Microlesson · 5-min read

Payment of Dividend — Recipients and Modes

# Payment of Dividend [Section 123(5)]

## Who is Entitled to Receive Dividend?

Persons whose names appear in the register of members as on the record date announced by the company are entitled to dividend.

## To Whom is Dividend Paid?

Dividend is paid to:

## Mode of Payment

Dividend shall be paid in:

### What is NOT Permitted

Dividend cannot be paid in kind — no goods, no products, no shares of subsidiary, etc.

## Key Memory Hook

"Record-date shareholders only, paid in money or money-equivalents — never in goods."

Worked example

### Example 1

Example: A pharma company proposes to pay its dividend in the form of free product samples to shareholders. Is this permitted?

Answer: No. Section 123(5) prohibits payment of dividend in kind. It must be paid in cash, cheque, dividend warrant or by electronic mode.

Paying dividend to a shareholder whose name was added to the register after the record date.
Permitting dividend in kind, e.g., bonus products or company merchandise.

Reference: Section 123(5) — Companies Act, 2013

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