The Equity Shares of Bharat Coal Ltd. are held by Central Government through its concerned ministry, Ministry of Coal. The Joint Secretary of coal, who is the Chairman of the Company also, while reviewing the financial d

Section 123 of the Companies Act, 2013 read with rule 3 of Companies (Declaration and Payment of Dividend) Rules, 2014 provides that in the event of inadequacy or absence of profit in the year, a company may declare the dividend out of free reserve subject to following conditions: The rate of dividend declared shall not exceed the average of the rates at which dividend was declared by it in the three years immediately preceding that year: 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. The amount so drawn shall first be utilised to set off the losses incurred in the financial year in which dividend is declared before any dividend in respect of equity shares is declared. The balance of reserves after such withdrawal shall not fall below fifteen per cent of its paid up share capital as appearing in the latest audited financial statement. Accordingly the following shall be calculated: S.N. Particulars Figures 1. Average Rate of Dividend of preceding three years in which the dividend was declared. (0+20+10) / 3 = 10% 2. The Total amount to be drawn from such accumulated profits shall not exceed one-tenth of the sum of its paid-up capital and free reserves 1/10 of (₹3,50,00,000 + ₹87,50,000 + ₹1,05,00,000) = ₹54,25,000/- 3. Total amount to be drawn ₹42,87,500/- a. 9% Preference dividend ₹87500 b. Permissible Equity Dividend ₹3500000 4. Total amount to be drawn from General Reserve ₹4287500 - (₹1785000 + ₹315000) = ₹2187500/- 5. Balance in General Reserve after dividend ₹10500000 - ₹2187500 = ₹83,12,500 6. The Balance of reserve after such withdrawal shall not fall below 15% of its paid up share capital (Paid up share capital includes equity share capital + Preference share capital) (₹8312500 / ₹43750000) × 100 = 19% 15% of the paid up capital amounting to ₹6562500 The Balance in the free reserve are more than the 15% of the paid up capital of the company Therefore, company can declare the 10% dividend, Re. 1/- each per equity share.