1. ESPN Heavy Engineering Ltd. is a listed entity engaged in the business of providing engineering solutions to clients across the country. The company followed consistent growth over the years. Rate of Declaration of dividend in immediately preceding three financial years were 15%, 20%, and 25%.
Unfortunately, due to obsolescence of a special part of machinery, company incurred losses in
current financial year.
Even though, during the financial year 2021-22, the company declared interim dividend of 10% on the equity shares.
The Board of Directors of the company approved the financial result for the financial year 2021-22 in its meeting held on 5th August, 2022, and recommended a final dividend of @15% in this board meeting.
The general meeting of the shareholders was convened on 31 st August, 2022. The shareholders of the company demanded that since interim dividend @10% was declared by the company, so the final dividend should not be less than 20%. It was also submitted that Rate of Declaration of dividend in immediately preceding three years were 15%, 20% and 25%, but the Company Secretary emphasised that final dividend cannot be increased.
(i) Whether company can declare interim dividend, if company incurred losses during the current financial year? What should be correct rate interim dividend?
(ii) Do you think decision of Company Secretary is correct? What should be correct rate of final dividend?
Justify your answer with reference to provisions of the Companies Act, 2013.
2. The Board of Directors of ABC Limited at its board meeting declared dividend on its paid-up equity share capital which was later on approved by the company’s Annual General Meeting. In the meantime, the directors diverted the amount of total dividend to be paid to shareholders for purchase of investments for the company. Due to this dividend was paid to shareholders after 45 days declaration.
3. Examining the provisions of the Companies Act, 2013, state whether the act of directors is in violation of the provisions of the Companies Act, 2013. Also explain what are the consequences of the above act of directors.
4. Name the authority who may establish the Investor Education and Protection Fund to safe guard the interest of the shareholders with respect to the refund of unclaimed and unpaid dividend. Specify the list of amounts that can be entrusted to the Fund 5. ASR Limited declared dividend at its Annual General Meeting held on 31-12-2022. The dividend warrant to Mr. A, a shareholder was posted on 22nd January, 2023. Due to postal delay Mr. A received the warrant on 5th February, 2023 and encashed it subsequently. Can Mr. A initiate action against the company for failure to distribute the dividend within 30 days of declaration under the provisions of the Companies Act, 2013?
