Microlesson · 5-min read

Section 51 - Dividend in Proportion to Paid-up Amount

# Section 51 — Dividend in Proportion

## Rule

If authorised by the AOA, a company may pay dividend in proportion to the amount paid up on each share (not in proportion to face value).

## Key Point

Default rule: Dividend is paid on face value of shares.
Exception (when AOA allows): Dividend is paid on paid-up value.
This is relevant where shares are only partly paid up.

Worked example

### Example 1

Example: Two shareholders each hold 100 shares of ₹10 FV. Shareholder A has paid ₹10 fully; Shareholder B has paid only ₹6. Company declares dividend of 10%. If AOA allows proportionate payment:

A receives: 10% × ₹10 × 100 = ₹100
B receives: 10% × ₹6 × 100 = ₹60

⚠️ Common exam mistakes

Paying dividend on face value when AOA permits payment on paid-up value (and vice versa).
Forgetting that this requires AOA authorisation.

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

Section 51 of the Companies Act, 2013 — Payment of dividend in proportion to amount paid-up.

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