Companies to disclose reasons for partial distribution or non-distribution of profit

Listed companies will have to disclose the reasons for partial distribution or non-distribution of profit to the shareholders as dividend to make shareholders informed about the companies' financing position.

The company's plan for utilisation of the undistributed profits will also be disclosed through the directors' report to the shareholders.

The Bangladesh Securities and Exchange Commission (BSEC) has included this provision in the draft of corporate governance guidelines.

The listed companies will also not be allowed to pay dividend other than profits for the year or any other undistributed profits.

"The board of directors shall disclose a detailed report on utilisation position of undistributed profit in its report for the annual general meeting of the company for shareholders' consideration," said the draft of corporate governance guidelines.

After taking public opinion the securities regulator will finalise the proposed corporate guidelines.

The BSEC officials said the shareholders remain in dark about utilisation of profit when it is distributed partially or remains un-distributed.

"That's why the regulator has included the provision of disclosing the reasons for partial distribution or non-distribution of profit as dividend," said a senior official of the securities regulator.

He said the objective of including the provision is to make clear the company's financing plan to be implemented with the un-distributed profit.

The condition of disclosing the reasons for undistributed profits will not be applicable for the issuer companies which would recommend at least 10 per cent cash dividend on the face value/paid-up capital for the relevant financial year.

As per the draft of corporate governance guidelines, the directors' report to the shareholders will also include a statement of utiliasation of proceeds from public issues (IPO/RPO), rights issues, private placement or through any others instruments.

Another explanation will be required if the financial results deteriorate after the company goes for Initial Public Offering (IPO), Repeat Public Offering (RPO), Rights Offer (RO), Private Placement (PP), Direct Listing (DL), etc. along with a comparative statement of financial results.

The directors' report will also include an explanation as well as a comparative report on financial results between actual results after the company goes for IPO, RPO, RO, PP, DL, and results estimated or projected in the prospectus, information memorandum, information document or rights share offer document before going for such IPO, RPO, RO, PP or DL.

The companies will require the explanation if significant variance occurs on the financial results or performances between the quarterly financial statements and annual financial statements.

According to draft of corporate governance guidelines, the listed companies will also require the disclosure on dividend policy.

The dividend policy will focus, among others, ordinary and minority shareholders' rights, equitable rights in dividend on ordinary shares, employees' stock option, if any, and dividend on preference shares, if any.

The directors' report to shareholders will include the statement to the effect that no dividend has been/shall be paid from any un-realised gain, any other comprehensive income or through reduction in capital.

"The directors' report will also include the statement to the effect that no bonus share or stock dividend has been /shall be declared as interim dividend," said the draft of corporate governance guidelines,".

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