Association of companies places proposals on dividend distribution to regulator

The Bangladesh Association of Publicly Listed Companies (BAPLC) has placed a set of recommendations in response to the Bangladesh Securities and Exchange Commission's (BSEC) recent directive regarding distribution of dividend.

The BAPLC recommended that cash dividend, as approved by the shareholders in AGM (annual general meeting), will be kept in a separate bank account within 10 days of such approval, and will be paid directly to the entitled shareholders as per the BSEC directive.

In its directive, issued on January 14, the BSEC said the issuers have to set aside funds against announced cash dividend within 10 days of a board meeting.

Meanwhile, the companies would get 30 days for disbursement of dividends, approved in the AGM, and the mutual funds would get 45 days.

The BAPLC opined that the dividend declared by the board will not be final until it is approved or passed by the shareholders in AGM. The amount declared by the board as dividend might be changed by the shareholders in AGM.

The association expressed apprehension that if the amount of cash dividend is kept in separate bank account within 10 days of the board meeting, the amount will remain unutilised, shrinking the company's working capital.

It will also have an adverse impact on the company's profitability as well as EPS (earning per share) and NAV (net asset value).

Usually, there is a gap of three months between the board meeting and the AGM.

The BAPLC urged expunging part of a sentence in the BSEC directive, which said, "subject to clearance of the exchange(s) and the Central Depository Bangladesh Limited (CDBL)".

According to the directive, the issuer will credit stock dividend directly to the BO account or issue the bonus share certificate of the entitled shareholders, as applicable within 30 days of declaration of approval or record date, as the case may be, subject to clearance of the exchange(s) and the CDBL.

The association noted that obtaining clearance from the exchanges and the CDBL will be cumbersome and unnecessary.

The BAPLC also sought clarification of a directive that said the companies and mutual funds have to keep all unclaimed cash and stock dividends in separate accounts, and those would be transferred to a proposed special fund after three years.

"If any cash dividend remains unpaid or unclaimed or unsettled, including accrued interest thereon, for a period of three years from the date of declaration of approval or record date, as the case may be, will be transferred by the issuer to the fund as prescribed by the commission," the directive mentioned.

Referring to the Indian Companies Act - which allows the companies up to seven years period to keep such unclaimed fund, the BAPLC said the existing Companies Act of Bangladesh needs to be changed and new provision needs to be incorporated.

However, the investors claiming the cash or stock dividends, upon proving their ownership, would get it back in 15 days with accrued interest added.

According to a compilation by the two stock exchanges, the listed companies and mutual funds have nearly Tk 10 billion in undisbursed cash dividends, as there is no claim from shareholders concerned.

The issuers also reported, a few weeks ago, undisbursed stock dividends worth nearly Tk 200 billion.

The BAPLC recommended that the securities houses will collect or update the information of shareholders, which will be stored with the CDBL. The issuer company will collect the information from the CDBL storage when required.

However, the BSEC directed that the issuer, by itself or by appointing an agent, will maintain detailed information of BO account, bank account, mobile phone number, email and address of the shareholder or unit-holder for proper distribution of cash dividend or stock dividend.

According to the stockbrokers, there are many investors, who are neither in touch with the stock market nor with the issuers concerned. Some of them have died and their nominees are also not in touch, some have gone abroad and are not following up with their financial assets in the stock market.

Some listed companies have decade-old shareholders, who do not even have BO accounts.

Some of the issuers are not cordial enough to get their cash dividends disbursed properly.

If the investor has no bank account for an electronic fund transfer (EFT), the issuer would try other ways to disburse dividends. If there is no way to reach the investor, the issuers must set aside the amount in a separate account.

Stock dividends must be disbursed in 30 days of an AGM. The issuers must communicate with the investors about transactions through SMS or e-mail.

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