Section 127 Of Companies Act 2013 (2024)

FAQs

Section 127 Of Companies Act 2013? ›

According to Section 127 of the Companies Act, 2013, if a company fails to pay a dividend within 30 days of the declaration of the dividend, the company, as well as the directors, may be fined.

Whoever receives any property knowing the same to have been taken in the commission of any of the offences mentioned in sections 125 and 126, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine and to forfeiture of the property so ...

“Clause 127 — This clause corresponds to section 207 of the Companies Act, 1956 and seeks to provide that where the dividend has been declared but has not been paid or the warrants have not been posted within thirty days of declaration, every director who is knowingly party to the default shall be punishable with ...

Section - 123 to 127 deals with the provisions related to the declaration and payment of dividend. Dividend is to be declared by the company at its Annual General meeting on such rate as may be recommended by board, and it has no power to declare dividend exceeding the amount recommended by the board.

The penalty in case of failure disperse dividend

For a company fine can be imposed in terms of interest @ 18% per annum from the date of default, and it is also applicable for a director who is also a criminal offence which may lead to imprisonment up to a period of 2 years along with fine of Rs.

In particular, section 127(3) allows a company to execute a document (in the case of a company with only one director) by having the document signed by the director or (in the case of a company having two or more directors) by two authorised signatories.

(3) A company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in accordance with subsection (1) or (2). Note: For provisions about technology neutral signing, see Division 1 of Part 1.2AA.

2018) Answer: Transfer to reserves (Section 123 of the Companies Act, 2013): A company may, before the declaration of any dividend in any financial year, transfer such percentage of its profits for that financial year as it may consider appropriate to the reserves of the company.

According to Section 128(1) every company to prepare and keep the books of account and other relevant books and papers and financial statements at its registered office. However, all or any of the books of accounts may be kept at such other place in India as the Board of directors may decide.

Section 126 of The Companies Act, 2013: Right to dividend, rights shares and bonus shares to be held in abeyance pending registration of transfer of shares.

Can a company just stop paying dividends? ›

While a company may choose to regularly issue dividend payments for decades on end, the board of directors can also choose to reduce those payments or even entirely discontinue the practice at any time. Unlike the interest on a bond, a company is not required to make dividend payments to its shareholders.

Shareholder oppression lawsuit - Minority shareholders may sue for oppression if the majority shareholders improperly deny payment of reasonable dividends. Breach of fiduciary duty claim - A claim could arise if the directors breach their fiduciary duties surrounding dividend declarations.

There is no legal obligation on a company to declare dividends. Even if there are available profits for distribution, the directors may decide not to declare a dividend if this is not in the best interests of the company.

This section further provides that dividend can only be paid in cash i.e. it cannot be paid in kind. First proviso to section – 123(5) provides that company may issue fully paid-up bonus shares out of the profits or reserves of the company without any restriction.

123Single member companies

(1)If a limited company is formed under this Act with only one member there shall be entered in the company's register of members [F1, with the name and address of the sole member,] a statement that the company has only one member.

Further, the Second proviso to Section 123(1)(b) states that in case of inadequacy or absence of profits, the company can propose to declare dividend out of the free reserves of the company, after complying with the restrictions prescribed under Rule 3 of the Companies (Declaration and Payment of Dividend) Rules, 2014 ...

There is no provision under the Act to deal with the waiver of dividend. Hence, such provisions may be contained in the articles of the company. Further, such waiver can either be full or partial. Dividend once declared becomes a debt to the company and therefore cannot be revoked once declared.