The top 500 listed companies (by market capitalisation) will now have to declare a dividend distribution policy to their shareholders, SEBI announced after its board meeting on Thursday.
In the recent past, the dividend issue has come under the regulator’s scanner, with some companies shying away from paying out part of their profits to investors.
Now companies will have to declare in their annual reports and on their websites the circumstances under which a shareholder can expect dividend and the financial parameters that will be considered before declaring dividends.
Additionally, the company would also have to lay out the internal or external factors it would have to watch out for before deciding dividends and the provisions it will make for various classes of shares.
If the company decides not to pay out in a certain year, then the policy should also explain how these retained earnings will be used.
SEBI believes that a publicly stated dividend policy would help investors take informed decisions.
Settlement Guarantee FundIn August 2014, the SEBI asked stock exchanges to set aside profits to create a core settlement guarantee fund (SGF) which could be used to honour settlements in case of a counterparty default, which exchanges have now built up.
In Thursday’s meeting, SEBI decided to do away with a requirement of transfer of 25 per cent of profits by stock exchanges to core SGF.
Instead, they will now be mandated to do a monthly review of the corpus and replenish the core SGF immediately in case of any shortfall.