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Sebi to review notice period for dividend

BS Markets Bureau

The Securities and Exchange Board of India will shortly be reviewing the 30-day mandatory notice period for fixing the record date for declaring dividends by listed corporates, Sebi chairman G N Bajpai announced on Thursday.

But he refused to be drawn into any further discussions on the subject.

He was speaking to reporters on the fringes of a meeting on corporate governance at the Indian Merchants Chamber.

Industry sources said Sebi may have been encouraged to rethink the mandatory period issue after its meeting with merchant bankers last month.

The merchant bankers had reportedly told Sebi that there is no legal sanction or binding ruling behind the 30-day period.

"It is a legacy of the times when shareholdings were in physical form. The idea perhaps was to give shareholders enough notice to get their shares registered if they wanted to avail themselves of the dividend. Now, with almost everything in demat form, it does not make sense anymore," a merchant banker said.

The 30-day notice period created havoc in March this year when companies rushed to declare dividends following the Budget announcement that dividends would be taxable in the hands of the recipients from the following fiscal, that is 2002-03.

None of the companies had given the required notice period and had already filed their announcements with the respective stock exchanges.

Initially, the stock exchanges had no problem with the shortened time period and allowed the companies to file their notices.

However, pressure from the finance ministry forced Sebi to direct stock exchanges to stick to the listing agreement and enforce the 30-day notice period rigorously. This forced all the companies to withdraw their dividend announcements.

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