On 27 March 2016, the Securities and Stock Market State Commission (SSMSC) decision from 12 March 2016 of No. 391 “On Procedure of payment of dividends by a joint stock company” came into force.
The document provides joint stock companies with a choice to carry out payment of dividends either through the depository system of Ukraine or directly to shareholders. The specific method of payment of the dividends is determined by a relevant decision of the general shareholders meeting about the entire issue of securities of the joint stock company (§3, Section І).
Payment of dividends directly to the shareholders
Payment of dividends directly to the shareholders on common shares is carried out within six months from the date of a decision of a general meeting of a joint stock company to pay dividends. A general meeting may also hold a decision to carry out the payment of dividends in the shorter term (§1, Section II).
Payment of dividends directly to the shareholders is held:
- By transferring funds to shareholders’ accounts (bank accounts which are specified in the list of persons entitled to receive dividends)
- By postal orders to the shareholders’ addresses, specified in the list of persons entitled to receive dividends (in case the list of persons entitled to receive dividends does not contain bank account information) (§3, Section II)
If the transferred funds return, the joint stock company has to provide an appropriate payment to the shareholders through the depository system of Ukraine (§4, Section II).
Payment of dividends through the depository system of Ukraine
Payment of dividends through the depository system of Ukraine is carried out based on the agreement on service of the securities issue with a central depository – National depositary of Ukraine (§1, Section III).
National Depository of Ukraine, after receiving information about the company`s intention to pay dividends and/or about the order to compile a list of persons entitled to receive them, publishes the relevant information on its website within the next business day (§6, Section I).
Payment of dividends through the depository system of Ukraine is carried out in three stages:
- Transfer of funds (that have to be paid to persons entitled to receive dividends) from the joint stock company to the banking account of the National Depository of Ukraine
- National Depository of Ukraine provides an order to other depository institutions to carry out the payment of dividends
- Depositary institutions pay the dividends to the shareholders (§2, Section III)
At the same time, the joint stock company can carry out the payment of dividends either by paying the entire amount of the dividends in full volume or by several parts, if it is required by the decision of the general meeting or the supervisory board of the company. In case of the company adopting the decision to pay dividends by parts, such payments are carried out simultaneously to all persons entitled to receive dividends (par.1, §2, Section III).
SSMSC decision No. 391 also governs the process of shareholders’ notification about the payment of dividends:
- A company shall notify the persons entitled to collect dividends of the date, amount, procedure and term of their payment
- If the dividends are paid directly to the shareholders, the notification shall also contain additional information about the method for shareholder to obtain dividends, as well as information about the procedure of payment through the depository system of Ukraine (in case the transferred funds return and the joint stock company has to provide an appropriate payment to the shareholders through the depository system)