# Dividend — Definition, Meaning & Concept
## 1. Statutory Definition
Section 2(35) of the Companies Act, 2013: 'Dividend' includes any interim dividend.
Note that the Act gives an inclusive (not exhaustive) definition — it merely clarifies that 'dividend' covers both final and interim dividends.
## 2. Conceptual Meaning
Dividend is the return on a shareholder's investment in the share capital of the company. Conceptually:
| Aspect | Explanation |
|---|---|
| Source | A portion of distributable profits allocated to shareholders |
| Recommendation | Board of Directors recommends the rate / amount |
| Approval | Members approve the dividend at the AGM by ordinary resolution |
| Ceiling | Members cannot increase the rate beyond what the Board recommended (they may reduce it) |
| Nature of liability | Dividend becomes a debt of the company only on declaration by members in a validly constituted general meeting |
| Computation base | Expressed as a percentage of nominal/face value of the share |
## 3. Why these features matter
- Board recommendation, member approval — a built-in two-tier governance: directors know the company's financial health; members protect their own interest.
- Ceiling on rate — protects creditors from a runaway dividend that drains cash beyond what the Board considered prudent.
- Liability only after declaration — until then, the company's reserves are intact and not earmarked for shareholders.
- Computed on face value, not market price — a dividend of 20% on a ₹10 face value share means ₹2 per share, irrespective of whether the market price is ₹100 or ₹500.
## Key Takeaway
Dividend = part of profits + recommended by Board + approved by members + payable on face value of shares. It crystallises as a debt only on declaration.