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

## The Rule

If authorised by its Articles of Association, a company may pay dividends in proportion to the amount paid-up on each share.

## Application

The Board of Directors may decide to pay dividends on a pro-rata basis if all equity shares are NOT equally paid-up.

## Important Exception — Preference Shares

In the case of preference shares, the dividend is always paid at a fixed rate — Section 51 does NOT apply to preference dividend computation.

## Summary Table

Share Type	Dividend Basis
Equity shares (unequally paid)	Pro-rata to paid-up amount (if AOA permits)
Equity shares (equally paid)	Equal per share
Preference shares	Fixed rate as per terms of issue

Worked example

### Example 1

Example — Pro-rata equity dividend:

ABC Ltd has issued 10,000 equity shares of ₹10 each. On 6,000 shares the full ₹10 is paid; on 4,000 shares only ₹6 is paid. If a 10% dividend is declared and AOA permits pro-rata payment:

Fully paid shares: 6,000 × ₹10 × 10% = ₹6,000
Partly paid shares: 4,000 × ₹6 × 10% = ₹2,400
Total dividend: ₹8,400

⚠️ Common exam mistakes

Applying pro-rata payment without checking whether the Articles authorise it — authorisation by AOA is mandatory.
Applying Section 51 logic to preference shares — preference dividend is always at a fixed rate.
Calculating dividend on face value when shares are partly paid — the basis is paid-up value if AOA permits pro-rata.

Bare-Act text Section 51 · The 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