What do you mean by Final dividend ?

Final dividend is a dividend which is declared at the annual general meeting of the shareholders and is declared by the shareholders only on the recommendation of the directors. The dividend proposed by the directors is provided for in the final accounts of the company and is paid only after it has been passed at the annual general meeting of the shareholders.

Disney Dividend -

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Dividends on Preference Shares. Preference shareholders enjoy a preferential right in respect of dividends as compared to the equity shareholders and are paid a fixed rate of dividend. But the right of dividend is subject to the availability of profits and recommendation of the directors. The holders of non-cumulative preference, shares cannot claim dividend in subsequent years if there are inadequate profits in any year but the holders of cumulative preference shares can claim the unpaid dividend in any year during the subsequent year or years when there arc sufficient profits. Arrears of dividends on cumulative preference shares are shown as a contingent liability by way of a foot-note to the Balance Sheet because the payment of arrears of dividends depends upon the future profits of the company which are uncertain.

Scrip Dividend. Previously some companies used to distribute dividend in the form of shares of other companies which may have been held by them as investments. Such type of dividend given in the form of shares was known as scrip dividend. But now-a-days such type of dividend is not allowed because according to Section 205 of the Companies Act, no dividend shall be payable except in cash.


Separate Bank Account for the Payment of Dividends. Usually a company opens a separate bank account for the payment of dividends. From the general bank account an amount equal to the net amount payable to the shareholders as dividends is transferred to the Dividend Banking Account. Such an account is debited when dividends are paid. Section 205 lays down that if a company is unable to make the payment of the dividend or post the dividend warrant within 42 days of the declaration of the dividend, it must open a special account entitled “Unpaid Dividend Account of…. (Name of the company)” in a scheduled bank and deposit therein the amount of the dividend as yet unpaid.

The special account must be opened within 7 days after the 42nd day of the declaration of the dividend. On the expiry of the 7th day after the 42nd day, the company will be liable to pay interest to the shareholders @ 12% p.a. on the amount that has not been deposited in the special bank account. After the transfer of the amount of the unpaid dividend to the special bank account, the dividends concerned will be paid out of this special account. If any dividend is not claimed for a period of 7 years, the balance in the special bank account must be transferred by the company to Investor Education and Protection Fund established by the Central Government. After such transfer, the claim for the unpaid dividend by the shareholders can be lodged with the Central Government. Thus, unclaimed dividend cannot be forfeited by the company but has to be deposited with the Central Government.

As per the Finance Act, 1997 dividend paid or declared are subject to corporate Dividend Tax @ 10% with effect from 1st June, 1997. Such Corporate Dividend Tax is debited to Profit and Loss Appropriation Account and in the Balance Sheet it is shown under the heading ‘Provisions’ on the liabilities side till it is paid. As per the Finance Act, 2000, the rate of this tax has been increased to 20%. This tax may also be subject to corporate tax, if any.

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