Mr. Koka is the one of the subscriber of the MOA, of Momu investment limited, out of the 7 subscribers but his name is not mentioned in the register of member of the company at the time of declaring the dividend, the company had not declared the dividend after arguing that Mr.Koka is not a registered shareholder of the company. Explain as per provisions of the company’s act 2015.( 15 marks)
According to provisions of the Company act of 2015, Mr Koka is not a registered member of the company because his name was not registered with the company; the following provisions provide for this:
Previous Board Resolutions of the Company must be filed with the Ministry of Corporate Affairs. Board Resolutions were open to the public and could be downloaded for a fee. The language "provided that no person shall be entitled under section 399 to see or receive copies of such resolutions" has been included to protect company secrecy.
According to the Companies Amendment Act of 2015, "no firm shall declare dividend unless carried over previous losses and depreciation not supplied in previous year or years are set off against profit of the company for the current year," Companies having losses or negative reserves, as a result, are unable to pay dividends.
When a company proposes to declare dividend out of the accumulated profits earned by it in previous years and transferred to the reserves, and when the declaration of dividend is not following the Rules, Section 205A(3) of the Companies Act, 1956 requires a company to seek prior approval from the Central Government due to inadequacy or absence of profits in the year.