SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. -LODR

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. -LODR

Source : http://www.sebi.gov.in/cms/sebi_data/attachdocs/1454044894181.pdf

Disclaimer: Based on queries/ comments received from market participants, these FAQs have been prepared to provide guidance on the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("the Regulations", "Listing Regulations", "LR") and circulars issued there under. For full particulars of laws governing continuous disclosure requirements, please refer to the Acts/Regulations/Guidelines/Circulars etc. appearing under the Legal Framework Section of SEBI website i.e., www.sebi.gov.in and the websites of respective recognized stock exchanges.

A.Definitions

Q1. Regulation 2(1)(b) of LR defines an ‘associate company’ to mean any entity which is an associate under the Companies Act, 2013 or under the applicable accounting standards. Whether both conditions have to be met or either of the two?

Answer: The definition of associate company should be viewed under the Companies Act, 2013 as well as Accounting Standards. If the condition is met under either of the two, then such entity should be classified as an associate company.

 

Q2. Regulation 2(1)(zb) of LR defines the term ‘Related party’ to mean related party under the Companies Act, 2013 or under the applicable Accounting Standards. Whether both conditions have to be met or either of the two?

Answer: The definition of related party should be viewed under the Companies Act,

2013 as well as Accounting Standards. If the condition is met under either of the two, then such party should be classified as a related party.

B. Common Obligations of Listed Entities

Q3. Regulation 9 requires a listed entity to frame a policy for preservation of documents approved by its board of directors, classifying them into the documents that can be preserved permanently or can be preserved for a period of not less than eight years after completion of the relevant transactions. What types of documents are covered under this regulation?

Answer: The documents preserved in terms of Regulation 9 includes document

required to be preserved by a listed entity in terms of securities laws defined under

Regulation 2(1) (zf) and other laws and statutes applicable to such listed entity.

 

C. Corporate Governance

Q4. Regulation 17(8) of LR requires a compliance certificate to the Board of directors by Chief Executive Officer (CEO) and Chief Financial Officer (CFO). Whether the Managing Director or Whole Time Director may certify the compliance certificate, when the company has not designated a CEO?

Answer: Such certificates may be signed by the officials who hold powers, duties and

responsibilities of a CEO/ CFO irrespective of their designations.

Q5. Regulation 23 (4) provides that all material related party transactions shall require approval of the shareholders through resolution and the related parties shall abstain from voting on such resolutions whether the entity is a related party to the particular transaction or not. In this regard, whether only those related parties who are related to the concerned transaction/ contract should abstain from voting or whether related parties should altogether abstain from voting?

Answer: The requirement under Regulation 23(4), is applicable for listed entities subject to the provisions of Regulation 15. Hence, for applicable entities, the regulation clearly provide that all material related party transactions shall require approval of the shareholders through resolution and the related parties shall abstain from voting on such resolutions whether the entity is a related party for the particular transaction or not.

Q6. Regulation 23(8) requires all existing material related party contracts or arrangements entered into prior to the date of notification of these regulations and which may continue beyond such date shall be placed for approval of the shareholders in the firstGeneral Meeting subsequent to notification of these regulations. Whether the listed entity requires to take a fresh shareholders approval in case it has already taken an approval prior to implementation of these regulations?

Answer: The listed entity need not take fresh approval of shareholders in case the entity has already fulfilled the requirement of the regulations.

Q7. Regulation 24(1) prescribes having at least one independent director of the listed entity as a director on the board of directors of 'unlisted material subsidiary

incorporated in India'. Sub-regulations (2), (3) and (4) to the same regulation refer to 'unlisted subsidiary'. Whether such sub-regulations (2), (3) and (4) are applicable to all unlisted subsidiaries or only material unlisted subsidiaries incorporated in India?

Answer: Listed entities may be guided by the provisions of Regulation 24. Wherever

'unlisted material subsidiary 'and 'unlisted subsidiary' have been distinctly mentioned in a particular sub-regulation, such sub-regulation shall be applicable to material unlisted subsidiaries or all unlisted subsidiaries as the case may be.

Q8. Regulation 24 (4) requires that the management of the unlisted subsidiary shall

periodically bring to the notice of the board of directors of the listed entity, a

statement of all significant transactions and arrangements entered into by the

unlisted subsidiary. Whether the requirement is applicable only to the material

unlisted subsidiary?

