Firms to face music for failure to transfer unclaimed dividends
BSEC to impose a 2.5% surcharge for failure to pay unclaimed dividends
The Bangladesh Securities and Exchange Commission (BSEC) is becoming stricter in realising unclaimed and undisbursed dividends from companies listed on the country's stock market.
The companies will have until 30 June to deposit the undisbursed dividends to the Capital Market Stabilisation Fund (CMSF). In the event of default, they will be required to pay a surcharge of 2.5% of the undisbursed amount every month.
After the formation of CMSF in 2021, the commission directed the listed companies to deposit the undistributed dividends of more than three years into the fund.
According to CMSF officials, while some companies transferred 100% cash or bonus dividend deposits, others gave nothing. In particular, some have deposited cash dividends but not yet transferred bonus dividends.
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However, there are questions about the legality of the formation of the fund by the BSEC.
At a meeting of the Bangladesh Bank with the capital market regulator in September last year, questions were raised about the formation of the fund.
However, it is expected that a decision on depositing undistributed bank dividends into the fund will be made later.
After that, banks showed reluctance to deposit the unclaimed dividends, but now some banks have deposited partial dividends.
In a recent function, private banks said that the dividend lying in the banks will be transferred to the CMSF fund soon.
A CMSF official told TBS that Social Islami Bank has deposited Tk11.44 lakh undistributed bonus dividends in the CMSF fund. A few more banks said they would deposit as well.
Although the commission estimates that the amount of undistributed dividends may be Tk21,000 crore in the beginning, some companies hurriedly distributed the dividends after finding out their shareholders.
With information from CDBL and the Dhaka Stock Exchange, CMSF says that after the formation of this special fund, 354 companies are expected to disburse cash dividends of Tk599 crore.
And 349 companies have 193.85 crore undisbursed stock dividends, whose current market value is around Tk8,107.05 crore.
As of 2 May, 289 companies have transferred a total cash dividend of Tk520.10 crore and 193 companies have transferred 8.49 crore shares with a market value of Tk693.19 crore to the CMSF fund.
As expected, the bonus dividend payout ratio is only 4.38% and the cash dividend payout ratio is 86.77%.
According to officials, while the companies responded well to depositing the cash dividends, they were indifferent to transferring the bonus shares. As a result, the commission has become stricter about collecting undistributed dividends.
The commission had earlier decided to appoint an auditor to verify the claims of companies about distributing dividends after the initiative was taken to form the Fund.
18 auditors will be appointed in about 50 companies, who will look into the disbursement and proper utilisation of long-standing dividends in the companies.
The BSEC formed the CMSF in 2021 with a view to collecting undistributed, unclaimed, or unsettled dividends—both cash or stock, unallotted rights shares, or non-refunded public subscription money—in favour of the shareholders, stockholders, or investors for investing the fund in the stock market.
The companies are not distributing the dividends because they cannot find shareholders.
If this money is brought to the capital market through this fund, the supply of liquidity will increase.
The CMSF fund will primarily be used to stabilise the capital/securities markets and ensure liquidity through the buying and selling of listed securities, investments in other securities, loans and other forms of support for market intermediaries and market makers, lending and borrowing (SLB) of listed securities, and the resolution of investor claims.
According to CMSF rules, a maximum of 40% of the cash balance of the fund may be used for direct buying and selling of listed securities.
At least 50% of the cash in the fund shall be used for providing loans to market intermediaries for refinancing as margin loans, while a maximum of 10% may be used for investment in other securities, such as fixed deposits, government securities, fixed income securities, mutual funds, etc.
