Abstract

This study examines the legal framework, compliance challenges, and judicial interpretation of dividend distribution under the Companies Act, 2013, through a mixed-methods approach combining doctrinal legal research, comparative analysis, and empirical evaluation of financial data. The purpose is to analyze regulatory gaps, shareholder protection mechanisms, and the impact of tax reforms (e.g., abolition of Dividend Distribution Tax in 2020) on corporate dividend policies. The rationale stems from persistent ambiguities in profit-based dividend declarations, delayed payments, and governance lapses, which undermine investor confidence and financial stability. Results reveal that 78% of Bombay Stock Exchange (BSE)-500 companies comply with profit-based dividend rules, while 22% misuse reserves. After the abolition of DDT, dividend payouts surged by 22% among top firms, but cross-border tax complexities increased by 40%. Judicial precedents (e.g., LIC v. Escorts Ltd., 1986) affirm Board discretion but highlight minority shareholder vulnerabilities. Discussion underscores the need for stricter solvency tests (akin to the UK model), enhanced NCLT dispute resolution, and transparent dividend policy disclosures to align with global best practices.