Answer: The requirement is applicable to all unlisted subsidiaries.

Q9. Regulation 26(1) stipulates that a director shall not be a member in more than ten committees or act as chairperson of more than five committees across all listed

entities. Clause (a) to the aforesaid sub-regulation requires membership on

committees that a director serves in all public limited companies, whether listed or

not, to be included for determining the count of committee membership/

chairmanship for sub-regulation (1) and excludes membership on committees of

private limited companies, foreign companies and companies under Section 8 of the Companies Act, 2013. Whether a director can be committee member for ten listed entities only or the same includes unlisted public companies as well?

Answer: A director of a listed entity can be member in maximum ten committees and chairperson of more than five committees of listed entities and unlisted public limited companies put together.

D. Disclosure of Events or Information

Q10. Regulation 30(8) of LR requires posting of disclosures on the listed entity’s website for a minimum period of five years. Whether the said provision is prospective from December 1, 2015 and pertains to disclosures relating to events happening thereafter?

Answer: The disclosures made under Regulation 30(8) shall be made w.e.f. December 01, 2015, i.e., the listed entity shall disclose on its website all such events or information which has been disclosed to stock exchange(s) under this regulation on or after the said date, and such disclosures shall be hosted on the website of the listed entity for a minimum period of five years from the date of disclosure to the stock exchange.

Q11. Regulation 30(9) of LR requires disclosure of all events and information with respect to subsidiaries which are material. If both parent and subsidiary are listed entities, would it be sufficient compliance if the listed subsidiary has made a disclosure or whether same disclosure be made by the parent listed entity also.

Answer: Both the parent and material subsidiary in their own right as Listed Entities

have to make disclosure separately as applicable under Listing Regulations.

Q12. Regulation 16 (1)(c) defines material subsidiary as - “material subsidiary” shall mean a subsidiary, whose income or net worth exceeds twenty percent of the consolidated income or net worth respectively, of the listed entity and its subsidiaries in the immediately preceding accounting year.” The Explanation to Regulation 16 (1)(c) states that the listed entity shall formulate a policy for determining material subsidiary. Can the listed entity adopt a different criteria for determining material subsidiary for the purpose of Regulation 30 (9)?

Answer: The definition of 'material subsidiary' under regulation 16(1)(c) defines a

subsidiary that is material to the listed entity. Further, the explanation to the aforesaid provision allows the listed entity to formulate a policy for the same, i.e., a listed entity can develop criteria that is stricter than what has been provided in the Regulations.

Regulation 30(9) requires the listed entity to disclose all events or information with

respect to subsidiaries which are material for the listed entity. The said sub-regulation places stress on materiality of the events or information. Therefore, disclosure would be required in cases where the event or information originating from a subsidiary is material to the listed entity, irrespective of whether such a subsidiary is material or not as per the definition provided at regulation 16(1)(c)

Q13. Schedule III Part A, Para A, item 1(ii)(a) requires disclosures on acquisition or

agreements to acquire shares or voting rights in a company, whether directly or

indirectly, such that the listed entity holds shares or voting rights aggregating to five per cent or more of the shares or voting rights in the said company. Whether the disclosure is with respect to acquisition of shares or voting rights when the target company is a listed entity only or whether it is applicable to unlisted entities also?

Answer: The Schedule refers to the listed entity’s acquisition of shares or voting rights in the company. Such target company can be listed or unlisted

Q14. Schedule III Para A of Part A, item 4 (d) on deemed material events mentions that a listed entity shall disclose within 30 minutes of the closure of the meeting the decision with respect to fund raising proposed to be undertaken. What all methods of fund raising are covered under the same?

Answer: The listed entity may be guided by Regulation 29(1) (d) which stipulates the

types of fund raising an entity is required to intimate to Stock Exchange.

E. Other Clarifications

Q15. Under Regulation 33(3), for submission of financial results for the last quarter,

whether Unaudited Results can be submitted to the Exchanges?

Answer: Regulation (33)(3)(d) clearly states that the listed entity shall file audited

annual results in 60 days from the end of the last quarter. Therefore, the financial

statements for the last quarter shall necessarily be audited. The said provision was also there in the erstwhile Listing Agreement.

