Section 124 of CA 2013 : Section 124: Unpaid Dividend Account

Explanation using Example

Imagine a company called "Bright Future Tech Ltd." declares a dividend on January 1, 2023. However, some shareholders do not claim or receive their dividend. According to Section 124(1) of the Companies Act, 2013, by February 1, 2023, the company must transfer the unclaimed dividend to a special Unpaid Dividend Account.

By May 2, 2023, Bright Future Tech Ltd. must comply with Section 124(2) by preparing a statement of unclaimed dividends with details of the respective shareholders and post it on their website and any other approved website.

If the company neglects to transfer the unclaimed dividends to the special account, as per Section 124(3), it will have to pay interest at 12% per annum on the unpaid amount.

Shareholders who have not claimed their dividend may follow Section 124(4) and apply to the company for their unclaimed dividends.

If, after seven years, there are still unclaimed dividends, Bright Future Tech Ltd. must transfer these funds to the Investor Education and Protection Fund in line with Section 124(5).

Furthermore, as per Section 124(6), if dividends on certain shares have not been claimed for seven consecutive years, those shares will be transferred to the Investor Education and Protection Fund, although claimants can recover these shares under prescribed conditions.

If Bright Future Tech Ltd. fails to follow these rules, under Section 124(7), it may face a fine ranging from five lakh to twenty-five lakh rupees, and the officers responsible could be fined between one lakh and five lakh rupees.