Zen Wave Technologies Pvt. Ltd. earned a profit of ₹ 70 crore for the financial year ending 31st March 2026. The Board in its meeting on 30th May 2026, proposed a final dividend of 30% on the paid-up share capital. While

As per Section 123(1) of the Companies Act 2013 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. Under the second Proviso to sub-section (1) of Section 123 of the Companies Act 2013, 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. Analysis and Conclusion: In this case, Zen wave Technologies Pvt. Ltd. earned a profit of ₹70 crore and the Board proposed a final dividend of 30% without transferring any portion of its profits to the general reserve. Since second proviso of Section 123(1) of Companies Act 2013, uses the expression "may", the transfer of profits or some portion thereof to reserves is not mandatory but discretionary of the Board of Directors of the Company. The Board is not mandatorily required to transfer 10% or any minimum percentage of profits to reserves before recommending or declaring the dividend. Therefore, the shareholders' objection is not justifiable, and the AGM may validly declare the proposed final dividend.