Approval for distribution of dividends on a quarterly basis

Romania
UniCredit Bank S.A.
Summary: 
The new Law no. 163/2018 has entered into force starting with July 15th, 2018. The law is allowing legal entities registered in Romania to distribute dividends quarterly.
Thu, 19/07/2018

The Law no 163/2018 „on the amendment and completion of Accounting Law no. 82/1991, of Companies Law no. 31/1990, as well as of Law no. 1/2005 on the organisation and operation of cooperation“ was published in the Romanian Official Gazette on 12 July 2018 and entered into force on 15 July 2018. Based on the Law no 163/2018 provisions, Romanian legal entities are able to distribute dividends to shareholders either:

-      quarterly, on an optional basis in proportion to participation in the share capital, based on interim financial statements;

or

-      annually, after adjustments made by way of annual financial statements, unless the articles of association provide otherwise.

Dividends may be distributed to shareholders on a quarterly basis during the financial year, up to quarterly net profit, plus any reported profits and amounts withdrawn from reserves available for that purpose, less any losses incurred and amounts deposited in reserves in accordance with legal or statutory requirements.

Amounts relating to the interim distribution of dividends should be recorded in the accounts and reflected in the interim financial statements as receivables against shareholders. Differences resulting from the distribution of dividends during the year are adjusted according to the annual financial statements. The amounts distributed during the financial year are adjusted upon approval of the annual financial statements, and dividends distributed and paid in excess during the financial year must be returned within 60 days from the date of approval of the annual financial statements.

Prior to the changes brought by Law no 163/2018, the distribution of dividends was solely possible pursuant to the approval of the annual financial statements, for the year ended.

Impact on investors: Starting from 15 July 2018, investors of Romanian companies could receive dividends on a quarterly basis. Distribution amounts will be based on the interim financial statements approved by the General Meeting of Shareholders.