Conditional approval/declaration of dividend by companies - Companies Law - CIRCULAR NO. 2/98

CIRCULAR NO. 2/98 [F.NO. 2/12/98 - CL-V], DATED 13-4-1998, ISSUED BY THE DEPARTMENT OF COMPANY AFFAIRS Subject:- Conditional approval/declaration of dividend by companies 1. It has been brought to the notice of this Department that there have been cases in which companies have conditionally declared dividends like 'Subject to prior approval from financial institutions/banks, etc.', as a result of which the shareholders have not been paid dividends within the statutory period of 42 days prescribed under section 207 of the Companies Act, 1956. Many investors have been complaining against the practice and consequential delay. 2.1 am directed to request you to advise your constituents that declaration of dividends by them should be unconditional and that they should not declare dividends subject to any conditions as aforesaid. They should take prior approval from financial institutions/banks wherever required before declaration of dividends. 3. This Department is also advising all Registrars of Companies that action should be initiated by them against all such companies who resort to such a practice and delay the payment of dividend to shareholders on such grounds.