Companies Act Section 124 — Unpaid Dividend Account
CHAPTER VIII DECLARATION AND PAYMENT OF DIVIDEND
Commercial / Corporate
Summary
Sub-section (1) requires a company to transfer any declared dividend that remains unpaid or unclaimed within thirty days of the declaration to a special bank account called the Unpaid Dividend Account. This transfer must happen within seven days after that thirty-day period ends.
Sub-section (2) requires the company, within ninety days of making any transfer to the Unpaid Dividend Account, to prepare a statement listing the names, last known addresses, and the unpaid dividend amount for each person entitled to it. This statement must be placed on the company's website, if it has one, and on any other website approved by the Central Government, in the prescribed form and manner.
Sub-section (3) states that if the company fails to transfer the full amount or any part of it to the Unpaid Dividend Account, it must pay interest on the untransferred amount at twelve percent per year from the date of the default. This interest accrues for the benefit of the company's members in proportion to the amounts still unpaid to them.
Sub-section (4) allows any person who claims to be entitled to money transferred to the Unpaid Dividend Account to apply to the company for payment of that money.
Sub-section (5) requires the company to transfer any money in the Unpaid Dividend Account that remains unpaid or unclaimed for seven years from the date of transfer, along with any interest accrued, to the Fund established under sub-section (1) of section 125. The company must also send a statement in the prescribed form to the authority administering that Fund, which will issue a receipt as evidence of the transfer.
Sub-section (6) requires the company to transfer all shares for which dividend has not been paid or claimed for seven consecutive years or more to the name of the Investor Education and Protection Fund, along with a statement containing prescribed details. The proviso states that any claimant of such transferred shares may claim them back from the Fund following the prescribed procedure and documents. The explanation clarifies that if dividend is paid or claimed for any year during those seven consecutive years, the share will not be transferred to the Fund.
Sub-section (7) imposes penalties for failure to comply with any requirement of this section. The company is liable to a penalty of one lakh rupees, plus a further five hundred rupees per day for continuing failure after the first day, up to a maximum of ten lakh rupees. Every officer of the company who is in default is liable to a penalty of twenty-five thousand rupees, plus a further one hundred rupees per day for continuing failure after the first day, up to a maximum of two lakh rupees.
Official Text
(1) Where a dividend has been declared by a company but has not been paid or claimed within thirty days from the date of the declaration to any shareholder entitled to the payment of the dividend, the company shall, within seven days from the date of expiry of the said period of thirty days, transfer the total amount of dividend which remains unpaid or unclaimed to a special account to be opened by the company in that behalf in any scheduled bank to be called the Unpaid Dividend Account.
(2) The company shall, within a period of ninety days of making any transfer of an amount under sub-section (1) to the Unpaid Dividend Account, prepare a statement containing the names, their last known addresses and the unpaid dividend to be paid to each person and place it on the website of the company, if any, and also on any other website approved by the Central Government for this purpose, in such form, manner and other particulars as may be prescribed.
(3) If any default is made in transferring the total amount referred to in sub-section (1) or any part thereof to the Unpaid Dividend Account of the company, it shall pay, from the date of such default, interest on so much of the amount as has not been transferred to the said account, at the rate of twelve per cent. per annum and the interest accruing on such amount shall ensure to the benefit of the members of the company in proportion to the amount remaining unpaid to them.
(4) Any person claiming to be entitled to any money transferred under sub-section (1) to the Unpaid Dividend Account of the company may apply to the company for payment of the money claimed.
(5) Any money transferred to the Unpaid Dividend Account of a company in pursuance of this section which remains unpaid or unclaimed for a period of seven years from the date of such transfer shall be transferred by the company along with interest accrued, if any, thereon to the Fund established under sub-section (1) of section 125 and the company shall send a statement in the prescribed form of the details of such transfer to the authority which administers the said Fund and that authority shall issue a receipt to the company as evidence of such transfer.
(6) All shares in respect of which 1[dividend has not been paid or claimed for seven consecutive years or more shall be] transferred by the company in the name of Investor Education and Protection Fund along with a statement containing such details as may be prescribed:
Provided that any claimant of shares transferred above shall be entitled to claim the transfer of shares from Investor Education and Protection Fund in accordance with such procedure and on submission of such documents as may be prescribed. 2[Explanation.— For the removal of doubts, it is hereby clarified that in case any dividend is paid or claimed for any year during the said period of seven consecutive years, the share shall not be transferred to Investor Education and Protection Fund.] 3[
(7) If a company fails to comply with any of the requirements of this section, such company shall be liable to a penalty of one lakh rupees and in case of continuing failure, with a further penalty of five hundred rupees for each day after the first during which such failure continues, subject to a maximum of ten lakh rupees and every officer of the company who is in default shall be liable to a penalty of twenty-five thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees.]