Q16. Regulation 33 (3)(d) requires a company to submit audited standalone financial results for the financial year, within sixty days from the end of the financial year along with the audit report and either Form A (for audit report with unmodified opinion) or Form B (for audit report with modified opinion). However for listed entities having subsidiaries whether two sets of Form A or Form B have to be prepared for standalone and consolidated results?

Answer: A company having subsidiaries will prepare two sets of Form A and/or Form B, one for standalone results and another for consolidated results based on the respective audit report.

Q17. Regulation 34 (2) (f) requires Annual Report to contain Business Responsibility Report (BRR). Since when this requirement will be applicable?

Answer: Presently Regulation 34 requires top hundred listed entities based on market capitalization(calculated as on March 31 of every financial year) to compulsorily and other than top hundred listed entities to voluntarily include BRR in their Annual Report.

Subsequent to amendment in SEBI (Listing Obligations and Disclosure Requirements) Regulation 2015 notified on December 22, 2015, the requirement of mandatory reporting of BRR in Annual Report has been raised from hundred to five hundred listed entities which will be effective from April 1, 2016 and hence it will form a part of the Annual Report for the financial year 2016-17.

Q18. Regulation 35 requires the listed entity to submit to the stock exchange(s) an Annual Information Memorandum in the manner specified by the Board from time to time. Since the Regulations do not currently specify the applicable date and the manner, is the said provision currently applicable?

Answer: As mentioned, in the regulation, the said requirement will become applicable as and when Annual Information Memorandum is specified by SEBI.

Q19. Regulation 40(3) requires that the listed entity shall register transfers of its securities in the name of the transferee(s) and issue certificates or receipts or advices, as applicable, of transfers; or issue any valid objection or intimation to the transferee or transferor, as the case may be, within a period of fifteen days from the date of such receipt of request for transfer. It provides that the listed entity shall ensure that transmission requests are processed for securities held in dematerialized mode and physical mode within seven days and twenty one days respectively, after receipt of the specified documents and that proper verifiable dated records of all correspondence with the investor shall be maintained by the listed entity. In this regard, how would a company ensure compliance in an era where companies have no role to play in processing of transmission of securities held in dematerialized mode?

Answer: The provision in Regulation 40(3) may be read in context with Regulation 7(1) which states that the listed entity shall appoint a share transfer agent or manage the share transfer facility in-house. In cases where the listed entity is managing the share transfer in-house, such compliance may be ensured. In this regard, the share transfer agent is an agent of the listed entity and it is imperative that the listed entity as a principal shall supervise the activities of its agent. Further, Regulation 8 provides that the listed entity, wherever applicable, shall co-operate with and submit correct and adequate information to the intermediaries registered with the Board including registrar to an issue and share transfer agents.

Q20. Regulation 40 (8) requires the listed entity that has not effected transfer of securities within fifteen days or where the listed entity has failed to communicate to the transferee(s) any valid objection to the transfer, within the stipulated time period of fifteen days to compensate the aggrieved party for the opportunity losses caused during the period of the delay. Sub regulation (9) of the aforesaid regulation states that the listed entity shall ensure that the share transfer agent and/or the in-house share transfer facility, as the case may be, produces a certificate from a practicing company secretary within one month of the end of each half of the financial year, certifying that all certificates have been issued within thirty days of the date of lodgement for transfer, sub-division, consolidation, renewal, exchange or endorsement of calls/allotment monies. The matter needs to be clarified.

Answer: It is clarified that the listed entity may seek such reports from share transfer

agents as they may require, so as to ensure compliance with the time period of 15 days for transfer of securities as stipulated in sub-regulation (8).

Q21. As per Regulation 46(2)(n), the listed entity is required to disseminate on its website details of agreements entered into with the media companies and/or their associates, etc. In this regard, should the listed entity disclose all agreements entered into with media companies/ their associates including ordinary agreements or disclose only such agreements that are not in the normal course of business as required under item 5 of paragraph A of part A of Schedule III of LR?

Answer: It is clarified that only such agreements that are not in the normal course of business shall be disclosed. Listed entities may refer to SEBI Press Release No. 200/2010 dated August 27, 2010 and Press Council of India Press Release No. PR/3/10-11-PCI dated August 02, 2010 wherein concerns related to 'private treaties' and their disclosures have been discussed in detail.

Q22. Regulation 46 (3) requires listed entity to update any change in the content of its website within two working days from the date of such change in content. Whether change in the content of website means any change on the website?

