Three clocks, each with its own starting event
Section 124 requires dividend remaining unpaid or unclaimed after thirty days from declaration to be transferred within the next seven days to a special Unpaid Dividend Account in a scheduled bank. The separate ninety-day statement requirement runs from making the transfer to that account. If the transfer is late or incomplete, statutory interest at 12% per annum applies to the untransferred amount from the default date.
This guide focuses on the company’s account reconciliation and first-stage section 124 controls, as checked on 23 October 2026. It is not a complete dividend-declaration, section 127 liability or IEPF refund procedure. Read the actual Companies Act, 2013, section 124 and separately apply the rules governing the relevant filings and any listed-company obligations.
Reconcile entitlement, successful payment and failed payment
Start with the declared entitlement register and reconcile valid discharges of the company’s obligation. A payment file being uploaded is not the same as successful payment. Identify rejected electronic credits, returned warrants, unclaimed amounts and any other unresolved entitlement. Reconcile withholding and remittance separately where applicable; do not treat a tax difference as an unexplained unpaid shareholder balance.
Avoid double counting. A failed payment already included in the unpaid control total is a reason for that total, not another amount to add to it. Equally, do not write off an unclaimed entitlement as income merely because the shareholder has not responded. The special-account transfer changes custody of the money; it does not extinguish the shareholder’s claim.
Use a dated control sheet rather than “about five weeks”
| Control | Starting event | Required action |
|---|---|---|
| Initial thirty-day period | Dividend declaration | Identify amounts still unpaid or unclaimed at expiry |
| Following seven-day period | Expiry of the initial thirty days | Transfer the outstanding total to the special account |
| Ninety-day statement period | Making the Unpaid Dividend Account transfer | Prepare and place the prescribed shareholder statement |
| Seven-year money ageing | Transfer to the Unpaid Dividend Account | Review continuing unclaimed money for the IEPF process |
The seven-day transfer window is not a new thirty-day payment period. The ninety-day statement clock is not measured from declaration. Record each underlying event and its bank evidence, and set an internal completion date before the statutory outer limit. A later correction or a delayed transfer does not erase the original default.
Section 124(2) requires a statement with names, last known addresses and unpaid amounts, placed on the company website if any and also on the other approved website in the prescribed manner. Merely making a bank transfer does not complete this information requirement. Maintain proof of the actual statement and placement, not only a calendar reminder.
Interest follows the untransferred balance
Section 124(3) uses the amount that should have been transferred but was not. If only part is late, compute interest on that part. If the balance changes as transfers occur, split the default into periods with consistent outstanding amounts. Do not charge the original full dividend for every day when a substantial portion was already paid or transferred.
The interest benefits members in proportion to their unpaid amounts. Maintain a shareholder allocation trail and distinguish this compensatory amount from statutory penalties or other legal consequences. The annual rate does not become a flat 12% charge for a short delay. The illustrations use simple interest, an expressly assumed actual/365 day-count and paise rounding; the section prescribes the annual rate, not that illustrative day-count convention.
Claims and later IEPF ageing remain live controls
Under section 124(4), a person claiming entitlement to money in the company’s Unpaid Dividend Account may apply to the company for payment. Verify entitlement and identity, record the discharge and update the remaining balance. A payment from the special account needs to reduce both the shareholder record and bank control so the same amount is not later transferred again as unclaimed money.
The seven-year monetary ageing in subsection (5) runs from the transfer date. Subsection (6) has a separate share-transfer condition involving dividends unpaid or unclaimed for seven consecutive years or more, with the stated interruption where a dividend is paid or claimed for any year during that period. Do not conclude that every old unpaid amount automatically requires transfer of the underlying shares on the same reasoning. Apply the current IEPF rules and forms for the particular stage; this guide does not substitute a homemade filing.
A payment or account-transfer delay can raise additional compliance questions beyond the section 124(3) interest calculation. Correcting the balance does not by itself prove that all consequences or filing failures have been resolved.
Worked illustrations
These illustrations use fictional facts and expressly stated assumptions. Amounts are Indian rupees unless a different currency or unit is specified. They are independent examples, not findings about any actual client.
Illustrative example 1: Failed payments are part of the control total
Assume all amounts are already reconciled to the shareholder obligation, without a withholding difference. Declared payable dividend is ₹12,00,000 and successfully paid dividend is ₹10,50,000. Outstanding is ₹1,50,000. Rejected electronic payments of ₹60,000 are already within that outstanding figure: they explain it and are not added again to make ₹2,10,000.
Illustrative example 2: Declaration and transfer deadlines
Assume declaration on 1 September 2026 and calendar-day counting excluding the triggering date. Thirty days expire on 1 October 2026. The next seven days end on 8 October 2026, the transfer outer date under these assumptions. Set a bank-execution control earlier rather than planning an unverified last-minute instruction.
Illustrative example 3: The statement has a different anchor
Assume the account transfer is completed on 8 October 2026. Counting ninety calendar days after that event gives 6 January 2027. The section 124(2) working uses that actual transfer date, not the 1 September declaration date from the preceding illustration.
Illustrative example 4: Only the delayed part bears this interest
Assume ₹2,50,000 that was required to be transferred remains untransferred for a confirmed default interval of 47 days. On the illustrative actual/365 convention, interest is ₹2,50,000 × 12% × 47/365 = ₹3,863.01, rounded to paise. This is not 12% of the company’s entire original dividend.
