07-24-2009, 06:00 PM
Although, Kamran bhai has replied the query in a well-mannered and have kept no way for equivocalness.
In case 1, There should not have any ambiguity regarding dividend declaration, since company has sufficient accumulated profits, which is much on the higher side (as a denomination to paid up capital of Rs. 1000,000)
However, in case 2, care must be taken while such contemplation(where, after declaration of dividends of Rs. 100,000 i.e. equal to profit of the year,nothing shall remain to offset the accumulated losses even a bit) specifically, when it is interim declaration on the anticipation of future profits,differently,contrary to the anticipation, it shall be tantamount to the voluntary reduction in capital, without compliance to section 96, ultimately directors shall be penalized for such act,
Practically, this is not considered to be prudent to do so,
However, It has been declared in some judicial cases,which favour Case 2 positively.
Best Regards,
In case 1, There should not have any ambiguity regarding dividend declaration, since company has sufficient accumulated profits, which is much on the higher side (as a denomination to paid up capital of Rs. 1000,000)
However, in case 2, care must be taken while such contemplation(where, after declaration of dividends of Rs. 100,000 i.e. equal to profit of the year,nothing shall remain to offset the accumulated losses even a bit) specifically, when it is interim declaration on the anticipation of future profits,differently,contrary to the anticipation, it shall be tantamount to the voluntary reduction in capital, without compliance to section 96, ultimately directors shall be penalized for such act,
Practically, this is not considered to be prudent to do so,
However, It has been declared in some judicial cases,which favour Case 2 positively.
Best Regards,
