FINANCE, ACCOUNTS AND AUDITCentral

Section 25 of The Road Transport Corporations Act, 1950

Guarantee by the State Government.

The shares of a Corporation shall be guaranteed by the State Government as to the payment of the principal and the payment of the annual dividend at such minimum rate as may be fixed by the State Government by notification published in the Official Gazette at the time of issuing the shares.

Summary

The State Government provides a guarantee for all shares issued by the Corporation.
This guarantee ensures the repayment of the principal, which is the original amount invested.
It also ensures the payment of an annual dividend, which is a share of the profits given to shareholders.
The State Government sets a minimum rate for this dividend at the time the shares are issued.
This minimum rate must be published in the Official Gazette, a formal government public record.

Practical examples

1Ramesh buys 100 shares in the State Bus Corporation for 10,000 rupees. Because of the guarantee, he knows the State Government will ensure he gets his 10,000 rupees back even if the company struggles.

2When the transport body issues new shares in June 2024, the State Government publishes a notice in the Official Gazette. This notice states that every shareholder is guaranteed at least a 3 percent annual dividend on their investment.

FAQ

1. Does the government back the shares of a transport body under Section 25 of The Road Transport Corporations Act, 1950?

Yes, Section 25 of the Road Transport Corporations Act, 1950 requires the State Government to guarantee the principal amount and the annual dividend for the shares.

2. How is the minimum dividend rate decided under Section 25 of The Road Transport Corporations Act, 1950?

Under Section 25 of the Road Transport Corporations Act, 1950, the State Government fixes the minimum rate by notification in the Official Gazette when the shares are issued.

3. What happens if the Corporation cannot pay its shareholders according to Section 25 of The Road Transport Corporations Act, 1950?

Because Section 25 of the Road Transport Corporations Act, 1950 provides a government guarantee, the State Government is responsible for ensuring the principal and minimum dividend are paid.

Test yourself

1.Under Section 25 of The Road Transport Corporations Act, 1950, what two things are specifically guaranteed?

2.Where must the minimum dividend rate be published under Section 25 of The Road Transport Corporations Act, 1950?

3.When is the minimum dividend rate fixed according to Section 25 of The Road Transport Corporations Act, 1950?

4.If a Corporation issues additional shares under Section 24, does the guarantee in Section 25 of The Road Transport Corporations Act, 1950 apply?

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