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The Tax Publishers Secretarial Standard on Dividend--An Overview Pragya Bhandari Secretarial standards bring the clarity and create uniformity of mottled secretarial practices under the Companies Act. Secretarial Standard on Dividend, issued by ICSI, prescribes a set of principles in relation to the declaration and payment of dividend and matters related thereto, however, it is voluntary for companies to adopt. This article highlights the main aspects of Secretarial Standard on Dividend in brief. 1. Prelude Declaration and distribution of dividends is a difficult task involving both financial and non-financial considerations. After the implementation of Secretarial Standards on Meeting of the Board Of Directors (SS-1) and General Meetings (SS-2), the Institute of Company Secretaries of India (ICSI) has issued Secretarial Standards-3 (SS-3) on 'Dividend'.Secretarial Standard lays down a set of principles in relation to the declaration and payment of dividend on equity and preference shares, interim dividend, treatment of unpaid dividend, revocation of dividend as well as the preservation of dividend warrants, maintenance of dividend registers, disclosure requirements and matters incidental thereto. Dividend can be paid by private as well as public company. However, companies licensed under Section 8 of the Companies Act, 2013 are prohibited from paying any dividend to its members. Section 205 of the Companies Act, 2013 casts a duty upon Company Secretary to ensure that company complies with the applicable secretarial standards. The SS-3 has come into effect from 01-01-2018. Although, Secretarial Standard-3 is recommendatory, not mandatory but its adherence would lead to transparency in practices, ensure effective corporate governance and to enhance the confidence of investors. 2. Non-applicability of Standard Secretarial Standard-3 would not apply to a company limited by guarantee not having share capital and does not deal with dividend, if any, declared by companies under liquidation. 3. Conformity of Standard with various enactments The principles enunciated in SS-3 are in conformity with the provisions of the Companies Act, 2013. Moreover, the provisions of the Securities Contracts (Regulation) Act, 1956 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 are applicable to listed companies. Any specific provision relating to dividend in the Income tax Act, 1961 or under any other statute would also be applicable. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Secretarial Standard on Dividend--An Overview

Pragya Bhandari

Secretarial standards bring the clarity and create uniformity of mottled secretarial practices under the Companies Act. Secretarial Standard on Dividend, issued by ICSI, prescribes a set of principles in relation to the declaration and payment of dividend and matters related thereto, however, it is voluntary for companies to adopt. This article highlights the main aspects of Secretarial Standard on Dividend in brief.

1. Prelude

Declaration and distribution of dividends is a difficult task involving both financial and non-financial considerations. After the implementation of Secretarial Standards on Meeting of the Board Of Directors (SS-1) and General Meetings (SS-2), the Institute of Company Secretaries of India (ICSI) has issued Secretarial Standards-3 (SS-3) on 'Dividend'.Secretarial Standard lays down a set of principles in relation to the declaration and payment of dividend on equity and preference shares, interim dividend, treatment of unpaid dividend, revocation of dividend as well as the preservation of dividend warrants, maintenance of dividend registers, disclosure requirements and matters incidental thereto.

Dividend can be paid by private as well as public company. However, companies licensed under Section 8 of the Companies Act, 2013 are prohibited from paying any dividend to its members. Section 205 of the Companies Act, 2013 casts a duty upon Company Secretary to ensure that company complies with the applicable secretarial standards. The SS-3 has come into effect from 01-01-2018. Although, Secretarial Standard-3 is recommendatory, not mandatory but its adherence would lead to transparency in practices, ensure effective corporate governance and to enhance the confidence of investors.

2. Non-applicability of Standard

Secretarial Standard-3 would not apply to a company limited by guarantee not having share capital and does not deal with dividend, if any, declared by companies under liquidation.

3. Conformity of Standard with various enactments

The principles enunciated in SS-3 are in conformity with the provisions of the Companies Act, 2013. Moreover, the provisions of the Securities Contracts (Regulation) Act, 1956 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 are applicable to listed companies. Any specific provision relating to dividend in the Income tax Act, 1961 or under any other statute would also be applicable.