Section 123 of Companies Act 2013 serves as a lodestar for companies navigating the terrain of dividend declaration. It embodies the principles of financial prudence, transparency, and accountability, safeguarding the interests of shareholders and fostering investor confidence. By adhering to the provisions delineated therein, companies can chart a course of sustainable growth and prosperity, in consonance with the overarching objectives of corporate governance.

Section 123 of the Companies Act, 2013 pertains to the declaration and distribution of dividends by companies. This section lays down the guidelines for the payment of dividends to shareholders. It states that dividends can only be paid out of profits earned by the company in the current financial year, or out of profits generated in previous financial years which have been transferred to the reserves of the company.

Additionally, it emphasizes that dividends cannot be declared and paid if the company does not have adequate profits, or if doing so would be detrimental to the company’s ability to meet its financial obligations. Furthermore, Section 123 outlines the procedure for declaring dividends, which includes convening a meeting of the board of directors to approve the declaration, and subsequently notifying the shareholders of the decision. Compliance with the provisions of this section ensures that dividends are distributed in a fair and transparent manner, safeguarding the interests of both the company and its shareholders.