Board Resolution explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
An interim dividend is a dividend the Board declares during the year, or after the year-end and before the annual general meeting, without waiting for the members' approval that a final dividend needs. Because the Board acts alone, the resolution must show that the money comes from a permitted source, that the amount is deposited within the statutory period, and that payment follows the Act. This guide gives a specimen resolution, explains each paragraph and sets out section 123(3), (4) and (5) of the Companies Act, 2013. If you want the resolution, the record-date notice and the bank arrangement prepared together, our board resolution drafting service covers it.
Under section 123(3), the Board may declare an interim dividend during any financial year, or at any time from the close of the financial year until the annual general meeting, out of the surplus in the profit and loss account, out of the profits of the year for which the dividend is declared, or out of the profits generated in the year up to the quarter before the declaration. If the company has made a loss up to the end of that quarter, the rate cannot exceed the average of the dividends declared in the three preceding financial years. The amount must be deposited in a separate account in a scheduled bank within five days of the declaration (section 123(4)).
When you need this resolution
Use it when the Board wants to pay a dividend before the final dividend is recommended and approved: for example, after strong first-half results, or to return surplus cash to shareholders between annual meetings. The resolution is a Board resolution passed at a Board meeting; it does not need a shareholders' vote. A final dividend, by contrast, is recommended by the Board and approved by members; see declaration and payment of dividend.
The decision should rest on proper accounts. Before the meeting, the finance team should prepare a statement of the profit and loss account surplus or of the profits to the preceding quarter, showing that the dividend can be paid from a permitted source and that previous losses and depreciation have been set off as the Act requires.
Specimen board resolution
The specimen is a model. Keep one source-of-funds option, delete the others, and replace each bracket.
CERTIFIED COPY OF RESOLUTION PASSED AT THE MEETING OF THE BOARD OF DIRECTORS OF (CIN ) HELD ON AT AT ITEM : DECLARATION OF INTERIM DIVIDEND FOR THE FINANCIAL YEAR The Chairperson placed before the meeting: (a) a statement by the Chief Financial Officer of / the profits for the financial year ending / the profits generated up to the quarter ended ]; (b) the unaudited / audited accounts to that date; (c) a certificate that carried-over losses and depreciation not provided for in earlier years have been set off against profit as the Act requires; and (d) the cash position of the Company after the proposed payment. After discussion, the following resolution was passed : "RESOLVED THAT pursuant to section 123(3) and other applicable provisions of the Companies Act, 2013 and the rules made under it, and subject to the Articles of Association of the Company, an interim dividend of Rs. per equity share of face value Rs. fully paid up ( per cent of face value), amounting in aggregate to Rs. , be and is hereby declared for the financial year , to be paid / out of the profits of the financial year / out of the profits generated in the financial year up to the quarter ended ], to the members whose names appear in the Register of Members, or in the list of beneficial owners furnished by the depositories, as on (the record date). RESOLVED FURTHER THAT the Board notes that / the Company has incurred a loss up to that quarter and the rate declared does not exceed the average of the dividends declared by the Company in the three immediately preceding financial years, namely ]. RESOLVED FURTHER THAT a separate account named be opened with , , and that Rs. being the total amount of the interim dividend be deposited in that account within five days from the date of declaration. RESOLVED FURTHER THAT , Director, and , Company Secretary, be and are hereby authorised, jointly / severally, to open the account, to sign the account opening form, to give the bank the papers and information it asks for, and to arrange the payment of the interim dividend. RESOLVED FURTHER THAT the interim dividend be paid , and that dividend warrants, if issued, be signed by and , and the bank be authorised to honour them on presentation. RESOLVED FURTHER THAT the Company Secretary be authorised to give notice of the record date to the members and, where the Company's securities are listed, to intimate the stock exchanges as the regulations require, and to take all steps needed to give effect to this resolution. RESOLVED FURTHER THAT the amount of any interim dividend that remains unpaid or unclaimed shall be dealt with as section 124 of the Companies Act, 2013 requires, and the Company Secretary be authorised to carry out the transfer." Certified true copy For Name: Designation: DIN / Membership no.: Date: Place:
Clause-by-clause explanation
| Part of the resolution | What it does | Drafting tip |
|---|---|---|
| Papers tabled | Shows the Board had accounts and a funding statement | Attach the statement to the minutes |
| Declaration paragraph | States rate, amount, source and record date | Pick one source option; state the share class |
| Loss proviso paragraph | Records compliance with the cap on rate when a loss has been incurred | State the three-year average, with figures |
| Bank account paragraph | Opens a separate account and fixes the deposit period | Count five days from the date of declaration |
| Authorised signatories | Names who opens the account and signs warrants | Name individuals and say jointly or severally |
| Mode of payment | Chooses electronic mode or warrants | Section 123(5) allows cheque, warrant or electronic mode |
| Record date and listing | Authorises notice to members and exchanges | Check the listing rules for the notice period |
| Unpaid dividend | Records the section 124 transfer duty | Diarise the thirty-day and seven-day dates |
| Certification | Allows certified copies | Date and sign |
The law behind the resolution
Section 123(3). The Board of Directors may declare interim dividend during any financial year or at any time from the close of the financial year until the annual general meeting out of the surplus in the profit and loss account or out of profits of the financial year for which the dividend is sought to be declared or out of profits generated in the financial year till the quarter preceding the date of declaration. If the company has incurred a loss in the current financial year up to the end of the quarter immediately preceding the date of declaration, the interim dividend cannot be declared at a rate higher than the average dividends declared by the company during the immediately preceding three financial years.
