Use of information technology in cash transaction of listed companies for payment of dividends - Companies Law - CIRCULAR NO. 5/99

CIRCULAR NO. 5/99 [F.NO. 5/9/99/CL-V], DATED 12-5-1999, ISSUED BY THE DEPARTMENT OF COMPANY AFFAIRS Subject:- Use of information technology in cash transaction of listed companies for payment of dividends 1. Under section 205(5)(6) of the Companies Act, 1956, a company may remit dividend in cash or by cheque or by warrant. It is, however, well- known that the amount of dividend can also be transmitted electronically to the shareholders after obtaining their consent in this regard and asking them to nominate the specific bank account number to which the dividend due to them should be remitted. 2. The shareholders have complained in the past about loss of dividend warrants sent by post due to pilferage in transit or undue delay in receipt of dividend warrants through post. 3. The Central Vigilance Commissioner has issued an order dated 27th November, 1998 directing that banks may switch over to remittance of dividends by computerised means as it will help to improve the vigilance administration. The Central Vigilance Commissioner has also requested us that in the interest of greater transparency, listed companies in India may be directed that they should go in for computerised cash transaction so far as dividend, interest payment, etc., are concerned. 4. You are, therefore, requested to advise your constituent listed companies to encourage their shareholders to send them authorisation to remit dividend to their designated bank accounts by means of electronic transfer as this will result in avoiding delay in remittance of dividends, etc. 5. An immediate action in this regard may please be initiated by you in the interest of investors.