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г.Новосибирск

Shareholder's right to receive dividends

28.06.2022

Implementation of the shareholder's right to receive dividends: payment of an increased amount of dividends. Arbitrage practice.

According to Art. 42 of the Federal Law "On JSC", the decision on the payment of dividends is made by the general meeting of shareholders. In this case, the decision regarding the establishment of the date on which the persons entitled to receive dividends are determined is made only at the proposal of the board of directors (supervisory board) of the company. In this regard, can an additional issue of JSC shares affect the exercise of the shareholder's right to receive increased dividends?

Case plot:

Angioline JSC paid dividends due to its participants in the amount of 14 million rubles. However, subsequently, by a court decision, the additional issue of ordinary registered non-documentary shares of JSC was declared invalid, as a result of which they were subsequently canceled.

The shareholders of the joint-stock company applied to the court with a claim for the recovery of dividends.

Firstly, according to the applicants, the courts incorrectly applied the provisions of Article 42 of the Federal Law “On Joint-Stock Companies”, did not take into account that the company’s profit was to be distributed only among the company’s shareholders, in fact, the plaintiffs did not receive the dividends due to them in full as part of the company’s profit.

Secondly, as a result of the adoption of the disputed judicial acts, the right to illegally receive dividends on the canceled issue of shares and distribute the company's net profit to persons who are not shareholders is actually legalized.

Thirdly, the applicants believe that due to the invalidation of the additional issue of shares, the part of the net profit allocated for the payment of dividends was subject to distribution among a smaller number of shares (ie, excluding shares of the additional issue).

Judicial act: Resolution of the Arbitration Court of the West Siberian District of February 10, 2022 in case No. A45-1493/2021

Court's findings:

1. There are no grounds for paying dividends in an amount greater than established by the decision of the general meeting of shareholders of the company.

2. The decision on the payment of dividends, including the amount of the dividend and the form of its payment, is taken by the general meeting of shareholders on shares of each category, including preferred ones, in accordance with the recommendations of the board of directors of the company. In the absence of a decision to declare dividends, the company is not entitled to pay, and the shareholders - to demand their payment.

3. The issue of a part of the shares, subsequently recognized as illegal, may be the basis for unjust enrichment among shareholders in connection with their receipt of dividends on the relevant shares, and does not in any way violate the rights of the plaintiffs to receive dividends in accordance with the decision of the general meeting of shareholders of the company, since they received their dividends in full.

Comment:

1. By virtue of the constitutional principle of freedom of economic activity, the general meeting of shareholders has the right to independently make strategic economic decisions.

2. Such decisions also include the decision on the payment (declaration) of dividends, including on the amount of the dividend and the form of its payment for each category (type).

3. The rules for the distribution of profits between shareholders are described in the charter or in a separate document on the dividend policy of the joint stock company. The issuer can tie the amount of payments to specific indicators - profit, free cash flow, etc.

4. The board of directors evaluates the received profit and makes a recommendation on how much to spend on dividends. The recommendation is discussed at the meeting of shareholders: it is it that determines the final amount of payments and the date of closing the register of shareholders entitled to receive dividends (cut-off date). The amount of dividends cannot exceed the limit recommended by the board of directors.

5. Thus, the right of a shareholder to receive dividends can be exercised only if the general meeting of shareholders makes a decision on accrual and payment of dividends based on the results of the financial year.

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