Companies (Transfer of Profits to Reserves) Rules, 1975
3. Conditions governing voluntary transfer of a higher percentage
Nothing in rule 2 shall be deemed to prohibit the voluntary transfer by a company of a percentage higher than 10 per cent of its profits to its reserves for any financial year, so however that.-
2 [( i ) Where a dividend is declared,-
(a) a minimum distribution sufficient for the maintenance of dividends to shareholders at a rate equal to the average of the rates at which dividends declared by it over the three years immediately proceeding the financial year; or
(b) in a case where bonus shares have been issued in the financial year in which the dividend is declared or in the three years immediately proceeding the financial year, a minimum distribution sufficient for the maintenance of dividends to shareholders at an amount equal to the average amount (quantum) of dividend declared over the three years immediately proceeding the financial year, is ensured.
Provided that in a case where the net profits after tax are lower by 20 per cent, or more than the average net profits after tax of the two financial years immediately proceeding, it shall not be necessary to ensure such minimum distribution.]
(ii) Where no dividend is declared, the amount proposed to be transferred to its reserves from the current profits shall be lower than the average amount of the dividends to the shareholders declared by it over the three years immediately proceeding the financial year.
If a comply fails to company with any of the provisions contained in these Rules, the company and every officer of the company in default shall be punishable with fine which may extend to five thousand rupees, and, where the contravention is a continuing one, with a further fine which may extend to fifty rupees for every day, after the first, during which such contravention continues.