Harmony Biotech Ltd., a manufacturing company, has proposed a dividend of 7.5% for the financial year 2024–2025, to be paid out of the profits…

According to section 123 of the Companies Act, 2013 a company may, before the declaration of any dividend in any financial year, transfer such percentage of its profits for that financial year as it may consider appropriate to the reserves of the company. Such transfer is not mandatory and the percentage to be transferred to reserves is at the discretion of the company. As per the given facts, Harmony Biotech Ltd. has earned a profit of 735crore for the financial year 2024-2025. It has proposed a dividend @ 7.5%. However, it does not intend to transfer any amount to the reserves of the company out of the profits of current year. As per the provisions stated above, the amount to be transferred to reserves out of profits for any financial year is at the discretion of the company acting through its Board of Directors. Therefore, at its discretion, if Harmony Biotech Ltd. decides not to transfer any profit to reserves before the declaration of dividend at 7.5%, it is legally allowed to do so.