Illustrative example 5: Split the outstanding balance into intervals
Assume a confirmed untransferred balance of ₹6,00,000 for 20 days, followed by ₹4,00,000 for 15 days, with no overlap. Actual/365 interest is [(₹6,00,000 × 20) + (₹4,00,000 × 15)] × 12% / 365 = ₹5,917.81 after rounding the final total. The first transfer reduces the second interval’s base.
Illustrative example 6: Allocate interest to the affected members
Assume a legally computed interest pool of ₹12,000 relates to three members with unpaid amounts of ₹60,000, ₹90,000 and ₹1,50,000 throughout the same period. Total unpaid is ₹3,00,000; proportions are 20%, 30% and 50%. Their interest allocations are ₹2,400, ₹3,600 and ₹6,000. The allocation totals ₹12,000 and is not divided equally by headcount.
Ten-step verification table
| Step | Verification | Evidence to retain |
|---|---|---|
| 1 | Ground the declared entitlement and declaration date | Resolution, entitlement register and payment timetable |
| 2 | Reconcile actual successful payments | Bank confirmations, returned warrants and rejected-credit reports |
| 3 | Explain the unpaid total without duplicate failed items | Shareholder-level outstanding schedule and withholding reconciliation |
| 4 | Calculate the thirty-day expiry and following seven days | Dated statutory-clock working with a stated counting basis |
| 5 | Complete the special-account transfer and retain evidence | Scheduled-bank Unpaid Dividend Account and bank value date |
| 6 | Track the ninety-day statement obligation independently | Transfer-anchored deadline, statement and placement evidence |
| 7 | Segment any default by outstanding balance and duration | Transfer chronology and non-overlapping interest intervals |
| 8 | Allocate statutory interest to affected members | Amount/time-based entitlement and rounding reconciliation |
| 9 | Verify and pay later claims, then update ageing | Claim evidence, payment discharge and revised bank/member balances |
| 10 | Maintain separate money and share IEPF tests | Transfer-date ageing, dividend claim history and applicable rule/form assessment |
Sixteen practitioner FAQs
1. Does issuing a payment instruction prove payment?
No. Reconcile the bank outcome and unresolved entitlement. Rejected transfers and returned instruments can remain unpaid despite a completed internal payment file.
2. Should failed credits be added to the unpaid ledger balance?
Only if they are not already included. Reconcile the control total first; otherwise the company can transfer more than the outstanding shareholder obligation.
3. Where is the unpaid money transferred?
Section 124 specifies a special Unpaid Dividend Account in a scheduled bank. A general internal reserve entry is not that bank transfer.
4. Does the company get thirty more days after the first period?
No. The transfer window is seven days following expiry of the initial thirty-day period. Keep those stages distinct.
5. When does the ninety-day statement clock start?
From making the transfer to the Unpaid Dividend Account. Do not use the original declaration date as the automatic anchor.
6. What information does the section identify for the statement?
Names, last known addresses and unpaid dividend payable to each person, together with the prescribed manner and particulars. Retain the actual statement and placement evidence.
7. Does the account transfer extinguish the shareholder’s claim?
No. Section 124(4) allows the person claiming entitlement to apply to the company for payment from the transferred money.
8. Is default interest 12% of the full declared dividend?
The section targets the amount not transferred as required. Successfully discharged or timely transferred amounts should not be treated as outstanding merely to simplify the spreadsheet.
9. Is 12% a flat charge for every delay?
It is an annual rate. Account for the actual default interval and applicable computation basis rather than charging a full year for a short delay.
10. What if the company makes several partial transfers?
Divide the computation into non-overlapping periods with the correct remaining balance in each. Reconcile dates to bank evidence.
11. Who benefits from the section 124(3) interest?
The affected members in proportion to the unpaid amounts under the statutory rule. Preserve a defensible allocation and rounding trail.
12. Does this interest calculation settle penalties too?
No. Interest, statutory penalties and other consequences are separate questions. A corrected bank balance does not by itself close every compliance issue.
13. When does monetary seven-year ageing begin?
Section 124(5) uses the date of transfer to the Unpaid Dividend Account. Maintain actual transfer dates rather than ageing every amount only from declaration.
14. Are the money and share-transfer tests identical?
No. The share rule considers seven consecutive years of unpaid/unclaimed dividends and the statutory interruption where a dividend is paid or claimed for a year in that period.
15. Can old unpaid dividends simply be written back to income?
An unclaimed balance does not cease to be subject to the statutory claim and transfer process because it is old. Follow the applicable company-law and IEPF requirements.
16. Which evidence best supports the close?
Tie the shareholder entitlement schedule to payment outcomes, the special-account statement, publication evidence, interest allocation, later claims and separate IEPF ageing records.
Working-paper organisation
Keep the source documents, calculation and final conclusion together for the same entity and period. If using assurePractice or other assureOffice tools, use only confirmed available functions and retain this evidence with the output.
Conclusion
Maintain three separately anchored deadlines and one reconciled shareholder-to-bank control. For defaults, use the actual untransferred balance and period, then preserve the members’ interest allocation and the later claim/IEPF trail.