Dividend payments by Listed Companies will now reach Shareholders faster
The recently approved amendments to the listing rules of the Colombo Stock Exchange (CSE) by the Securities and Exchange Commission of Sri Lanka (SEC) will enable shareholders to receive dividends declared by Listed companies much faster. These reforms are a part of broader changes considered and implemented by the SEC and CSE to facilitate the digitization of capital market operations.
The amended rules have shortened the time period for the payment of dividends by Listed companies from 7 market days to 2 market days from and excluding the XD date in instances where the shareholder has provided accurate bank account details to the Central Depository Systems (Pvt) Limited (CDS) or to the company. In such instances, it has been made mandatory to all Listed companies to directly credit the respective bank accounts within the time period.
The XD date is the day immediately following the date on which the dividend payment resolution is passed at the shareholders meeting in instances where the approval of shareholders is required and in instances where shareholder approval is not required, the XD date is the 7th market day excluding the date of the dividend announcement.
It is noted that dividend payments are generally made in the traditional form via cheques, even though the electronic payment option is available. Under the amended rules, shareholders could continue to receive dividends through cheques but the option has been provided for shareholders to receive dividends much faster by declaring their bank account details in a secure manner to the CDS through their respective Stockbroker.
In the perspective of investors, receiving dividends via direct deposits to their bank accounts brings about a seamless process as opposed to payments via cheques, which may face unexpected interruptions such as postal delays and undue inconvenience of visiting the banks to deposit the cheques. Given the social distancing measures in place, this could be considered a timely measure.
In the perspective of corporates, paying dividends directly to shareholder bank accounts will ease what could be a complicated and long-drawn manual process, which could involve complications such as managing delivery failures. Depending on the volume, there is also likely to be a saving in terms of the cost of processing cheques.
Through this initiative the capital market has made a complete commitment to supporting the wider financial sector reforms in reducing physical cheque payments and supporting the national payment and settlement effort.
