According to the IEPF, Dividend refers to the part if the amount from the company’s profit that is distributed among the shareholders of the business as a return on the investments, that is the shares purchased by them. In simple words, an interim dividend is an amount that is declared by the board of directors of the company in between two annual general meetings. This happens when the company earns surplus profits. On the other hand, the dividend that is usually announced at the end of every financial year at the annual general meeting of a company is called a final dividend.
Let us get into the details and differences between the two. There are IEPF rules listing the differences between interim and final dividend, they are:
- The dividend that is abruptly declared in the middle of the financial year to surplus profits received by the company is known as an interim dividend. This happens before the finalization of the financial statements of the company for that year. In contrast, the dividend that is declared by the board of directors and issued by the company at the end of the financial year at the annual general meeting is known as a final dividend
- The interim dividend is usually issued at a period of 6 months after the commencement of the financial year whereas the final dividend is declared at the end of each year
- The interim dividend can be recommended by the board of directors but it needs to be approved by the shareholders of the company as well. The final dividend is also recommended by the board of directors but it is voted upon and needs to be approved at the annual general meeting after the completion and issue of financial statements at the end of a financial year. Therefore, when it comes to interim, the shareholders have the power over the board of directors and when it comes to the final dividend, it is the opposite
- The interim dividend is issued in the middle of the year before the finalization of the company’s accounts and the final dividend is only issued after the presentation of the financial statements of the company for that year.
- The interim dividend can be rejected or canceled with the consent from the shareholders but once the final dividend is declared, the decision cannot be reversed.
- The interim dividend cannot become a liability that is owned by the company to the shareholders whereas the final dividend is a debt that needs to be paid out by the company. IEPF claim refund policy states that shareholders can claim refund only in the final
- The issue of the interim dividend also depends on the articles of the company’ association. It needs to signify it specifically. However, there is no such requirement when it comes to issuing a final dividend
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