Resolution for Declaration of Final Dividend at the AGM: Format with Specimen

Resolution for Declaration 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.

A final dividend is recommended by the Board and declared by the members at the annual general meeting. This article gives a specimen ordinary resolution, explains what the Companies Act, 2013 requires before and after the declaration, and lists the mistakes that lead to penalties for late payment.

The Board recommends the dividend in its report; the members declare it by ordinary resolution as ordinary business, so no explanatory statement is needed. The resolution states the amount per share, the financial year and the source of payment. Section 127 makes late payment an offence: a declared dividend must be paid, or the warrant posted, within thirty days of declaration, and the company owes simple interest on the delay. The dividend must come from the sources section 123(1) allows.

When you need this resolution

You need it when the company has distributable profits and the Board has recommended a dividend on its equity shares for the year, to be declared at the annual general meeting. Declaration of any dividend is one of the four heads of ordinary business at an annual general meeting under section 102(2)(a)(ii). If the Board has already declared an interim dividend during the year under section 123(3), the members' resolution may instead confirm it; our interim dividend guide covers the Board side. To have the whole AGM notice and resolutions reviewed, see board resolution and legal documents.

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Specimen ordinary resolution

CIN: 

AGENDA ITEM NO.  (ORDINARY BUSINESS)
To declare a final dividend on the equity shares of the Company for the financial year ended .

To consider and, if thought fit, to pass the following as an ordinary resolution:

"RESOLVED THAT a final dividend of  per equity share of the face value of  each, fully paid up, as recommended by the Board of Directors, be and is hereby declared for the financial year ended , out of the profits of the Company for that financial year , to be paid to the members whose names appear in the Register of Members  as on .

RESOLVED FURTHER THAT the dividend be paid within the period allowed by the Companies Act, 2013, in cash, by  to the registered shareholder or to his order or to his banker, .

RESOLVED FURTHER THAT the Board of Directors and the Company Secretary be and are hereby authorised to open a separate bank account for the dividend, to do all acts needed to pay the dividend, and to deal with unpaid or unclaimed amounts as the law requires."

NOTE TO MEMBERS (to appear in the notice)
1. The total outgo on the dividend will be  on  equity shares.
2. The register of members will remain closed from  to  (both days inclusive) .
3. Members who have not updated their bank details should do so with  before .

Date: 
Place: 
By order of the Board
, Company Secretary

Clause-by-clause explanation

The law behind it

Section 123(1). No dividend may be declared or paid for a financial year except out of the profits of that year after providing for depreciation under Schedule II, or out of undistributed profits of earlier years arrived at after depreciation, or out of both; or out of money provided by the Central or State Government for payment of dividend under a guarantee. Unrealised gains, notional gains and revaluation items are excluded from the computation of profits. A company may transfer a percentage of profits to reserves before declaring. Dividend out of accumulated profits when profits are inadequate or absent can be declared only in accordance with the rules. No dividend may be declared or paid from reserves other than those the Act permits, and none until carried-over losses and unprovided depreciation of earlier years are set off against current profits.

Section 123(4) and (5). The dividend amount is deposited in a scheduled bank in a separate account within five days of declaration. Dividend is paid only to the registered shareholder, or to his order or banker, and only in cash; it may be paid by cheque, warrant or electronic mode. Bonus shares by capitalisation are not affected.

Section 123(6). A company that fails to comply with sections 73 and 74 on deposits cannot declare dividend on equity shares while the failure continues.

Section 124. A dividend that remains unpaid or unclaimed for thirty days from declaration is transferred within seven days after the thirty days to the Unpaid Dividend Account.

Section 127. If a declared dividend is not paid, or the warrant not posted, within thirty days from declaration to a shareholder entitled to it, every director who is knowingly a party to the default is punishable with imprisonment up to two years and fine as the section prints, and the company pays simple interest at the rate printed in the section for the period of default, subject to the exceptions in the provisos (for example a dispute over the right to receive the dividend). Read our section 123 guide and the section 127 guide.

The Dividend Rules and the listing requirements add record-date and intimation steps; check the current text before you fix the dates.

Stamp duty, registration and execution

A resolution declaring a dividend is not an instrument for which stamp duty or registration is prescribed. The chairman signs the minutes of the meeting. Keep proof of the separate bank account and of each payment mode used, and look to the income-tax guides on our site for tax deducted at source on dividend.

Common mistakes

1. Declaring more than the Board recommended without a fresh Board recommendation.
2. Paying from a source that section 123(1) does not allow, such as unrealised gains.
3. Declaring a dividend before earlier losses and depreciation are set off.
4. Failing to open the separate account within five days.
5. Missing the thirty-day period for payment, which attracts section 127.
6. Paying in a manner other than cash, cheque, warrant or electronic mode.
7. Declaring while the company is in default on deposits under sections 73 and 74.
8. Leaving record date or closure dates out of the notice.

Need help with dividend resolutions?

If your Board is recommending a dividend and the AGM notice, resolution and payment steps need to line up, our team can prepare the papers and check the conditions in section 123. See board resolution and legal documents. For the accounts item that precedes it, see our resolution for adoption of financial statements at the AGM.

Key takeaways

• Members declare the final dividend as ordinary business.
• The source must be one that section 123(1) allows.
• Deposit in a separate bank account within five days.
• Pay or post the warrant within thirty days to avoid section 127.
• Unpaid amounts move to the Unpaid Dividend Account under section 124.

Read next

• Section 123: dividend
• Section 127: penalty for non-payment of dividend
• Board resolution for declaration of dividend
• Resolution for adoption of financial statements at AGM

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.