You may have seen our recent legal update Dividend Cuts. Since publishing that update ICSA have released a guidance note on the withdrawal or amendment of a dividend resolution which is to be put to the AGM. The note contains clear guidance on how to withdraw or amend the resolution up to the point the resolution has been put to the AGM.
We are starting to see a range of approaches appear within the market with some companies opting to use interim dividends as a more flexible way to offer investors some form of return albeit with the ability to change that position up until the point that the payment is made. Others are opting to cut the dividend completely given the current uncertainty and competing demands for cash in their underlying businesses and some have ploughed ahead with their dividends remaining unchanged.
As the AGM season unfolds what is clear is that directors are having to balance the competing interests of a range of stakeholders during unprecedented times making the decision on whether or not to recommend a dividend increasingly more complex.
Written by Amy Carr.
Due to the unprecedented impact of COVID-19 on businesses, many companies will be considering that there is a need for prudent cash management at this time. The Board may therefore conclude that it is no longer appropriate to recommend or declare a dividend that is due to be put to shareholders for approval at the Annual General Meeting. Alternatively, Boards may conclude that a dividend should still be paid but the amount of the divided should be reduced.
https://www.icsa.org.uk/my_cg/technical-archive/tb_agm_dividend_resolution_guidance