HE the Governor of Qatar Central Bank (QCB) and Chairman of the Board of Directors of Qatar Financial Markets Authority (QFMA) Sheikh Bandar bin Mohamed bin Saoud al-Thani issued new rules for the dividend distribution in financial markets.
Such rules, which are being implemented for the first time, include substantial changes in the mechanisms of annual dividend distribution to shareholders in public shareholding companies listed on the Qatar Stock Exchange (QSE) and include regulating the interim dividend distribution (quarterly, semi-annually) for companies wishing to do so.
CEO of QFMA Dr Tamy bin Ahmad al-Binali announced that the new rules will be implemented as of 2024.
He said that under such rules, QSE listed public shareholding will be allowed for dividend distribution on an interim basis (three months or six months) or annually, as is currently in effect. These companies will also be required to distribute dividends within certain period, which shall not be exceeded.
In addition, Dr al-Binali explained that public shareholding companies will no longer be the entity authorized to distribute dividends and bonus shares to shareholders, explaining that this responsibility will be assumed from now by Edaa, which will make dividend distribution to shareholders on behalf of the public shareholding companies.
He stressed that the new rules for dividend distribution obligated these companies to transfer the dividends scheduled to be distributed to Edaa, which in turn would transfer them to shareholders through several options stipulated in Article (13) of the rules, which include transferring the dividends to the bank account of each investor, or to the trading account of the brokerage company with which the investor deals, or added to the balances of the investor's Qatari credit card (Himyan), according to the investor's choice of his due dividends collection methods.
Article (13) also stipulates, as Dr al-Binali said that the dividend payments to beneficiaries shall be within a period not exceeding the end of the fifth business day after the date of dividends receipt from the listed company. Whereas Article (12) of the rules sets out that "The listed company shall transfer the full value of the cash dividends to the allocated dividends account, which it has been notified of by the Depository and shall send name lists of the shareholders entitled to the cash dividends scheduled to be distributed and their respective share of the dividends to the Depository. This shall be done within a period not exceeding three business days from the date of the interim dividend's decision of the General Assembly or board of directors". Such dividends shall be transferred to the investor's account within a period not exceeding 10 days from the date of their approval by the concerned party in the company, whether the General Assembly or the Board of Directors.
Dr al-Binali spoke about the advantages and implications of the new rules, which allows listed companies to distribute interim dividends that provide investors in the stock market with a periodic return (quarterly or annually) on the value of their investments instead of waiting for the annual one. It also contributes to reinjecting part or all the dividends into the market periodically during the financial year as well increasing activity in the market. This also can help attracting a new category of investors to the stock market and enhancing investor confidence in the operational performance of listed companies, the strength of their financial position and their ability to generate real interim revenues and cash flows.
Dr al-Binali pointed out that the interim dividend distribution enhances the expectations of investors in the markets regarding achieving good financial results at the end of the financial year.
He continued by saying that dividends distribution through Edaa aims to facilitate and ease the distribution procedures, preserving shareholders' dividends with a reliable party, unifying the procedures and party of distribution, and accelerating the process of distribution and delivery to such beneficiaries. This can be achieved by shortening the period of dividends receipt by the shareholder to a few days, reducing the costs and burdens on listed companies, and encouraging investors to direct all or some of these dividends back into the market, as well as enabling them to choose the most appropriate means of collecting their due cash dividends as they see fit.
Dr al-Binali said that QFMA conducted a comprehensive study on the possibility of interim dividends distribution in the Qatari capital market, and surveyed, through a questionnaire, the consultations of all those concerned with the new rules, as it became clear that most investors and QFMA's partners prefer the interim dividends distribution (quarterly or semi-annually) which guarantees them a quick cycle of income, provides them with an investment alternative to savings pools in banks, and attracts more of them towards investing in listed companies. This would reflect positively on increased activity in the financial markets and lead to an increase in the volume of liquidity therein.
CEO of QFMA confirmed that QFMA's development of new rules for the dividend distribution comes as pursuant to Articles No. 189 and 323 of Commercial Companies Law No 11 of 2015, setting out rules for the shareholder's obtaining his portion of the profits.
Dr al-Binali said that if the listed company distributes interim cash dividends to shareholders during the financial year, it shall take into account the fulfilment of a number of conditions, which include that the company's articles of association shall include a clause that allows the Board of Directors to distribute interim dividends during the year and gets the approval of the Qatar Central Bank for companies subject to its jurisdiction, and a decision shall be issued by the company's Board of Directors to determine the percentage of interim dividends during the financial year (quarterly or semi-annually) and the due date for the dividends, in accordance with the controls included in the company's articles of association. The Board of Directors shall not approve the interim dividends except after the issuance of the company's quarterly or semi-annual financial statements attached with an audit report from the company's external auditor.
The date of the Board of Directors meeting to discuss the item of interim dividends shall be announced no less than a week before the meeting, and the company shall have achieved net profits in the quarterly or semi-annual financial statements upon which it was decided to distribute dividends to shareholders. Interim dividends shall only be distributed after deducting the specified percentage of legal and optional reserves, if any.
The value of the dividends distributed at the end of each quarter shall not be greater than the profits achieved in the financial statements for the same quarter after deducting the specified reserves, and the company's annual report submitted to the General Assembly shall include the percentages of interim dividends distributed to shareholders during the year in addition to the percentage of dividends proposed to be distributed at the end of the financial year and the total of these distributions.
Dr al-Binali added that, according to these conditions, the company shall not oblige the shareholder to return the interim dividends distributed in accordance with these rules if the company achieves losses in subsequent financial periods during the year, and the external auditor's report shall include a review of the interim financial statements (quarterly/semi-annually), some data that includes the company's achievement of real profits, the value of the net profits achieved after deducting reserves, the availability of sufficient liquidity to cover the distributions proposed by the Board of Directors, and the lack of impact of the proposed distributions on the company's payment of its debts and obligations on the scheduled dates.
