State-run companies not paying dividend to govt
The government is being deprived of hundreds of crores of taka every year in dividend income from listed state-run companies as no shares are issued against the government's investment in those companies.
In fiscal 2018-19 alone, the government missed out on at least Tk 1,155.51 crore in dividend against Tk 6,652.57 crore the companies showed in their "share money deposit" accounts as the government's investment.
Share money deposit is the money paid in exchange for shares which have not yet been acquired.
The Financial Reporting Council (FRC), an independent government regulatory body under the finance ministry, detected the anomaly and apprised the ministry of this last month through a letter.
Despite taking money from the government, the companies did not issue shares, which is a breach of corporate governance rules and accounting policies, the FRC said in the letter.
Though the government had not earned a dime from its investment, the other investors booked handsome dividends from these companies, said Sayeed Ahmed, an executive director of the FRC.
"Every year, the government is thus being deprived of dividend," he said.
The government was denied Tk 948.12 crore and Tk 816.19 crore in dividend income in fiscals 2017-18 and 2016-17 respectively, according to the FRC letter.
"Every capital has a cost but the government saw no return on its capital. This is unfair," Ahmed said.
The government is partly to blame as it did not give any clear directive in this regard while investing the fund.
"The companies took advantage of this lapse," he added.
Until fiscal 2018-19, the government invested Tk 6,652.57 crore in Bangladesh Submarine Cable Company, Titas Gas, Power Grid Company, Meghna Petroleum, Rupali Bank and Dhaka Electric Supply Company and the amount was shown as share money deposits in the companies' financial reports.
The share money deposits of the companies were Tk 4,775.54 crore in fiscal 2017-18 and Tk 3,815.75 crore in fiscal 2016-17 respectively.
When asked by the FRC, the companies had replied that they had done so in the absence of specific instruction from the government, according to the letter.
"But this is not acceptable as per the rules and regulations of the listed companies."
The companies had feared that they would see a negative impact on their earnings per shares if they issued the shares.
The government can now address the problem by asking the companies to convert irredeemable preference shares or convertible preference shares into ordinary shares at a logical dividend, it said.
As preference shares get a certain amount of dividend every year, these types of shares would not impact the companies' earnings much, Ahmed said.
So, the finance ministry should initiate a process to get a return from the government's investment in these companies, he added.
From Power Grid Company alone, the government missed a dividend income of Tk 2,637.22 crore in the last three financial years.
Accordingly, it was deprived of Tk 63.11 crore, Tk 59.17 crore, Tk 19.79 crore and Tk 140.86 crore from Bangladesh Submarine Cable Company, Titas Gas, Meghna Petroleum and Dhaka Electric Supply Company respectively during the period.
Rupali Bank did not come under the purview as it did not announce any cash dividends in the last three years.
As the money kept as share money deposit could be misused, the finance ministry should resolve the issue by talking with the companies, the FRC said.
Earlier in February, the FRC directed the listed companies to convert their share money deposits into paid-up capital within six months.
According to the directive, the share money deposit received for increasing equity or paid-up capital of a company must not be withdrawn or taken back under any circumstances.
Besides, the share money deposit will be considered as potential share until its conversion into paid-up capital, and the company must show the diluted earnings per share in the financial statement or impact of the new shares on EPS.
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