Question

Explain Interim Dividend.

Explain the features of Interim Dividend.

Answer 1

Meaning:

The dividend which is declared by the Board of Directors between two Annual General Meetings is called Interim Dividend. The interim dividend is paid in the middle of the accounting year, i.e., before the finalization of annual accounts for the year. The opinion of the company’s Auditors should be taken before declaring an Interim Dividend.

Features:

1. The Board of Directors has the power to declare Interim Dividend.
2. Interim Dividend is only a payment on account of the whole dividend for the year.
3. Company should provide depreciation for the entire year and not proportionately for a part of the year before declaring Interim Dividend.
4. Interim dividends cannot be paid out of any reserves.
5. Articles of Association of the company must authorize the Board of Directors to declare Interim Dividend.
6. The Board Meeting has to pass a resolution for declaring the Interim Dividend.
7. The amount to be given as Interim Dividend must be credited in a separate Bank account in a scheduled bank within 5 (five) days of its declaration.
8. Interim Dividend should be paid within 30 days of its declaration.
9. Unpaid/Unclaimed Interim Dividend should be transferred to ‘Unpaid Dividend Account within 7 days of the expiry of 30 days of declaration, i.e., 37 days of its declaration.
10. Any amount remaining unpaid/unclaimed in the ‘Unpaid Dividend A/c’ for 7 (seven) years should be transferred to IEPF.