SEBI Grade A 2025 phase 1 exam is on 10th of Jan, 2026. The phase 2 is on 26th of Feb 2026. The Companies Act, 2013 plays a major role in the syllabus. Today we will learn Chapter 8 of companies act, 2013.

Chapter 8 of Companies act, 2013: Section 123 to 127

Section 123 – Declaration of Dividend

Section 124 – Unpaid dividend account

Section 125 – Investor Education and Protection Fund

Section 126 – Right to dividend, right shares, bonus shares to be held in abeyance pending registration of transfer of shares

Section 127 – Punishment for failure to distribute dividend

Section 123 – Declaration of Dividend

1. A company can declare or pay dividend only from:

• Company’s profits of the current year, after charging depreciation, or
• Profits of previous years which were not distributed earlier (after depreciation), or
• A combination of both, or
• Money given by the central or state govt (only if the govt has guaranteed the dividend)

2. Unreal profits like Revaluation gains, Notional gains, fair value charges cannot be used to pay dividends.

3. Before declaring dividend, the company may transfer some profits to reserve if it wants.

4. If the company has no profit or very little profit in a year, it can still declare dividend from past accumulated profits, but –

• only from free reserves
• only by following government rules

5. Dividend cannot be paid from –

• Capital reserves
• Revaluation reserves

6. A company cannot declare dividend unless Previous year’s losses, and unprovided depreciation are first adjusted against current profits.

7. Depreciation must be calculated strictly as per Schedule II of companies act, 2013.

8. The Board of Directors can declare Interim dividend –

• During the financial year, or
• After year-end but before the AGM

It can be paid from:

• current year profits, or
• Surplus in Profit & Loss account

If the company has losses during the year : Interim dividend rate cannot exceed the average dividend of the last three years.

9. After declaring dividend, the company must deposit the amount in a separate bank account within 5 days of declaration.

10. Dividend can be paid –

• only to registered shareholders
• only in cash including cheque, warrants, or electronic transfer

11. The section 123 does not prohibit the company from issuing bonus shares, or using profits to make partly paid shares fully paid.

12. If the company has not compiled with section 73 and 74, then it cannot declare dividend on equity shares until the default is corrected.