# Payment of Dividend in Proportion to Paid-up Amount — Section 51

## Core Rule

A company may pay dividend in proportion to the amount paid-up on each share — only if the Articles of Association authorise it.

## When Does This Arise?

This becomes relevant when not all equity shares are equally paid-up (some are fully paid, others partly paid).

## Board's Power

The Board of Directors may decide to pay dividend on a pro-rata basis based on paid-up amount, provided:

The Articles permit it, AND
The equity shares are not equally paid-up.

## Critical Exception — Preference Shares

In the case of preference shares, dividend is ALWAYS paid at a fixed rate — never pro-rata based on paid-up amount. Section 51 applies essentially to equity shares.

Worked example

### Example 1

Example: ABC Ltd has 10,000 equity shares of ₹100 each. On 6,000 shares, the full ₹100 is paid-up; on 4,000 shares only ₹50 is paid-up. If Articles permit and Board declares dividend pro-rata on paid-up value:

Fully paid shares: dividend on ₹100 each
Partly paid shares: dividend on ₹50 each (half the rate)

### Example 2

Example (Preference shares): XYZ Ltd has 8% preference shares of ₹100 each, ₹50 paid-up. Even though paid-up amount is half, preference dividend is paid at the fixed rate of 8% on the nominal/face value — Section 51 pro-rata principle does NOT apply.

⚠️ Common exam mistakes

Applying pro-rata dividend rule to preference shares — it does not apply; preference dividend is at the fixed rate.
Assuming pro-rata dividend is automatic — Articles must authorise it.
Forgetting that this section is relevant only when shares are unequally paid-up.

Bare-Act text Section 51 · Companies Act, 2013 · click to expand

Section 51: A company may, if so authorised by its articles, pay dividends in proportion to the amount paid-up on each share.

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Payment of Dividend in Proportion to Paid-up Amount (Section 51)

Worked example

⚠️ Common exam mistakes