Dividend-I

	Article 70
First Article in the series ‘dividend’.
The word “dividend” is originated from Latin word dividendum, which means something to be divided. The Oxford dictionary defines this term as “a sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves)”. Ironically, he Companies Act, 1956 does not define this term. But, the Companies Act, 1956 says through Section 2(14A) that “dividend” includes any interim dividend.  We can rely on general meaning and Judicial pronouncements to understand this term.
Case study:
Dividend is the share of the Company’s profits distributed among the members.
Barjor Hoshangi Vakil V. Mettur Chemical & Industrial Corpn. Limited,1963.
In the hands of the recipient, it means the sum paid and received as the quotient forming the share of the divisible sum payable to the  recipient.
Kent Waterworks v. Lamplough, 1904.
Section 205(3) of the Act says dividend can be paid only in Cash. The Act does not allow paying dividend in Kind.
The Board has to recommend final dividend to the members through their annual report (Director’s report). This is a legal requirement under Section 217 of the Act. The power to declare dividend is vested on the members of the Company at their General Meeting. There is no legal compulsion on directors to recommend dividend. They may or may not recommend it. At the same time, the shareholders have no power to declare or increase final dividend in the absence of recommendation by the Board of the Company.
Normally declaration of dividend is an ordinary business in an Annual General Meeting. But the Act does prevent the declaration of dividend in an Extra-ordinary General Meeting. Neither Section 205 nor any other Section insists declaration of dividend at an Annual General Meeting. Regulation 85 of Schedule A also states, “the Company in general Meeting may declare dividends”. Thus, a Company can declare dividend in an extra ordinary meeting unless the Articles provided that the dividend cannot be declared in an Extra-ordinary General Meeting. But, see the given verdict of the Culcutta High Court. “the declaration of dividend being a matter pertaining to Annual General Meeting, dividend can be declared at an Annual General Meeting only. An Articles of Association empowering the Company to declare dividend at an Extra-ordinary General Meeting was ultra vires the Act”. Raghunandan neotia v. Swadeshi Cloth Dealers Limited, 1964.