Digi (DIGI.RO) is currently analyzing the effects of this change and OMV Petrom (SNP.RO) says the dividends are decided yearly and the decision is the prerogative of the general meeting of shareholders.
First tier private companies are therefore reluctant to pay dividends quarterly, a step that allows money to change hands faster and will mostly benefit the government, which is experiencing a cash flow problem at the moment.
“The law allowing quarterly payment of dividends, which is optional, is generally beneficial and is in line with the regulations in other countries. At the same time, however, it also includes a series of requirements that might be restrictive,” says Alexandra Smedoiu, partner with the tax advisory service department with Deloitte.
The most important limitation is the requirement to draw up interim financial statements and have them audited.
“Unlike small companies where such things are easy to do (as auditing is not necessary), as far as listed companies are concerned, the too high costs and the audit duration are obstacles for the enforcement of this law.”
The PSD government will thus be able to patch the much too generous budget for the second poorest economy of the European Union every few months because the companies whose majority shareholder it is will be turning over some of their profits every quarter.
Investors say they were expecting the large companies to keep the traditional model.
“The only expectations of investors in the last few years are from state-run companies,” says Dumitru Beze, chairman of the association of capital market investors. “To a private sector company, it is rather bureaucratic to deliver dividends every quarter.”
Alexandra Smedoiu says that the law also stipulates that at the end of the year, any dividends paid above the actual the profit must be given back.
“It would be very complicated for listed companies procedures-wise to ask former shareholders to repay the dividends. Since we’re talking about a high number of shareholders of listed issuers, it may generate lawsuits to recoup the dividends that should be returned at the end of the year.”
Raluca Ganea, chairperson of Investors Club said she was expecting private issuers to not share their profits every quarter.
“I expected the law to be a challenge for large listed companies, so they would decide not to pay dividends every quarter. To disburse divisions one needs auditing, plus there’s the risk of returning the money, pressure on cashflow. It is complicated, and I understand the decision.”
(English version by Loredana Fratila-Cristescu)