend in the bank account within 5 days of declaration of dividend.

Mode of Payment of Dividend?

  • Dividend payable in cash may be paid through cheque or warrant or in any electronic mode to the shareholders entitled to payment of dividend.

In case of Inadequacy of profit can a company declare dividend?

  • The company may declared dividend in case of inadequacy of profit after fulfilling the conditions specified under Rule 3 of Companies (Declaration and Payment of Dividend) Rules, 2014 which are as follows:
    • Rate shouldn’t exceed the average rate of dividend paid by company in immediately preceding 3 FY.

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