The Russian Ministry of Finance has drafted amendments to the Federal Law “On Joint-Stock Companies”, proposing the possibility to pay dividends out of other sources than the company’s net profit, and to link dividends to other performance indicators. The main criterion to pay dividends will become the extent of excess of the company’s net asset value over its equity capital. Moreover, dividend payouts must not result in the company’s bankruptcy.
It is also suggested to amend the dividend payout procedure for preferred shares. The proposal is to fix the dividend amount due to payment for preferred shares in the company’s charter, either in absolute terms or as a percentage of nominal value of these shares, or to link it to any of the company’s performance indicators. According to current legislation, dividends on preferred shares are to be paid out of the net profit or may be disbursed from funds specifically provided for this purpose. If dividends cannot be paid out, such shareholders receive voting rights.
The amendments to the Law are primarily aimed at increasing dividend payments made by state companies. Last week the Ministry of Finance called to increase dividends under international accounting standards in all state companies and corporations in Russia to 35% starting from 2016, saying that this would increase revenues to the state budget.
Impact on investors: Investors may receive larger amounts of dividends paid by Russian companies.