Answer: Regulation 46(2) prescribes the list of information to be disseminated by a

listed entity on its website. Regulation 46 (3) refers to the update of any change in the content which is provided as per the requirements of Regulation 46 (2).

F. Miscellaneous

Q23. The regulations do not define 'working days'. Whether the same can be clarified?

Answer: 'Working days' means working days of the stock exchange where the securities of the entity are listed.

 

 

 

 

ALL ABOUT DIVIDEND

ALL ABOUT DIVIDEND

Written by Mr. UDIT GOYAL

The world dividend is derived from Latin world dividendum.

Meaning of dividend: - Dividend means-

• In accounting terms – the profit distributed to shareholders.
• In financial terms – the return on investment of short term investor.

Dividend is generally paid on two types of instruments viz.

1.     Preference shares – at fixed percentage

2.     Equity shares – at rate decided by board

As per section – 2(35) of Companies Act, 2013 dividend is defined as “dividend includes any interim dividend”.

After enactment of Companies Act, 2013, the concept of payment of dividend is very liberalized. This is because when we compare the provisions of Companies Act, 1956 with the provisions of Companies Act, 2013 various relaxations regarding payment of dividend are provided in Companies Ac, 2013 Act.

In this article, we will discuss various provisions provided in section – 123 related to dividend under Companies Act, 2013.

Let’s starts with section – 123(1) of Companies Act, 2013 which provides that no dividend shall be declared or paid by a company for any financial year except—

(a) out of the profits of the company for that year arrived at after providing for depreciation in accordance with the provisions of sub-section (2), or out of the profits of the company for any previous financial year or years arrived at after providing for depreciation in accordance with the provisions of that sub-section and remaining undistributed, or out of both; or                

(b) out of money provided by the Central Government or a State Government for the payment of dividend by the company in pursuance of a guarantee given by that Government:            

Provided that a company may, before the declaration of any dividend in any financial year, transfer such percentage of its profits for that financial year as it may consider appropriate to the reserves of the company:

Provided further that where, owing to inadequacy or absence of profits in any financial year, any company proposes to declare dividend out of the accumulated profits earned by it in previous years and transferred by the company to the reserves, such declaration of dividend shall not be made except in accordance with such rules as may be prescribed in this behalf:

Provided also that no dividend shall be declared or paid by a company from its reserves other than free reserves.

Provided also that no company shall declare dividend unless carried over previous losses and depreciation not provided in previous year or years are set off against profit of the company for the current year

Analysis

In simple, dividend can be paid out of the profits of current year or previous years or both. Let say if company incurred losses in current year even then it can distribute dividend if it has profit remaining undistributed in previous years. Further if the company has negative balance in profit and loss account in the beginning of current year and company earns profit in current year but that profit is insufficient to cover the losses of previous year (i.e. profit and loss account shows negative balance after accounting the profit of current year) even then dividend can be distributed out of the profit earned during current year. In nutshell, if company earned profit in any year preceding the current year or in current year, than that profit can be distributed as dividend irrespective of losses incurred by company in any of the year. However that profit must be kept intact in profit and loss account. In other words, if profit is transferred to reserve than second proviso to section – 123(1) will apply. Further, for working out the profit for dividend purpose, depreciation must be provided in accordance with the provisions of schedule II. The provision of depreciation for working out the profits is must in Companies Act, 2013. However in Companies Act, 1956 central government was conferred with the power to allow payment of dividend without providing depreciation. Further, additional depreciation which has to be provided only because of revaluation of assets is permitted to be transferred to Statement of profit and loss account. So due regard is given to depreciation in Companies Act, 2013…. this may be to protect the interest of lenders.

In Companies Act, 1956, it was mandatory to transfer the profit to general reserve before declaring dividend but first proviso to section – 123(1) of Companies Act, 2013 provides that it is the discretion of the company to transfer the profits to reserve at such rate as it deems fit before declaring dividend.

However, although it is not mandatory to transfer the profit to reserve, it may be noted that section – 134 of Companies Act, 2013 requires the board of director to make the statement that will provide the particulars of amount, if any, the company proposes to carry to its reserve. Further section – 135(3)(c) and section – 135(5) requires the board of directors to file directors’ responsibility statement. Therefore while board of directors now have discretion of transferring the profit to reserves, they will have to exercise this discretion responsibly and in the best interest of company.

