What are the different types of dividend in a private limited company?
The Pvt Ltd Company is run privately. The shares are limited. Minimum two members are needed as shareholders and members. This feature increases small entrepreneurs. So people always choose private limited companies. Since there is stability the personal asset will not be seized. Also the private company has a long term in the nosiness market, so the loan can be obtained from the bank. The OPC can also be converted mandatorily or voluntarily into a private company. When a One Person Company has annual turnover above 2 Crore and investment exceeds Rs. 50 lakhs then definitely it should be converted into Private limited company. It is called compulsory or mandatory conversion. After 2 years of expiry the OPC can be converted into a private limited company. It is called voluntary conversion.
The foreigners and NRI (Non Resident Indian) can start a private limited company in India. It is a separate legal entity. Minimum one lakh share capital is needed. Also, The name selection must be unique and the nature of the business is shown. For example,Infosys Technology Services. Here Infosys is a unique name which differs from others. Technology refers to the nature of the business. So they are combined to form the name of the business. It has its own duties and rights. The director is an individual who tries and makes company success using skills, experience and judgements. Pvt Ltd Company registration which is limited by shares, the director is also an employee who works on a daily basis, and gets the salary.
Procedure for Final dividend in a Pvt Ltd Company
A part of a company’s profit can be used as reward. The shareholders can enjoy the dividend. Dividend is also called a return or profit. The dividend can be defined as the final dividend and interim dividend. The final dividend is declared at the end of the financial year. The interim dividend is declared during the year.
The Board of directors declare final dividend, in case of loss it will not be declared. It is declared at the Annual General Meeting. The following steps are taken by the company registration to declare a final dividend.
- Issue notice for holding a meeting of the Board of Directors. Board meetings should be held for taking resolutions to approve annual accounts and the quantum of the final dividend is declared.
- Open a separate bank account.
- Fixing the time, venue and date for holding etc ensuing AGM of the company.
- The shareholders cannot declare the final dividend at a higher rate than recommended by the board.
- Prepare statement of dividend to the shareholder. And also the dividend tax must be paid to tax authorities. There is no need for RBI approval for the payment of the final dividend.
- From 30 days of declaration the payment must be done.
Procedures for interim dividend
- To declare the interim dividend, issue a notice for a board meeting.
- Open a separate bank account.
- Fixing the time, venue and date for holding ensuing AGM of the company must be done.
- The dividend warrant must be prepared.
- And the Board meeting resolution should be passed.
- Ensure the dividend distribution is shared.
- Approval of dividend is made in the next Annual general Meeting.
- The current year’s profit, surplus amount in the profit is given as interim dividend. Before the final dividend interim dividend must be made. It cannot be revoked. This belongs to the full year of the business.
So if you are starting a business you may get the salary as Director. And if you are the shareholder you can get the money as dividend. Also you can lend the money as a loan to the company. the company has to repay the loan as loan repayment. You can invest the money at the time of Pvt ltd company registration but you can only cash the money out eventually when you sell your company shares partially or totally once you sell your business to somebody else. It is declared only when the article of association specifically permits the declaration. It can be revoked with consent of all shareholders. The interim dividend defines part of the year.
Limited by shares means the liability of the shareholders to creditors of the company is limited to the capital originally invested. It is the nominal value of the shares. The first accounts of the private company must be delivered within nine months. For every financial year, the tax return must be filed. The Pvt Ltd Company can also be converted into a public limited company. So when the private company is registered it can have credibility among the public and the fundraising is easy.
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