ICSI Secretarial Standard on Dividend. SS-3 is effective from 01-01-2018

ICSI Secretarial Standard on Dividend effective from 01-01-2018. As per SS-dividend includes Interim Dividend but bonus shares are not Dividend.

The Institute of Company Secretaries of India (ICSI) has recently released the Secretarial Standard (SS-3) on Dividend for its members.

This Standard shall come into effect from 1st January, 2018

In commercial usage, the term “Dividend” refers to the share of profits of a company that is distributed amongst its Members. Companies licensed under Section 8 of the Companies Act, 2013 or corresponding provisions of any previous enactment thereof are prohibited by their constitution from paying any Dividend to its Members. This Standard issued by the Institute prescribes a set of principles in relation to the declaration and payment of Dividend and the related matters.

The term “Dividend” has been inclusively defined in the Act to the effect that it includes Interim Dividend. The Companies Act, 2013 neither specifically defines the term Dividend nor makes any distinction between Interim and Final Dividend. ICSI has clarified that for the purposes of this Standard, capitalization of profits in the form of bonus shares is not Dividend.

The principles set out in the SS-3 relate to declaration and payment of Dividend on equity as well as preference share capital in accordance with the provisions of the Act and are in respect of Dividend as it relates to a going concern. These are equally applicable to Final as well as Interim Dividend unless otherwise stated. 

In addition, 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 shall also be applicable. If due to subsequent changes in the Act or other applicable laws, a particular Standard or any part thereof becomes inconsistent with the Act or other applicable laws, the provisions of the Act or such applicable laws shall prevail,” it said.

However, SS-3 does 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.

Disclosure Requirements under SS-3:

(1) Notes to Accounts forming part of the financial statements of the Company shall disclose the aggregate amount of Dividend proposed to be distributed to equity and Preference Shareholders for the financial year and the related amount of Dividend per share. Arrears of fixed cumulative Dividend on preference shares shall also be disclosed separately.

(2) The Balance Sheet of the company shall also disclose under the head ‘Current Liabilities and Provisions’, the amount lying in the Unpaid Dividend Account together with interest accrued thereon, if any.

(3) The amount of Interim Dividend, if any, paid during the financial year and final Dividend recommended by the Board of directors shall be disclosed in the Board’s Report.

(4) The Annual Report of the company shall disclose the total amount lying in the Unpaid Dividend Account of the company in respect of the last seven years and when such unpaid Dividend is due for transfer to the Fund. The amount of Dividend, if any, transferred by the company to the Investor Education and Protection Fund during the year shall also be disclosed

Additional  Compliances have been prescribed for Listed Companies.

ICSI Secretarial Standard on Dividend