Dividend involves the part of the earnings of a corporation not kept but paid by the company to its owners, depending on the equity owned by the company, instead of their contributions. At the general meeting of the corporation, the dividend decided at the end of the financial year, and approved by the board of directors, is known as the proposed dividend.
Taking part in the interim dividend between two general meetings declared by the Board of Directors of the Corporation where the dividend is declared on the excess earnings proceeds.
Interim Dividend vs Proposed Dividend
The main difference between interim dividend and proposed dividend is that an interim dividend that is announced by the directors before the determination of annual profit or loss and the Company’s General Annual Meeting (AGM), i.e. at some moment between the two successive AGMs, can be interpreted as a dividend. On the other hand, Proposed dividends are the dividends announced by the corporation after reporting to the company’s Annual General Meeting (AGM) on the financial statements of the year and determination of the financial situation and profitability position.
The interim dividend is payable either from income held in benefit and loss accounts or from gains from the financial year in which the dividend is sought. According to the company’s financial statements, the interim dividend rate does in the previous three years not surpass the annual dividend announced by it.
The proposed dividend shall include the dividend announced by the Management Board at the closing of the financial year at the Annual General Meeting of the Corporation. A statement of dividends, transacted at the general meeting of the corporation, is deemed to be an ordinary enterprise. The company shall pass the share of the earnings to the company’s reserve before the declaration of dividend.
Comparison Table Between Interim Dividend and Proposed Dividend
| Parameter of comparison | Interim Dividend | Proposed Dividend |
| Meaning | The interim dividend shall be announced and paid in the middle of an accounting year, i.e. before the year’s accounts are completed. | The proposed dividend shall include the Management Board’s dividend at the closing of the financial year at the Annual General Meeting of the Corporation. |
| Announcement | Advisory Board announced by the Firm. | Recommended in the meeting of the Board and announced by the members of the AGM |
| Declaration Time | Until financial statements are prepared. | After the financial statements have been prepared. |
| Revocation | With the agreement of all the owners, it can be revoked. | It can’t be withdrawn. |
| Dividend Rate | Less | Comparatively higher |
| Articles of Association | It is proclaimed only if the articles authorize the declaration explicitly. | No particular provisions in the papers are needed. |
What is Interim Dividend?
A dividend that is announced by the directors before the determination of annual profit or loss and the Company’s General Annual Meeting (AGM), i.e. at some moment between the two successive AGMs, can be interpreted as an interim dividend. The board of directors announces it, but the owners are open to consent.
The interim dividend is payable either from income held in benefit and loss accounts or from gains from the financial year in which the dividend is sought. According to the company’s financial statements, the interim dividend rate does not surpass the annual dividend announced by it in the previous three years. After the dividend has been declared, the dividend balance proposed by the corporation shall be deposited into a different bank account within five days of the date of the declaration.
What is Proposed dividend?
Proposed dividends are the dividends announced by the corporation after reporting to the company’s Annual General Meeting (AGM) on the financial statements of the year and determination of the financial situation and profitability position. If the proposed dividend has been declared, the corporation is enforceable.
A statement of dividends, transacted at the general meeting of the corporation, is deemed to be an ordinary enterprise. The Company shall pass the share of the earnings to the Company’s reserve before the declaration of dividend. The organization will then selectively determine how many to allocate to savings. If in case there is no profit or any surplus in the fiscal year or any undistributed earnings to report as a dividend, then the dividend is declared out of savings, as per the rules provided by the government, but it should be out of free reserves only.
Main Differences Between Interim Dividend and Proposed Dividend
- The dividend declared and paid before the close of the accounting year is known as the temporary dividend in the middle of the accounting year. On the other hand, after the financial year has ended, dividends declared by the Executive Board are regarded as a proposed dividend at the General Assembly of the Corporation.
- In each financial year and during the time – from the end of the financial year to the meeting of the AGM – the dividend is announced by the Boards of Directors. The proposed dividend, in exchange, shall be demanded by the board of directors, and shall be declared by the AGM members, and shall be voted on and accepted upon benefit assurance.
- Before the close of the company’s books, the interim dividend shall be announced. On the other hand, following the preparation of the financial statements of the corporation a proposed dividend is announced.
- With the approval of all owners, the temporary dividend will be revoked, while the dividend planned cannot be revoked until it is announced.
- The interim dividend rate is always lower than the dividend rate proposed.
- Only if the Terms of Incorporation of the organization expressly mean the same will the interim dividend be declared. In the case of the proposed dividend, though, there is no such condition.
Conclusion
Dividends are the appropriation of interest that recovers the amounts paid by owners. While the proposed dividend covers a portion of the year, the proposed dividend usually covers six months, i.e. the entire year. Dividends recommended shall be declared and paid monthly after the income has been made public for the financial year, while a conditional dividend shall be paid out of the (undistributed) surplus earnings of previous years.
References
- https://www.emerald.com/insight/content/doi/10.1108/10867370810918128/full/html
- https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1468-036X.1996.tb00027.x