A final dividend is the return a company distributes to its shareholders out of the profits of a financial year. The Board recommends the dividend, the shareholders declare it at the Annual General Meeting, and the company pays it within a fixed period. Because shareholders’ money is involved, the law prescribes strict timelines for depositing, paying and accounting for every rupee declared, including amounts that remain unclaimed.

This article walks through the complete final dividend cycle, from the Board Meeting that recommends the dividend to the upload of the unpaid dividend statement, with the timeline for each step.

Sources from which Dividend can be Declared

Dividend can never be paid out of capital. A company that has defaulted in repaying deposits or interest under Sections 73 and 74 cannot declare any dividend on its equity shares while the default continues (Section 123(6)).

Step-by-Step Procedure

Step 1: Notice and Agenda to Directors – at least 7 days before the Board Meeting
(Applicable to All Companies)
Section 173(3) of the Companies Act, 2013 read with SS-1

• Notice of the meeting is required to be given in writing to every director at the address registered with the company, by hand, post or electronic means.
• The agenda is required to cover the recommended rate per share, the total amount, the source of profits or free reserves, provision for depreciation, and confirmation that the dividend is not being paid out of capital.
• The notice is required to be accompanied by the agenda, notes on agenda and the draft resolution.

Step 2: Prior Intimation to Stock Exchanges – at least 2 working days before the Board Meeting
(Applicable in case of Listed Company)
Regulation 29 of the SEBI (LODR) Regulations, 2015

Prior intimation, mentioning the date of the meeting, is required where the Board is to consider recommendation of dividend. The 2 working days exclude the date of intimation and the date of the meeting.

Step 3: Closure of Trading Window – as per the code of conduct, with simultaneous intimation
(Applicable in case of Listed Company)
Regulation 9 of the SEBI (Prohibition of Insider Trading) Regulations, 2015

• The recommendation of dividend is Unpublished Price Sensitive Information until it is disclosed, so the trading window is required to be closed for designated persons as per the company’s code of conduct.
• The closure of the trading window is required to be intimated to the stock exchanges at the same time.

Step 4: Holding the Board Meeting – on the date fixed
(Applicable to All Companies)
Sections 123(1) and 173 of the Companies Act, 2013 read with SS-1

• The meeting is required to have the prescribed quorum present throughout.
• The Board passes a resolution recommending the final dividend, recording the rate per share, total amount and source.
• The Board also approves the notice of the AGM, in which the dividend is placed before shareholders for declaration.

Step 5: Disclosure of Outcome to Stock Exchanges – within 30 minutes of conclusion of the meeting
(Applicable in case of Listed Company)
Regulation 30(6) read with Schedule III of the SEBI (LODR) Regulations, 2015

The recommendation of dividend is required to be disclosed within 30 minutes of the conclusion of the meeting, along with the time of commencement and conclusion of the meeting.

Step 6: Website Disclosure – simultaneously with the stock exchange disclosure
(Applicable in case of Listed Company)
Regulation 30(8) of the SEBI (LODR) Regulations, 2015

All disclosures made to the stock exchanges are required to be hosted on the company’s website at the same time, and retained there for at least 5 years.

Step 7: Circulation of Draft Minutes – within 15 days of the Board Meeting
(Applicable to All Companies)
Paragraph 7.4 of SS-1

Draft minutes are required to be circulated to all directors, who may give their comments within 7 days of receipt.

Step 8: Finalisation and Signing of Minutes – within 30 days of the Board Meeting
(Applicable to All Companies)
Section 118 of the Companies Act, 2013 read with SS-1

Minutes are required to be entered in the Minutes Book within 30 days of the meeting and signed by the Chairman. A copy of the signed minutes is required to be circulated to all directors within 15 days of signing.

Step 9: Notice of Annual General Meeting – at least 21 clear days before the AGM
(Applicable to All Companies)
Sections 96, 101 and 102 of the Companies Act, 2013 read with SS-2

• Declaration of dividend is ordinary business under Section 102(2)(a), so no explanatory statement is required for this item.
• As good practice under SS-2, the notice states the rate and source of the recommended dividend.
• A shorter notice is permitted only with the consent of the members prescribed under Section 101.

Step 10: Declaration of Dividend at the AGM – on the date of the AGM
(Applicable to All Companies)
Sections 96 and 123(1) of the Companies Act, 2013 read with SS-2

• The AGM is required to have the quorum prescribed under Section 103.
• Shareholders declare the dividend by ordinary resolution. They may approve the rate recommended by the Board or a lower rate, but cannot declare a dividend higher than the Board’s recommendation.
• The date of the AGM is the date of declaration, from which the deposit, payment and transfer timelines are counted.

Step 11: Submission of Voting Results – within 2 working days of the AGM
(Applicable in case of Listed Company)
Regulation 44(3) of the SEBI (LODR) Regulations, 2015

Details of the voting results, including the resolution declaring the dividend, are required to be submitted to the stock exchanges and hosted on the website.

Step 12: Minutes of the AGM – within 30 days of the AGM
(Applicable to All Companies)
Section 118 of the Companies Act, 2013 read with SS-2

Minutes of the AGM, recording the declaration of dividend, are required to be finalised and signed within 30 days of the conclusion of the meeting.

Step 13: Intimation of Record Date – at least 3 working days before the record date
(Applicable in case of Listed Company)
Regulation 42 of the SEBI (LODR) Regulations, 2015

• Advance notice of the record date, stating its purpose and the rate of dividend, is required to be given to the stock exchanges. The 3 working days exclude the date of intimation and the record date.
• The record date is required to fall at least 3 working days after the date of the AGM. It cannot coincide with or precede the AGM.
• The gap between two record dates is required to be at least 30 days.
• Shareholders whose names appear in the Register of Members or in the depository records at the close of the record date are entitled to the dividend. The RTA and depositories are required to be informed.

Step 14: Deposit of Dividend Amount – within 5 days of declaration
(Applicable to All Companies)
Section 123(4) of the Companies Act, 2013

The total dividend amount is required to be deposited in a separate account opened with a scheduled bank.

Step 15: Payment of Dividend – within 30 days of declaration
(Applicable to All Companies)
Sections 123(5) and 127 of the Companies Act, 2013 read with Regulation 12 of the SEBI (LODR) Regulations, 2015

• Dividend is required to be paid in cash, preferably through the electronic payment modes approved by RBI.
• Where electronic payment is not possible, payable-at-par warrants or cheques are issued. Listed companies send warrants above ₹1,500 by speed post.
• Tax is required to be deducted at source where applicable, and FEMA provisions are required to be followed for non-resident shareholders.

Step 16: Transfer to Unpaid Dividend Account – within 7 days after expiry of the 30-day payment period
(Applicable to All Companies)
Section 124(1) of the Companies Act, 2013

Any dividend remaining unpaid or unclaimed after 30 days is required to be transferred to a special account called the Unpaid Dividend Account, i.e. by the 37th day from declaration.

Step 17: Statement of Unpaid Dividend on Website – within 90 days of transfer to the Unpaid Dividend Account
(Applicable to All Companies)
Section 124(2) of the Companies Act, 2013 read with Rules 5(8) and 7(2B) of the IEPF Rules, 2016

A statement containing the names, last known addresses and unpaid dividend payable to each person is required to be placed on the company’s website. Dividend remaining unclaimed for 7 years is later transferred to the Investor Education and Protection Fund.

Post-Declaration Filings and Disclosures

Penalties for Non-Compliance

Final Dividend at a Glance

BM = Date of Board Meeting; AGM = Date of AGM (date of declaration)