According to information shared by Investment Newspaper on April 29, 2023, “many banks and businesses made big profits last year but still did not pay dividends, disappointing shareholders and investors.” So the question is do those banks and businesses have the right to decide whether or not to pay it?
1. Regulations on dividend payment
Article 135, Enterprise Law 2020 stipulates as follows:
“Dividends paid for preferred shares are made according to separately applicable conditions. Dividends paid on common shares are deducted from the company’s retained profits. The Board of Directors prepares a list of shareholders eligible to receive dividends and determines the amount of dividends to be paid for each share.”
Accordingly, dividends are distributed from the company’s retained profits. Additionally, the Board of Directors (BOD) possesses the authority to propose the amount of money that should be paid according to point o, Article 153, Law on Enterprises 2020. Moreover, the General Meeting of Shareholders (AGM) retains the responsibility of determining the annual dividend level for each type of share as stated in point b, Article 138 of the Enterprise Law 2020. Consequently, no entity can exercise discretion in the decision to pay dividends. Furthermore, it is solely the General Meeting of Shareholders that determines the percentage of profit that shareholders can receive as dividends.
2. Cases where the company may not pay dividends to shareholders
Article 135, Enterprise Law 2020 stipulates the conditions for dividends as follows:
– The company has fulfilled its tax and other financial obligations;
– Company funds have been set aside and made up for previous losses;
– After paying all dividends, the company still ensures payment of debts and other financial obligations due.
3. Regulations on shareholders’ right to object to dividends
As long as the business has retained profits, its shareholders will receive dividends appropriate to that profit level. Shareholders also have the right to object when the dividend level given is inappropriate.
When shareholders do not agree to the dividend distribution plan:
– Before the General Meeting of Shareholders, shareholders have the right to propose issues to be included in the meeting agenda.
– During the meeting, shareholders have the right to speak and vote against the recommendation of the Board of Directors.
– After the meeting, shareholders are entitled to request the cancellation of the resolution of the General Meeting of Shareholders.
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Harley Miller Law Firm “HMLF”
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