Section 2(ii) in Companies (Declaration of Dividend out of Reserves) Rules, 1975
(ii)the total account to be drawn from the accumulated profits earned in previous years and transferred to the reserves shall not exceed an amount equal to one-tenth of the sum of its paid up capital and free reserves and the amount so drawn shall first be utilised to set off the losses incurred in the financial year before any dividend in respect of preference or equity shares is declared ; and
