SECP allows firms to withhold dividends

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has allowed companies to withhold all future dividends of such shareholders who have not provided their computerised National Identity Card (CNIC) numbers to companies to be written on the dividend warrants.

However, the companies will require the SECP’s approval to withhold dividend of any shareholder.

The Securities and Exchange Commission of Pakistan had introduced the policy of mandatory bearing of CNIC numbers on the dividend warrants of shareholders in 2001.

This was aimed at minimising the risk of money laundering, terrorists’ financing and benami transactions.

Following the introduction of aforesaid requirement, extensive efforts were made by companies to procure copies of CNICs of their shareholders, through public notification, and substantial compliance has been made.

Still there is a small number of shareholders who have not provided their CNICs to the companies.

Therefore, the companies have been allowed to withhold all future dividends of such shareholders who have not provided their CNICs, despite publication/issuance of notices by the company.

Such companies have been advised to provide public notice for at least three dividend declarations to the shareholders before approaching to the Securities and Exchange Commission of Pakistan.

Nevertheless, such companies will be required to issue dividend warrants to such shareholders within five days of receipt of CNIC copy.

The companies will also ensure that list of such shareholders will be prominently displayed on companies’ website.

The SECP believes that this is to safeguard the interests of shareholders, and make the dividend declaration less cumbersome.