Sebi cracks down on cos over dividend

The Securities and Exchange Board of India on Wednesday directed the stock exchanges not to relax norms and allow companies to declare interim dividend before the stipulated period, a measure companies are adopting to avoid tax liability of the next fiscal.

"Stock exchanges are hereby advised to take a uniform view in the matter, namely to advise companies of the requirement of due notice period of Listing Agreement, and that no relaxation in the mandatory 30-day notice for dividend announcements would be permitted," the market regulator told bourses.

Under the SEBI norms on Listing Agreement, a company has to inform the stock exchanges about the notice period for book closure and record date, which should not be less than 30 days for demat shares and 42 days for shares in physical form.

However, it was found that scores of companies announced interim dividends within four days of the Budget announcement of taxing dividends at the hand of recipients as against the previous rule of a 10 per cent distribution tax on companies and mutual funds.

"This would enable the promoters and shareholders to avoid the tax liability proposed to be imposed by the Finance Bill 2002," SEBI noted.

The decision comes after a finance ministry directive to SEBI to look into the irregularities by companies while announcing interim dividends announced by companies soon after the Budget.

Accordingly, SEBI had asked stock exchanges to furnish details in this regards.

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