Section 205 of the Act regulates the declaration and distribution of dividend. All the companies which have share capital other than section 25 companies and make profit are bound by law to declare and distribute dividends. As per Section 205 of the Companies Act, 1956, a dividend (including interim dividend) can be paid out of current profits or profits accumulated of earlier years. However, depreciation for the entire year has to be provided before a dividend is declared or paid. For this purpose, the Board needs to approve the provisional financial results (unaudited) and a working of the profits available for distribution as dividend, post providing for depreciation for the full year and amount required to be transferred to reserves as per the Companies. Sections 205 A, B and C deal with some other aspects of distribution of dividend such as establishment of Investor Education and Protection Fund, Payment of unpaid and unclaimed dividend....
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