RECORDER REPORT

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has allowed companies to withhold payment of dividend to shareholders in certain circumstances.

According to the Companies (Distribution of Dividends) Regulations, 2017 issued here on Monday, the SECP has explained the circumstances to withhold payment of dividend.

A company may, on its own and without making an application to the Commission, withhold the payment of dividend of a shareholder where the shareholder has not provided the company with its identification number.

A company may, within a period stipulated apply to the Commission for approval to withhold or defer payment of dividend to the shareholder or person entitled to receive dividend along with payment of fee as specified. Provided that the company shall intimate the respective shareholder of its intention to withhold dividend amount and reason thereof within fifteen days from the date of its declaration. The Commission after providing an opportunity to the shareholder or person aggrieved may allow the company to withhold or defer payment of dividend, the SECP said.

A company may on its own and without making an application to the Commission withhold the payment of dividend of a shareholder in case of a listed company, the shareholder has not provided the company with complete and valid details of designated bank account for direct credit of cash dividend. In case of a company other than a listed company, the shareholder has instructed the company for direct credit of cash dividend to designated bank account but has not provided the company with complete and valid details of designated bank account for direct credit of cash dividend and an embargo or restriction has been placed by the competent authority in respect of shares held by the entitled shareholder: provided that before withholding payment of dividend, the company shall send a notice to the shareholder on its registered address and advertisement in this regard shall be published in two newspapers having nationwide circulation within fifteen working days of declaration:

Provided further that no notice will be required to be sent to a shareholder to whom the company has already sent three consecutive notices under the first proviso of this regulation.

In case where a shareholder has mandated the company for direct transfer into the designated bank account and also provided the company with details of its designated bank account, it shall be responsibility of the company to make payment of dividend payable in cash to such person directly into the designated bank account of such shareholder in the laid down manner.

Under the procedure, the company may appoint a paying agent, directly or through its share registrar, and provide it with details of entitled shareholders including its name, identification number, information pertaining to designated bank account number and net amount required to be paid into the designated bank account.

The net amount required to be paid into the designated bank accounts of relevant shareholders shall either be transferred to the bank account of paying agent or made available to paying agent through any other mean for onward distribution to the entitled shareholders and the paying agent shall make payments as per details provided by the company and in case of failure to transfer any amount into any designated bank account for any reason, promptly communicate the same to the company and the paying agent shall provide the company with confirmations of payments into the designated bank accounts of relevant shareholders for onward communication to the relevant shareholders.

In case, shares of listed companies are held with the custodian banks where checking accounts and/or omnibus cash accounts are maintained for the purpose of distribution of dividend, the paying agent shall be authorized to credit the checking account or omnibus account, as the case may be as provided by the custodian bank.

The custodian banks shall ensure passing on the dividend amount to the respective foreign investors within five working days of receipt of the same and in case of inability of custodian bank to pass on dividend amount with the allowed time period, it shall forthwith return the money to the respective listed company. In case shares of a company, whether listed or not, are held by a non-resident shareholder having no designated bank account, the company may make payment of cash dividend to such shareholder in a manner and within such time period as may be allowed by the State Bank of Pakistan.

Any dividend withheld shall be paid to the entitled shareholder in the same manner as provided under this regulation within a period of fifteen working days from the date of removal of reason to withhold such cash dividend, the SECP added.