The audited financial statements of Jo Ltd. for the year ended 31st March 2025 show the following: Paid-up equity share capital: ₹ 50 lakh (5 lakh shares of ₹ 10 each) Surplus in Profit & Loss Account: ₹ 10 lakh Free

Advisory on Declaration of Interim Dividend: Under Section 123(3) of the Companies Act, 2013 As per Section 123(3), the Board of directors of a company may declare interim dividend during any financial year or at any time during the period from closure of financial year till holding of the annual general meeting- Out of the surplus in the profit and loss account, or Out of profits of the financial year for which such interim dividend is sought to be declared, or Out of profits generated in the financial year till the quarter preceding the date of declaration of the interim dividend. In case the company has incurred loss during the current financial year up to the end of the quarter immediately preceding the date of declaration of interim dividend, such interim dividend shall not be declared at a rate higher than the average dividends declared by the company during the immediately preceding three financial years. Further, SS-3 provides that in the event of loss or inadequacy of profits during the financial year, no interim dividend shall be declared/paid out of free reserves. Analysis and Conclusion: Jo Ltd. has a P&L surplus of ₹10 lakh, but the current-year loss up to 31 December 2025 is ₹3 lakh. Thus, only ₹7 lakh is available for interim dividend. The proposed dividend @ ₹5 per share requires ₹25 lakh, which exceeds the available amount. The company has incurred a loss during the current year up to the preceding quarter- Proviso to subsection (3) of Section 123 of the Companies Act, 2013 states that in case the company has incurred loss during the current financial year up to the end of the quarter immediately preceding the date of declaration of interim dividend, such interim dividend shall not be declared at a rate higher than the average dividends declared by the company during immediately preceding three financial years. Average rate = (10% + 12% + 8%) / 3 = 10%. Maximum permissible interim dividend = 10% of ₹50 lakh = ₹5 lakh, i.e., ₹1 per share. Free Reserves of ₹30 lakh are not available for interim dividend. Hence, the Board cannot declare interim dividend @ ₹5 per share as proposed. It may declare a maximum of ₹1 per share, being within both: Available profits (₹7 lakh); and The average of the past three years' dividend rates (10%).