The following summarized information is available in respect of a company for the year ended 31st March, 2019 : Equity Share Capital 10,000 shares of the face value of ₹ 100 each ₹ 10 Lakh Free Reserves ₹ 2 Lakh Revaluat

As per Section 123 (1) of the Companies Act, 2013, a company can distribute dividends out of profits of the current year or from profits of previous financial years. In the event of inadequacy or absence of profits in any financial year, if the company wants to propose declaration of dividend, it can pay it out of accumulated profits earned by it in previous years and transferred by the company to the free reserves, according to the conditions prescribed under Rule 3 of the Companies (Declaration and Payment of Dividend) Rules, 2014. In the instant case, the net loss for the year 2018-19 is ₹ 25000. According to Rule 3 of the Companies (Declaration and Payment of Dividend) Rules, 2014 the following conditions must be fulfilled: The rate of dividend cannot exceed the average of the rates at which dividend was declared in the three years immediately preceding that year i.e. (8%+10%+12%)/3 = 10% so in this case, the amount of dividend should not exceed ₹ 1 Lakh. The total amount to be drawn from such accumulated profits shall not exceed one-tenth of the sum of its paid-up share capital and free reserves as appearing in the latest audited financial statement. Thus the company can draw only upto ₹ 1.2 lakh. The balance of reserves after such withdrawal shall not fall below 15% of its paid up capital as appearing in the latest audited balance sheet. Accordingly the maximum that may be withdrawn cannot exceed ₹ 50000. However, the amount so withdrawn must be used to set-off losses of the current year i.e. ₹ 25000. Therefore, the maximum amount in this instant case that can be paid by way of dividend is ₹ 25000 .