Declaring a dividend in a listed company is not merely a financial decision — it is a regulated corporate action that requires careful coordination among the finance, management, and compliance teams. The process must strictly adhere to the provisions of the Companies Act, 2013, the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR), and the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations).
The following is a step-by-step practical guide, illustrated through the example of A Limited, a company listed on both the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
End of Financial Year and Trading Window Closure
The financial year of A Limited ends on March 31, 2025.
Immediately after the closure of the financial year, the Trading Window is closed in accordance with Schedule B of the SEBI (Prohibition of Insider Trading) Regulations, 2015.
The trading window remains closed from the end of the quarter until 48 hours after the declaration of financial results, ensuring that directors, officers, and designated employees do not trade while in possession of Unpublished Price Sensitive Information (UPSI).
Preparation of Financials and Dividend Proposal
The Finance Team prepares the draft financial statements and formulates the proposed dividend, ensuring full compliance with the company’s Dividend Distribution Policy as required under Regulation 43A of SEBI (LODR) Regulations, 2015.
The Chief Financial Officer (CFO) and Managing Director (MD) play a pivotal role in assessing:
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The company’s profitability,
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Availability of free reserves, and
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Liquidity position before recommending a dividend payout.
Simultaneously, the Company Secretary (CS) ensures:
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Compliance with statutory timelines,
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Coordination of board and committee meetings, and
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Fulfilment of disclosure and filing obligations.
Convening the Board Meeting
A formal notice of the Board Meeting is issued to all directors at least seven days in advance, accompanied by the detailed agenda and supporting papers.
Typical Board Agenda Includes:
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Approval of audited financial results for FY 2024–25.
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Recommendation of final dividend and fixation of record date.
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As clarified under Regulation 42(1) of SEBI (LODR), a minimum gap of three working days (exclusive of both the approval date and record date) must exist between the date of Board/Shareholders’ approval and the record date.
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Approval of AGM date, draft notice, and Annual Report.
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Appointment of a Scrutinizer for e-voting and poll at the AGM.
Prior Intimation to Stock Exchanges
In compliance with Regulation 29 of SEBI (LODR) Regulations, 2015, A Limited provides prior intimation of the Board Meeting to both NSE and BSE at least two working days in advance, excluding the date of intimation and the meeting date.
This disclosure must clearly mention that the meeting will consider the approval of financial results and recommendation of dividend.
Audit Committee and Board Meeting
To maintain confidentiality and prevent any potential information leak, A Limited conducts the Audit Committee Meeting and Board Meeting back-to-back on the same day.
Audit Committee Review
The draft financial statements and proposed dividend are first reviewed by the Audit Committee to ensure:
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Compliance with accounting and statutory requirements,
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Adequacy of reserves and liquidity, and
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Alignment with the company’s Dividend Distribution Policy.
After thorough review, the Audit Committee recommends the financials and dividend proposal to the Board.
Board Meeting
Immediately thereafter, the Board of Directors convenes to:
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Approve the audited financial statements,
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Recommend the final dividend,
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Fix the record date for dividend entitlement, and
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Approve the AGM date, draft notice, and annual report.
Outcome of Board Meeting
As per Regulation 30 of SEBI (LODR) Regulations, 2015, the outcome of the Board Meeting — including dividend recommendation, record date, and financial results — must be intimated to the stock exchanges within 30 minutes of the meeting’s conclusion.
Newspaper Advertisement
Under Regulation 47 of SEBI (LODR) Regulations, 2015, A Limited must publish a newspaper advertisement within 48 hours of the Board Meeting.
This advertisement should include:
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Financial results,
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Dividend details, and
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Any other prescribed disclosures.
It must be published in one English national daily and one vernacular newspaper circulated in the district of the company’s registered office.
Circulation of AGM Notice and Annual Report
The AGM Notice, along with the Annual Report, is dispatched to all shareholders at their registered email IDs.
The company must also publish a newspaper advertisement confirming the dispatch of the notice.
Cut-off Date for E-Voting
As per Rule 20(3)(vii) of the Companies (Management and Administration) Rules, 2014,
“The cut-off date shall not be earlier than seven days before the date of the general meeting.”
Only shareholders whose names appear as on this cut-off date are eligible to vote electronically or at the AGM.
E-Voting Window
As per Rule 20(4)(vi) of the same Rules,
“The e-voting shall remain open for not less than three days and shall close at 5:00 p.m. on the date preceding the date of the general meeting.”
The Company Secretary must ensure the cut-off date and e-voting timelines are strictly compliant with these provisions.
Annual General Meeting and Dividend Approval
At the AGM, shareholders pass an Ordinary Resolution approving the final dividend recommended by the Board.
The Scrutinizer, appointed earlier, supervises the entire e-voting and physical voting process and submits a Scrutinizer’s Report consolidating both results.
Post-AGM Compliances
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The Scrutinizer’s Report and voting results must be filed with the stock exchanges within 48 hours of the AGM’s conclusion, as per Regulation 44(3) of SEBI (LODR).
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Upon shareholder approval, the dividend amount must be credited to shareholders’ bank accounts within 30 days from the date of declaration, as per Section 123(5) of the Companies Act, 2013.
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Any unpaid dividend must be transferred to the Unpaid Dividend Account within 7 days from expiry of the 30-day payment period.
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The company must update its website within two working days of any relevant change.
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AGM proceedings must be filed with the stock exchanges under Regulation 30 of SEBI (LODR).
Conclusion
The declaration of dividend in a listed company such as A Limited is a meticulously regulated process that demands accuracy, transparency, and timely communication.
While the CFO and MD assess the company’s financial capacity, the Company Secretary acts as the compliance guardian — ensuring every disclosure, filing, and statutory obligation is fulfilled precisely within prescribed timelines.
A well-coordinated process between the Audit Committee, Board of Directors, and shareholders not only reinforces good governance practices but also strengthens investor confidence and corporate credibility — the true essence of a compliant dividend declaration.
Disclaimer : It is limited in scope and may omit certain procedural nuances, interpretations, or exceptional cases that can vary depending on company-specific circumstances, regulatory updates, or stock exchange clarifications. Readers are advised to refer to the original provisions, circulars, and professional guidance before applying this in practice.