Last year, when responding to the feedback received in respect of its insolvency and corporate governance consultation, the Department for Business, Energy and Industrial Strategy stated that it was "concerned at what appears to be a growing trend for companies to pay only interim dividends which, under most articles of association, do not require shareholder approval": see here (pdf, para. 1.52).* The Investment Association was asked to assess and report on the prevalence of this practice and this it did a few days ago with the publication of its report Shareholder votes on dividend distributions in UK listed companies: see here (pdf).The IA's sample contained 628 companies: the constituents of the FTSE All-Share as at 1 January 2018 that held an AGM between 1 December 2017 and 30 November 2018. This sample included 98 FTSE 100 companies, 249 FTSE 250 companies and 281 FTSE SmallCap companies. The IA found that of those companies paying dividends, 22% did not seek shareholder approval. The majority of such distributions were interim dividends: 92% of companies not seeking a shareholder resolution were distributing interim dividends only.
The IA's findings lead it to call on companies to publish a distribution policy, in respect of which the IA will establish a working group to develop best practice guidance. The group will also consider whether there should be a mandatory vote on this policy and/or yearly distributions. The guidance is expected in the autumn this year.
Note
* - See, for example, Article 70 of the Model Articles for Public Companies - available here.
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