Interim Dividend to Foreign Residents

Interim Dividend ( under Section 205, 205A, 205C, 206, 206A, 207) Companies Act, 1956

1.      Suitable provision in the articles: The articles of the company must authorise the Board to declare interim dividend. Regulation 86 of Table A provides for Board’s power to pay such interim dividend to its members from time to time.

2.      Board’s function: A Board meeting must be called and rate at which dividend payable must be stated in the resolution passed for declaration of interim dividend. The Board must also obtain prior approval from the banks/financial intuitions whenever required before making such declaration and such declaration must be unconditional.

3.      Separate account: Once declared, interim dividend must be transferred to the separate bank account within 5 days of such declaration and amount so transferred must not be utilised for any other purpose. The interim dividend must be paid within 30 days from the date of declaration.

4.      Mode of payment: Interim dividend may be paid in cash/cheque/warrant sent through post directly to the address of shareholders entitled to such dividend. Once declared and communicated, it shall become a debt for a company and cannot be revoked by the Board.

Procedure for payment to non-residents:

As regards the remittance of interim dividend,

·                Application may be made by the company in India to the Authorised Dealer by letter (in duplicate) enclosing only the form RCD 2

·                A copy of the Board Resolution approving the payment of interim dividend.

Authorised dealers may allow the remittance of interim dividend subject to the following:-

(a)    Authorised dealers should verify the particulars with reference to the documents submitted in support of the non-resident shareholding and satisfy themselves that necessary permission of the Reserve Bank has been obtained by the non-resident shareholders in terms of Section 29(1)(b) or 29(4)(a) of the Act for purchase/holding of the shares and/or the company has permission under Section 19(1) of the Act for issue of shares to the non-residents and that the terms of the permission do not prohibit remittance of dividend.

(b)   Authorised dealers should also verify that the certificate given in Part 'B' of the form RCD 1 has been properly completed by the company's auditors and specifically confirm on form A2 that they have verified the Reserve Bank's approval for purchase/holding/issue of the shares held by the non-resident beneficiary and it does not prohibit the remittance of dividend.

(c)    Authorised dealers should separately forward one copy of the application in form RCD 1 (without its enclosures) to the office of Reserve Bank within whose jurisdiction the Head/Registered Office of the company is situated, after completing the certificate in Part C thereof.

(d)   The Indian company/authorised dealers should ensure that the reference number, date, etc. of Reserve Bank's permission and the repatriable/non-repatriable nature of the shares/debentures/bonds held by the concerned non-residents are incorporated on the counterfoil of the dividend warrants.