Company Liquidation Dividend Account: Section 352

The company liquidation dividend account is where money that nobody has collected goes while the law waits for someone to claim it. Section 352 of the Companies Act, 2013 names it the Company Liquidation Dividend and Undistributed Assets Account, fixes a six month trigger for paying into it, a sixty day deadline for paying out of it, and a fifteen year point after which the Central Government takes the balance.

What goes into the company liquidation dividend account?

Two kinds of money, each after six months. Section 352(1) applies where a company is being wound up and the liquidator has in his hands or under his control any money representing (a) dividends payable to any creditor but which had remained unpaid for six months after the date on which they were declared; or (b) assets refundable to any contributory which have remained undistributed for six months after the date on which they become refundable. The liquidator shall forthwith deposit the said money into a separate special account to be known as the Company Liquidation Dividend and Undistributed Assets Account maintained in a scheduled bank.

The two limbs run off different clocks. Clause (a) counts six months from declaration of the dividend; clause (b) counts six months from the date the assets became refundable to a contributory on the list. Once either period expires the duty is immediate: forthwith.

Section 352(2) adds the closing sweep. On the dissolution of the company the liquidator must pay into the same account any money representing unpaid dividends or undistributed assets in his hands at the date of dissolution, whether or not six months have run.

What has to be filed with the payment?

A statement identifying everyone entitled. Section 352(3) requires the liquidator, when making any payment referred to in sub-sections (1) and (2), to furnish the Registrar a statement in the prescribed form, setting forth, in respect of all sums included in such payment, the nature of the sums, the names and last known addresses of the persons entitled to participate therein, the amount to which each is entitled and the nature of his claim thereto, and such other particulars as may be prescribed.

That list is what makes the account searchable later: the names and last known addresses are filed at the moment the money leaves the liquidator's hands. Section 352(4) then entitles the liquidator to a receipt from the scheduled bank, which shall be an effectual discharge of the Company Liquidator in respect thereof.

Section 352(5) ties the account to the periodic filing in a voluntary winding up. The Company Liquidator, when filing a statement under sub-section (1) of section 348, must indicate the sum of money which is payable under sub-sections (1) and (2) of this section during the six months preceding the date on which the said statement is prepared, and pay that sum into the account within fourteen days of the date of filing the said statement. That filing is covered in information as to pending liquidations.

How does a claimant get the money back?

Through the Registrar, on a deadline. Section 352(6) lets Any person claiming to be entitled to any money paid into the Company Liquidation Dividend and Undistributed Assets Account, whether paid in pursuance of this section or under the provisions of any previous company law, apply to the Registrar for payment, and the Registrar, if satisfied that the person claiming is entitled, may make the payment to that person of the sum due.

The proviso puts a clock on the Registrar rather than on the claimant: the Registrar shall settle the claim of such person within a period of sixty days from the date of receipt of such claim, failing which the Registrar shall make a report to the Regional Director giving reasons of such failure. The consequence of missing the deadline is a reasoned report upward, not a deemed payment.

Money left long enough moves on. Section 352(7) transfers anything which remains unclaimed thereafter for a period of fifteen years to the general revenue account of the Central Government, while preserving the claim: it may still be preferred under sub-section (6) and shall be dealt with as if such transfer had not been made, with any payment order treated as an order for refund of revenue.

What does a liquidator who holds the money back face?

Interest, a penalty, expenses, and in a Tribunal winding up his office. Section 352(8) applies to Any liquidator retaining any money which should have been paid by him into the Company Liquidation Dividend and Undistributed Assets Account under this section, and imposes three consequences: (a) pay interest on the amount so retained at the rate of twelve per cent. per annum and also pay such penalty as may be determined by the Registrar, subject to a proviso letting the Central Government remit that interest either in part or in whole in any proper case; (b) be liable to pay any expenses occasioned by reason of his default; and (c) where the winding up is by the Tribunal, also be liable to have all or such part of his remuneration, as the Tribunal may consider just and proper, to be disallowed, and to be removed from his office by the Tribunal.

Compare that with section 350(2), the deposit duty covered in the liquidator's duty to deposit monies. The rate is the same twelve per cent in both. The differences are who sets the penalty, the Registrar here and the Tribunal there, and the condition on clause (c): removal under section 352(8) is expressed to apply where the winding up is by the Tribunal, where section 350(2) carries no such limb.

Section 353 sits behind all of it as the enforcement backstop for filings. Where a Company Liquidator has defaulted in filing, delivering or making any return, account or other document, or in giving any notice he is required by law to give, and fails to make good the default within fourteen days after the service on him of a notice requiring him to do so, the Tribunal may, on the application of any contributory or creditor or the Registrar, order him to make good the default within a specified time. Section 353(2) allows the costs of that application to be borne by the liquidator, and section 353(3) preserves any other enactment imposing penalties for the same default.

For a creditor or a member chasing money years after a winding up, the company liquidation dividend account is the place to look first, and section 352(3) is the reason a name and address are on file to match against.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.