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INTERIM DIVIDENDS FOR ROMANIAN COMPANIES

For many years there has been an ongoing debate in Romania about the payment of dividends during the current financial year. Following a strict interpretation of the law most companies would not pay a dividend until the closing of the year-end in question and when the actual profit had been ascertained, as the law provides dividends can only be paid out of profits.

On 10 July 2018, the Romanian Parliament adopted Law no. 163, which gave to the shareholders of a company the option to distribute interim dividends on a quarterly as well as an annual basis.

It is now therefore possible for a company to distribute dividends to shareholders on a quarterly basis. The payment will be made to all shareholders in accordance with their shareholding. The dividend payment will be made based on the paid-up share capital and on interim financial statements. At the year-end any additional dividends (annual dividends) will be paid subject to adjustments being made with respect to the annual financial statements, unless the Statutes of the company of the company state otherwise. This means that companies will still only be able to pay the dividends for the year based on the profits earned during that year.

The regularisation of any shortfall with respect to amounts distributed during the fiscal year can only take place after approval of the annual financial statements, and such differences must be paid within 60 days of the date of approval of the annual financial statements. If this deadline is not observed, the company will pay penalty interest. Failure to pay on time will incur the company in paying interest on the dividend due either at the statutory rate or a higher rate if this is mentioned in the statutes.

In the case of a quarterly distribution of dividends during a fiscal year, the annual financial statement must how the payment of these dividends as well as the regularisation of any differences.

The annual financial statements, the annual report of the Board of Directors or the report of the Directory Board and the report of the Supervisory Board, as well as the proposal regarding the distribution of dividends must be made available to the shareholders at the headquarters of the company from the date of the notice convening the General Shareholders Assembly. Shareholders if they request it can receive copies of the documents on payment of a fee.

Companies that opt to pay dividends on a quarterly basis are required to prepare interim financial statements. If the company is being audited for statutory purposes, these interim financial statements will also need to be audited.

Will Romanian companies pay interim dividends? This will be a question that can only be answered over a period and will depend on the attitude of the Board. There have been some comments in the Press that only companies in which the Government or investment funds have substantial holdings will interim dividends be paid. Only time will.