Chapter IV - Share Capital and Debentures
Section 51
Section 51: paying dividend in proportion to paid-up amount
Where the articles authorise it, a company may pay dividends in proportion to the amount paid-up on each share, so partly paid shares receive a proportionately smaller dividend.
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Need advice on Section 51?
This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
A company may, if so authorised by its articles, pay dividends in proportion to the amount paid-up on each share.
Introduction
Section 51 matters when a company has partly paid shares. Without authority in the articles, the section does not apply. With it, the company may link dividends to the amount actually paid-up on each share.
Section 51 came into force on 12 September 2013 under S.O. 2754(E). The consolidated text shows no amendment to it.
Key takeaways
Articles needed
The power depends on authority in the company’s articles.
Proportion to paid-up
Dividend may be paid in proportion to the amount paid-up on each share.
Declaration rules still apply
Section 51 concerns proportion only; declaration and payment of dividend remain governed by the other dividend provisions of the Act.
Check the articles
Confirm that the articles authorise payment of dividends in proportion to the amount paid-up. Without that authority, section 51 does not provide the power.
Compute the proportion
Identify partly paid shares and the amount paid-up on each. Apply the dividend rate to the paid-up amount where the articles adopt the proportional basis.
Practical preparation
Review the articles. List partly paid shares and their paid-up amounts. Apply the proportional basis. Keep the Board and general-meeting records for the dividend.
Practical checklist
Do
- Keep a share-wise record of amounts paid-up.
- Check the articles before each dividend declaration.
Avoid
- Do not assume proportional dividends are allowed without authority in the articles.
Illustrative example
Hypothetical: partly paid shares
Some equity shares are fully paid and others are half paid. The articles authorise proportional dividends.
Confirm
Check the authority in the articles.
Compute
Apply the dividend to the amount paid-up on each share.
Record
Document the computation with the dividend records.
Outcome
- Half-paid shares receive dividend in proportion to the amount paid-up on them.
Glossary
- Paid-up amount
- The amount actually paid on a share, which may be less than its nominal value for partly paid shares.
Frequently asked questions
Is proportional dividend mandatory?
No. Section 51 says a company "may" pay in proportion to the paid-up amount, if its articles authorise it.
Has section 51 been amended?
The India Code consolidated text shows no amendment to section 51.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026