The Securities and Exchange Board of India (SEBI) has amended the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, through the SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2016. The amendment has inserted regulation 43A, which states that the top 500 listed entities, based on market capitalization (calculated as on 31 March of every financial year), shall formulate a dividend distribution policy which they must disclose in their annual reports and on their websites.
Regulation 43A also lays down parameters that the top 500 entities must include in their dividend distribution policy. These are:
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- The circumstances under which the shareholders of the listed entities may or may not expect dividends;
- The financial parameters that shall be considered while declaring dividends;
- Internal and external factors that shall be considered for declaration of dividends;
- Policy as to how the retained earnings shall be utilized; and
- Parameters that shall be adopted with regard to various classes of shares.
If a top 500 entity proposes to declare dividends on the basis of additional parameters apart from those above, or proposes to change such additional parameters or the dividend distribution policy contained in any of the parameters, it must disclose these changes and the rationale for them in its annual report and on its website.
Listed entities outside of the top 500 listed entities may disclose their dividend distribution policies on a voluntary basis in their annual reports and on their websites.
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