Section 362

Section 362 of the Companies Act, 2013, states that 'No dividend shall be declared or paid by a company for any financial year except out of the profits of the company for that year or out of the undistributed profits of any previous financial year or years.' The section further provides that 'where, in respect of a financial year, a company has incurred a loss, or its profits for that year, together with the undistributed profits of any previous financial year or years, are insufficient to cover the dividend on its preference shares, the dividend on the preference shares shall be paid only out of the profits of the company for that year or out of the undistributed profits of any previous financial year or years.' The section aims to prevent companies from declaring dividends out of capital or accumulated losses, thereby protecting the interests of creditors and shareholders.