Due to inadequacy of profits during the year ended 31st March, 2025, DAY Ltd proposes to declare 9% dividend out of General reserves. From the…

Amount that can be drawn from reserves for 9% dividend 9% dividend on 95,00,0008,55,000 Profits available Current year profit (3,75,000) Amount which can be utilised from reserves 4,80,000 Conditions as per Companies (Declaration of dividend out of Reserves) Rules, 2014: Condition I Since 9% is lower than the average rate of dividend (12.5%), 9% dividend can be declared. Thus, this condition is satisfied. Condition II Maximum amount that can be drawn from the accumulated profits and reserves should not exceed 10% of paid up capital plus free reserves i.e.11,35,000 [10% of (95,00,000+18,50,000)]. Thus, this condition too is satisfied. Condition III The balance of reserves after drawl - 13,70,000 (₹ 18,50,000 -4,80,000) should not fall below 15. % of its paid up capital i.e.14,25,000 (15% of 95,00,000] Thus, this condition is not satisfied, the company cannot withdraw 4,80,000 from accumulated reserves. Conclusion: Since condition-III is not satisfied, the Day Ltd cannot declare dividend @ 9%. However, all three conditions to be satisfied, Day Ltd. can MAXIMUM utilize 4,25,000 and pay dividend to that extent.