9 firms face fines for dividend payout failure

Nine publicly listed companies are facing potential fines from the Bangladesh Securities and Exchange Commission (BSEC) for failing to pay dividends to shareholders within the stipulated timeframe.

The BSEC had earlier set a deadline of 15 December for these companies to disburse the dividends. Failure to comply could result in significant penalties for the company's directors.

The companies are BD Paints, Oryza Agro Industries, Safko Spinning Mills, Mamun Agro Products, Lub-rref (Bangladesh), Krishibid Feed, Associated Oxygen, Pacific Denims and Krishibid Seed.

Two years ago, after declaring dividends for fiscal year 2021-22, the companies defaulted on payments to their shareholders within the stipulated time mandated by the listing regulations.

To protect investors' interests and promote the development of the capital market, the Bangladesh Securities and Exchange Commission (BSEC) decided in the second week of November to impose fines for defaults and non-compliance with securities laws.

When the decision to impose fines was made, the commission also set a deadline for disbursing dividend payments. 

If the company owners, excluding all independent directors, miss the deadline, the commission will impose fines ranging from a minimum of Tk10 lakh to a maximum of Tk2.35 crore for each director.

If the default continues, all directors including its managing director will face Tk10,000 as penalty for every day.

The rules

According to listing regulations, listed companies are required to disburse declared or approved cash dividends within 30 days of approval at their annual general meeting (AGM). 

If any listed company fails to pay dividends within the stipulated time, its directors shall be jointly and severally liable to pay a penalty of Tk5,000 for every day the default continues.

The defaulting companies declared dividends for FY22, which ended on 30 June 2022.

Later, the declared dividends were approved at their respective AGMs.

Non-compliance and fines

According to BSEC reports published recently as part of enforcement actions, BD Paints declared a 10% cash dividend for FY22 but failed to pay it within the mandated time.

As a result, the commission decided to fine each director Tk97 lakh, if failed to disburse the dividend to its shareholders within 15 December. The penalty must be paid as a personal liability, the report states.

The default of the other eight companies is similar to that of BD Paints.

Oryza Agro Industries approved an 11% cash dividend for FY22. However, as it failed to disburse the dividends, the BSEC decided to impose a fine of Tk47 lakh on each director.

The directors of Safko Spinning Mills, which approved a 2% cash dividend, will face fines of Tk20 lakh each.

Each director of the other defaulting companies will face the following penalties: Pacific Denims Tk13 lakh, Lub-rref (Bangladesh) Tk2.35 crore, Mamun Agro Tk13 lakh, Krishibid Feed and Krishibid Seed Tk10 lakh and Associated Oxygen Tk1.91 crore.