So, except for providing depreciation before declaring dividend, the concept of dividend is fully liberalized, which proved as legislative and judicial benediction to corporate sector.

Second proviso to section – 123(1) provides that if company intends to declare dividend out of reserves because of inadequacy or absence of profit in any financial year, than it can do so subject to rules made by central government in this behalf.

It is however be noted that this proviso is an exception to general rule that dividend can only be declared out of profits (i.e. profit and loss account) which means company can declare dividend from source other than profits (i.e. reserve). Further, if there is an inadequacy or absence of profits and company intends to declare dividend out of reserves only then rules made by central government will apply. It seems that if there is no inadequacy or absence of profit even then dividend can be declared out of the reserves because second proviso is an exception and in that case rules will not apply. This opinion is further warranted by the phrase used in the Act i.e. ‘any company proposes to declare dividend out of the accumulated profits earned by it in previous years and transferred by the company to the reserves’. Following the principle of ‘Substance Over Form’ the balance of the reserve is actually the accumulated profits of the company and dividend can be declared out of profits. Therefore the matter is debatable.

The analysis of rules made by central government in pursuance of power conferred to it in second proviso to section – 123(1) is given below:-

• Rule No. 3(1) provides that the rate of dividend declared shall not exceed the average of the rates at which dividend was declared by it in the three years immediately preceding that year:

Provided that this sub-rule shall not apply to a company, which has not declared any dividend in each of the three preceding financial year.

Illustration for proviso to sub rule – 1:-

Particulars	Case – I	Case – II	Case – III
Preceding financial year 1	Dividend declared @20%	Nil	Dividend Declared @10%
Preceding financial year 2	Nil	Nil	Dividend Declared @5%
Preceding financial year 3	Nil	Nil	Not Applicable (i.e. only 2 financial year to incorporate)
Proviso to sub rule – 1	Not applicable (Avg. Rate 6.66%)	Applicable (Any Rate)	Not Applicable (Avg. Rate 7.5%)

• Rule No. 3(2) provides that the total amount to be drawn from such accumulated profits shall not exceed one-tenth of the sum of its paid-up share capital and free reserves as appearing in the latest audited financial statement.
• Rule No. 3(3) provides that the amount so drawn shall first be utilised to set off the losses incurred in the financial year in which dividend is declared before any dividend in respect of equity shares is declared.
• Rule No. 3(4) provides that the balance of reserves after such withdrawal shall not fall below fifteen per cent of its paid up share capital as appearing in the latest audited financial statement.

           (Note:- Rule – 5 was omitted by Companies (Declaration and Payment of Dividend) Second Amendment Rules, 2015)

Third proviso to section – 123(1) provides dividend can only be declared out of free reserve. Example:- Dividend cannot be declared out of revaluation reserve.

Fourth proviso to section – 123(1) was inserted by Companies (Amendment) Act, 2015 which provides that dividend can only be declared when carried forward previous losses and depreciation not provided in previous year/s are set off against the profit of the company in current year.

Section – 123(2) provides that for the purposes of clause (a) of sub-section (1), depreciation shall be provided in accordance with the provisions of Schedule II.

Section – 123(3) provides that the Board of Directors of a company may declare interim dividend during any financial year out of the surplus in the profit and loss account and out of profits of the financial year in which such interim dividend is sought to be declared:

Provided that in case the company has incurred loss during the current financial year up to the end of the quarter immediately preceding the date of declaration of interim dividend, such interim dividend shall not be declared at a rate higher than the average dividends declared by the company during the immediately preceding three financial years.

Analysis

Section – 2(35) provides that “dividend” includes any interim dividend. This definition was first provided by Companies (Amendment) Act, 2000. Before Companies (Amendment) Act, 2000, payment of dividend on interim basis was provided in article – 86 of Table A of Companies Act, 1956 and it has been a practice with the companies to pay interim dividend. And may be due to this reason, dividend was defined to include interim dividend under Companies (Amendment) Act, 2000. Before Companies (Amendment) Act, 2000, dividend can be paid on interim basis if so authorized by articles. However, in terms of section – 205(1A) of Companies Act, 1956 and section – 123(3) of Companies Act, 2013, the power to declare dividend on interim basis is statutorily conferred on the companies and now there is no need of power in Articles of Association to declare interim dividend.

