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Dividends - Quarterly distribution

Dividends - Quarterly distribution

Law no. 163/2018 (the Law) amending Article 19(3) of the Accounting Law (no. 82/1991), amending and supplementing the Companies Law (no. 31/1990), and amending Law no. 1/2005 on the organization and functioning of cooperatives was published in the Official Journal of Romania, Part I, no. 595 of 12 July 2018.

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The law allows for the distribution of dividends quarterly, as compared to the previous regulation under which dividends could only be distributed once a year, after approval of the annual financial statements.

If the company opts for the quarterly distribution of dividends, it will be required to prepare interim financial statements in accordance with the legislation in force. The interim financial statements are subject to audit, if the entities preparing them are required to have a statutory audit of their annual financial statements, or if they opt to have their annual financial statements audited, in accordance with the law

Provisions on the quarterly distribution of dividends

  • Optionally, based on the interim financial statements, dividends may be distributed to shareholders quarterly, proportionately to their participation in the paid-up share capital, unless otherwise provided in the Articles of Incorporation.
  • Distribution is made within the level of the quarterly net accounting profit, plus any retained earnings carried forward and amounts withdrawn from available reserves less any loss carried forward and amounts deposited in reserves in accordance with the legal or statutory requirements.
  • Quarterly dividends are paid within the time limit set by the general meeting of shareholders or by special laws, as appropriate.
  • In the case of partial distribution of dividends to shareholders during the financial year, the partially distributed dividends should be set out in the annual financial statements and the resulting differences should be settled accordingly.
  • Settlement differences should be paid/redeemed within 60 days of the date of approval of the annual financial statements for the previous financial year. Failure to meet this deadline will lead to penalties for the company/ shareholders.
  • Dividends paid contrary to the above requirements should be refunded if the company proves that the shareholders knew of the irregularity of the distribution or if, under the circumstances, they could have been expected to have been known.

Accounting

  • Entities opting for the quarterly distribution of dividends are required to prepare interim financial statements accounting for the partially distributed dividends.
  • Amounts relating to interim dividend distributions are recorded in the accounts and are reflected in the interim financial statements as receivables from shareholders.

Audit and verification

Interim financial statements are subject to audit if the entities preparing them are required to have statutory audits of their annual financial statements or they opt to have their annual financial statements audited, in accordance with the law, and are subject to verification by censors if the annual financial statements are required to be verified by censors, according to the law.

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