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Record Date for Dividend and Voting Rights of Shareholders

A record date in relation to the dividend, which is declared and to be paid by a company, is the date which lets a company to ascertain the names of shareholders (share certificate) and beneficial owners  (demat account) as on a particular date who are entitled to receive the dividend.

According to section 123(5) of the Companies Act, 2013, dividend is required to be paid by a company in respect of any shares only to its registered shareholders.

Book closure

In order to comply with the above mentioned provision and determine the list of registered shareholders, a company can close its register of members in accordance with the provisions of section 91, after giving not less than 7 days' prior notice to the members by advertisements in 2 newspapers (1 English + 1 vernacular language circulating in the district in which the registered office of the company is situated) and publish it in the company's website.

Dividend is paid to the shareholders whose name appears on the register of members on the ‘record date’ as fixed by the company.

Record date is also called as cut-off date.

Example:

Suppose a company is holding its Annual General Meeting on 30th September, 2020 and one of the items of business to be dealt with at the meeting is to declare a final dividend for the year ended March 31, 2020.

The company can give a notice of closure of the Register of Members and the Share Transfer Books of the company for a period from Thursday, September 24, 2020 to Wednesday, September 30, 2020 (both days inclusive) and fix the record date or cut off date as on Tuesday, September 23, 2020.


Record Date for Voting Rights

Similarly, for determining the list of registered shareholders who are entitled to attend and vote at the ensuing general meeting, the company can close its Register of Members and fix a record date in the same way as described above.

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