Likewise final dividend, interim dividend should also be paid out only from profits. The payment of interim dividend is the discretion of board. The board should have to give due regard to adequacy of profits remaining after provision of depreciation while exercising its discretion for payment of interim dividend.

Further proviso to section – 123(3) provides that interim dividend cannot be paid at the rate higher than the average rate of dividend declared in 3 preceding financial year if company incurred losses during current financial year up to the end of last quarter preceding the date of interim dividend.

Illustration for further explaining the proviso to section – 123(3):-

Particular	Case I	Case II	Case III
Quarter 1	Loss	Profit	Loss
Quarter 2	Loss	Loss	Profit
Quarter 3	Profit	Loss	Profit
Total	Loss in aggregate	Profit in aggregate	Loss in aggregate
Let say today is       5th January, whether proviso to section – 123(3) is applicable?	Applicable	Not Applicable	Applicable

So what has to be seen is the aggregate of profit / loss up to the end of last quarter.

Also there is minute difference between interim dividend and final dividend i.e. a final dividend once declared by members in general meeting becomes a liability of the company and creates a enforceable obligation but declaration of interim dividend by board does not create any liability and that declaration may be cancelled any time before actual payment of interim dividend. The cancellation can be done even if amount of interim dividend has been transferred into separate bank account. Further declaration of interim dividend is not subject to be approved by members in general meeting rather it is a power of board to declare interim dividend. Clause 81 of Table F of Companies Act, 2013 provides that subject to the provisions of section 123, the Board may from time to time pay to the members such interim dividends as appear to it to be justified by the profits of the company. However DCA issued its view on interim dividend which states that approval of dividend is the privilege of general meeting and board can pay interim dividend if so authorized by the articles of association subject to regularization of interim dividend by company in general meeting (Letter No. 8/13/205 A/79-CL-V, dated 18-07-1981). However these are not binding per se. Further it was issued before Companies (Amendment) Act, 2000. Re, CIT Vs. Express Newspaper Ltd., the question before Supreme Court was of rebate on dividend under Income Tax Act, 1961. The Supreme Court is of the view that shareholders do not get any vested right under directors’ resolution for payment of interim dividend and therefore such resolution is revocable. However, vested right to dividend arises on declaration of dividend at general meeting.

Section – 123(4) provides that the amount of the dividend, including interim dividend, shall be deposited in a scheduled bank in a separate account within five days from the date of declaration of such dividend.

Analysis

In case of final dividend, the amount of dividend declared should be deposited in scheduled bank in separate account within 5 days from the date of declaration of dividend by members in general meeting and in case of interim dividend, the amount of interim dividend declared should be deposited in scheduled bank in separate account within 5 days of declaration of dividend by board in board meeting.

Section – 123(5) provides that no dividend shall be paid by a company in respect of any share therein except to the registered shareholder of such share or to his order or to his banker and shall not be payable except in cash:

Provided that nothing in this sub-section shall be deemed to prohibit the capitalization of profits or reserves of a company for the purpose of issuing fully paid-up bonus shares or paying up any amount for the time being unpaid on any shares held by the members of the company:

Provided further that any dividend payable in cash may be paid by cheque or warrant or in any electronic mode to the shareholder entitled to the payment of the dividend.

Analysis

This section provides that company should pay dividend only to

• shareholder of such share registered with company or
• the person to who the registered shareholder requires or
• the banker

This section further provides that dividend can only be paid in cash i.e. it cannot be paid in kind.

First proviso to section – 123(5) provides that company may issue fully paid-up bonus shares out of the profits or reserves of the company without any restriction. It further provides that profits and reserves can be capitalized for paying up any amount which is, for the time being, unpaid on any shares held by the members of the company.

Second proviso to section – 123(5) provides that dividend can be paid only through

• cheque or
• warrant or
• in electronic mode

Electronic mode for payment of dividend was not provided in Companies Act, 1956 in fact that was DCA circular under which the payment of dividend in electronic mode was provided.

Section 123(6) provides that a company which fails to comply with the provisions of sections 73 and 74 shall not, so long as such failure continues, declare any dividend on its equity shares.

Section – 73 contains the provisions regarding deposits accepted by private company from its members and section – 74 contains the provisions regarding deposits accepted by company before 1^st April, 2014.