Answer: Interim dividend is a dividend declared by the Board of Directors between two Annual General Meetings, before the final accounts of the year are prepared.
- Declared by the Board: it is declared by the Board of Directors if authorised by the Articles; members' approval is not required.
- Time: it is declared during the financial year, any time between two AGMs.
- Source: it is paid out of the surplus in the profit and loss account or the profits of the current financial year (or the quarter preceding the declaration).
- Restriction on rate: if the company has incurred a loss up to the quarter preceding the declaration, the rate cannot exceed the average rate of dividend of the preceding three years.
- Separate bank account: the amount must be deposited in a separate scheduled bank account within 5 days of declaration.
- Payment: it must be paid within 30 days of declaration.
- Adjustment: it is in the nature of an advance and is taken into account when the final dividend is decided; it can be confirmed at the AGM.
