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Dividend and Interest — Secretarial Practice STD 12 Commerce / Arts — Question

Maharashtra BoardEnglish MediumSTD 12 Commerce / ArtsSecretarial PracticeDividend and Interest4 Marks
Question
Interim dividends cannot be paid out of free reserves.
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Answer

    • Dividend declared by the Board of Directors between two Annual General Meetings is called Interim Dividend.
    • The interim dividend shall not be declared out of free reserves.
    • In the event of a loss or inadequacy of profits during a financial year, no interim dividend shall be declared.
    • The declaration of an interim dividend does not create a debt against a company.
    • The board of directors can cancel an interim dividend after declaring it.
    • Thus, it is rightly justified that Interim dividends cannot be paid out of reserves.

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