Dividend policy

The purpose of having and disclosing a dividend policy is to provide an account of how the board stewards the company’s income to create value for shareholders. A dividend policy explains how the cash generated by the company is allocated, the objectives, risks and constraints considered, and why the allocation is appropriate.

It is good for a company to announce its dividend policy as this is a factor that investors may generally consider when assessing the company’s expectations of future cash flows and the extent to which those cash flows can be used for reinvestment, may be available for dividends, or can be used for other purposes. This information is a relevant input into investors’ pricing of the company’s shares and can also attract potential investors that are looking for a particular type of company.

A company would normally consider various factors including its cash and reserves position, business prospects, capital commitments, and projected financial position in deciding whether to declare any dividend and, if so, the level of dividend to be declared. It is helpful to investors when companies that do not intend to distribute dividends nevertheless communicate their considerations for not doing so under their dividend policy disclosure and identify the circumstances that would allow them to do so in the future.

A dividend policy also provides useful information to assist investors in assessing the company’s expectations of cash flows, its ability and propensity to use that cash flows to pay dividends to investors and thus the suitability of the company’s shares as an investment to the investor. A disclosed dividend policy may encourage the company to exercise greater discipline and consistency in the distribution of dividends to shareholders.

It is appropriate to review the dividend policy regularly in light of the changing business environment. Factors to consider include capital expenditure needs, growth opportunities, business risk assessments, economic cycles, and changes in regulation or taxation.

Facilitating shareholder participation at general meetings

While companies are required to meet the minimum notice period for general meetings, companies should consider providing longer notice for meetings, especially when dealing with complex transactions, or where the company has numerous overseas shareholders.

Management is encouraged to make a presentation to shareholders to update them on the company's performance, position and prospects at general meetings. Presentation materials should be made available on SGXNET and the company's website for the benefit of shareholders.

In order to enhance shareholder participation in general meetings, companies should use their best endeavours to avoid scheduling meetings during peak periods when the meetings may coincide with those of other companies, especially if they have a large shareholder base. Companies should consider other avenues of engaging shareholders, such as through townhall meetings, briefings and roadshows, or webcasting meetings and allowing electronic online voting of shares.

Resolutions

In general, resolutions should not be bundled or made inter-conditional on each other. This is to ensure that shareholders are given the right to express their views and exercise their voting rights on each resolution separately. However, in situations where resolutions have to be inter-conditional (such as in meetings to approve a reverse takeover), the company should provide clear explanations.

Companies should provide the necessary information on each resolution to enable shareholders to exercise their vote on an informed basis. For resolutions on the election or re-election of directors, companies should provide sufficient information on the background of directors, their contributions to the company, and the board and committee positions they are expected to hold upon election.

Director involvement during general meetings

Directors should be present for the entire duration of general meetings. The Chairman of the meeting should facilitate constructive dialogue between shareholders and the Board, Management, external auditors and other relevant professionals. The Chairman should allow specific directors, such as board committee chairs or the lead independent director, to answer queries on matters related to their roles.

Directors should take the opportunity to interact with shareholders before and/or after general meetings.