# Definition, Meaning & Concept of Dividend
## Statutory Definition - Sec 2(35)
> "Dividend" includes any interim dividend.
This is an inclusive definition — the Act does not exhaustively define dividend, but expressly brings interim dividend within its scope.
## Meaning and Concept
### Nature of Dividend
1. Return on Investment: Dividend is the shareholder's return on capital invested in the company.
2. Distributable Profits: It is a portion of profits allocated as payable to shareholders when declared.
3. Proportion of Face Value: Dividend is declared as a proportion of the nominal/face value of shares (not market price).
### Procedural Flow
1. Board recommends the dividend.
2. Shareholders approve it at the AGM (by ordinary resolution).
3. Approval converts the recommendation into a declared dividend.
### Critical Rules
- The company cannot declare a dividend higher than the rate recommended by the Board — shareholders may reduce or approve as recommended, but cannot increase.
- A dividend is not a liability of the company until it is validly declared by shareholders in a properly constituted general meeting by ordinary resolution.
- Once declared, the dividend becomes a debt payable by the company.
## Key Concept Diagram
```
Profits → Board Recommendation → Shareholder Approval (AGM, OR) → Declared Dividend → Liability
```
## Two Types of Dividend
1. Interim Dividend — declared by Board between two AGMs.
2. Final Dividend — declared by shareholders at AGM on Board's recommendation.