Section 123(1) and (2). No dividend may be declared or paid for a financial year except out of the profits for that year after providing for depreciation under Schedule II, or out of undistributed profits of earlier years after providing for depreciation, or out of both; or out of money provided by the Central or State Government for the purpose. Unrealised gains, notional gains and revaluation of assets are excluded in computing profits. No dividend may be declared from reserves other than the category of reserves the Act defines for distribution (see the definitions in section 2), and none may be declared unless carried-over previous losses and depreciation not provided in previous years are set off against the current year's profit. These conditions are in the provisos to section 123(1). See section 123.
Section 123(4). The amount of the dividend, including interim dividend, must be deposited in a scheduled bank in a separate account within five days from the date of declaration.
Section 123(5). No dividend is paid except to the registered shareholder or to his order or to his banker, and only in cash; dividend payable in cash may be paid by cheque, warrant or any electronic mode.
Section 123(6). A company that fails to comply with sections 73 and 74 (deposits) cannot declare any dividend on its equity shares for so long as the failure continues.
Section 124. Where a declared dividend is not paid or claimed within thirty days from the date of declaration, the company must, within seven days from the expiry of the thirty days, transfer the unpaid amount to a special account called the Unpaid Dividend Account, and must publish a statement of unpaid dividends within ninety days of that transfer. See rules on declaring dividend out of reserves, the interim dividend conditions and how to declare an interim dividend.
Tax on dividends, including any tax to be deducted at source, is outside this article; see our income-tax guides.
Stamp duty, registration and execution
A board resolution is not registered and does not carry stamp duty as an agreement does. Where a dividend payment arrangement is documented in a contract with a bank or registrar, check whether any such contract is chargeable under the Stamp Act and Schedule of the State where it is signed; see stamp duty on legal documents, State-wise.
Steps: prepare the accounts and funding statement; convene the Board meeting; pass the resolution; sign the minutes; open the account and deposit the amount within five days; announce the record date; pay by electronic mode or warrant; file any returns or intimations the company's status requires; and transfer unpaid dividend as section 124 requires.
Common mistakes
- Declaring an interim dividend from a source other than the three in section 123(3).
- Ignoring the cap on the rate when the company has made a loss up to the previous quarter.
- Failing to set off previous losses and depreciation before declaring.
- Missing the five-day period to deposit the dividend in a separate account.
- Not recording the record date or the mode of payment.
- Declaring while the company is in default on deposits under sections 73 and 74.
- Forgetting the Unpaid Dividend Account transfer for amounts left unpaid.
- Calling the dividend interim when it is a recommendation to be approved at the annual general meeting.
Need help with an interim dividend resolution?
We prepare the resolution, check the funding statement against section 123, draft the record-date notice and track the five-day and thirty-day dates. Start with our board resolution drafting service.
Key takeaways
- Only the Board's decision is needed for an interim dividend; no members' resolution.
- The source must be one of the three in section 123(3).
- If there is a loss up to the previous quarter, the rate cannot exceed the three-year average.
- Deposit the amount in a scheduled bank in a separate account within five days.
- Unpaid dividend moves to the Unpaid Dividend Account under section 124.
Read next
- Interim dividend: Board powers, conditions and restrictions
- How to declare an interim dividend
- Declaration and payment of dividend: a complete legal guide
- Section 123 of the Companies Act, 2013: dividend
Disclaimer: This specimen is a general model for information. Every document must be adapted to its facts and to the law, rules and forms in force when it is signed or filed; stamp duty, registration and court fees depend on the State and the forum. This article is general information, not legal advice; check the official text before acting.