CA Inter P2 · Chapter 7 · Question 7 of 9
Under section 127, a director is NOT liable for failure to pay a declared dividend within thirty days in which of the following cases?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) There is a dispute regarding the right to receive the dividend
Explanation
The proviso to section 127 lists cases where no offence is committed. These are: dividend could not be paid because of the operation of law; the shareholder's directions could not be complied with; there is a dispute about the right to receive the dividend; the dividend was lawfully adjusted against a sum due from the shareholder; or the failure was not due to any default of the company. Diverting the funds or lacking money are not excuses.
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