Section 124: Unpaid Dividend Account
This section is for the transfer of unpaid dividends to a special account and the eventual transfer of unclaimed amounts and related shares to the Investor Education and Protection Fund.
Penalty
(7) If a company fails to comply with any of the requirements of this section, such company shall be liable to a penalty of one lakh rupees and in case of continuing failure, with a further penalty of five hundred rupees for each day after the first during which such failure continues, subject to a maximum of ten lakh rupees and every officer of the company who is in default shall be liable to a penalty of twenty-five thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees.]
The section, clause by clause
What the section says
In plain terms
(1)Where a dividend has been declared by a company but has not been paid or claimed within thirty days from the date of the declaration to any shareholder entitled to the payment of the dividend, the company shall, within seven days from the date of expiry of the said period of thirty days, transfer the total amount of dividend which remains unpaid or unclaimed to a special account to be opened by the company in that behalf in any scheduled bank to be called the Unpaid Dividend Account.
If a company declares a dividend but it remains unpaid or unclaimed by a shareholder within 30 days, the company must transfer the unpaid amount to a special account called the Unpaid Dividend Account within 7 days after the 30-day period ends.
(2)The company shall, within a period of ninety days of making any transfer of an amount under sub- section (1) to the Unpaid Dividend Account, prepare a statement containing the names, their last known addresses and the unpaid dividend to be paid to each person and place it on the website of the company, if any, and also on any other website approved by the Central Government for this purpose, in such form, manner and other particulars as may be prescribed.
Within 90 days of transferring the unpaid dividend to the Unpaid Dividend Account, the company must prepare a statement with the names and last known addresses of the persons entitled to the unpaid dividend and place it on the company's website and any other approved website.
(3)If any default is made in transferring the total amount referred to in sub-section (1) or any part thereof to the Unpaid Dividend Account of the company, it shall pay, from the date of such default, interest on so much of the amount as has not been transferred to the said account, at the rate of twelve per cent. per annum and the interest accruing on such amount shall ensure to the benefit of the members of the company in proportion to the amount remaining unpaid to them.
If a company fails to transfer the unpaid dividend to the Unpaid Dividend Account, it must pay interest at 12 per cent per annum on the unpaid amount from the date of default, and the interest will accrue to the benefit of the company's members.
(4)Any person claiming to be entitled to any money transferred under sub-section (1) to the Unpaid Dividend Account of the company may apply to the company for payment of the money claimed.
A person claiming to be entitled to money transferred to the Unpaid Dividend Account can apply to the company for payment of the claimed amount.
(5)Any money transferred to the Unpaid Dividend Account of a company in pursuance of this section which remains unpaid or unclaimed for a period of seven years from the date of such transfer shall be transferred by the company along with interest accrued, if any, thereon to the Fund established under sub-section (1) of section 125 and the company shall send a statement in the prescribed form of the details of such transfer to the authority which administers the said Fund and that authority shall issue a receipt to the company as evidence of such transfer.
If money remains unpaid or unclaimed in the Unpaid Dividend Account for 7 years, the company must transfer it to the Fund established under section 125, along with any accrued interest.
(6)All shares in respect of which 1[dividend has not been paid or claimed for seven consecutive years or more shall be] transferred by the company in the name of Investor Education and Protection Fund along with a statement containing such details as may be prescribed:
Shares for which dividend has not been paid or claimed for 7 consecutive years or more must be transferred by the company to the Investor Education and Protection Fund.
provisoProvided that any claimant of shares transferred above shall be entitled to claim the transfer of shares from Investor Education and Protection Fund in accordance with such procedure and on submission of such documents as may be prescribed.
explanation2[Explanation.— For the removal of doubts, it is hereby clarified that in case any dividend is paid or claimed for any year during the said period of seven consecutive years, the share shall not be transferred to Investor Education and Protection Fund.]
(7)If a company fails to comply with any of the requirements of this section, such company shall be liable to a penalty of one lakh rupees and in case of continuing failure, with a further penalty of five hundred rupees for each day after the first during which such failure continues, subject to a maximum of ten lakh rupees and every officer of the company who is in default shall be liable to a penalty of twenty-five thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees.]
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. The proviso ins. by Act 1 of 2018, s. 32 (w.e.f. 9-2-2018).
- 2. Subs. by s. 32, ibid., for “transferred by the company to the reserves” (w.e.f. 9-2-2018).
- 3. The Proviso ins. by Act 21 of 2015, s. 10 (w.e.f. 29-5-2015).
- 4. Subs. by Act 1 of 2018, s. 32, for sub-section (3) (w.e.f. 9-2-2018).
- 1. Subs. by Act 21 of 2015, s. 11, for “unpaid or unclaimed dividend has been transferred under sub-section (5) shall also be” (w.e.f. 29-5-2015).
- 2. 2. The Explanation ins. by s. 11, ibid. (w.e.f. 29-5-2015).
- 3. Subs. by vide Notification No. S.O. 1303(E), for sub-section (7) (w.e.f. 24-3-2021).
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Referred to by
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.