Focus View
L&G minorities caught off-guard
FocusM team | 21 Apr 2017 00:00
MANY Land & General Bhd (L&G) minority shareholders received a rude awakening on April 18 when they found that the ongoing rights issue shares qualify for a two sen special interim dividend. 

They had sold the rights to the shares when trading began on April 17 – before being informed the shares qualified for the special dividend. 

To recap, L&G announced the special interim dividend to Bursa Malaysia on March 9 but made known the May 22 entitlement date only on April 18. Since the rights allotment date falls on May 3, the rights shares qualify for the special dividend as the latter’s entitlement date is later. 

The unusual move to announce the entitlement date more than a month after the special dividend announcement as well as after the rights shares began trading upset many minority shareholders. They claim the sequence of events meant they had sold their rights to the shares without information crucial to making an informed decision.

Furthermore, there is also the issue of whether the rights issue which falls outside of a financial year should be entitled to dividends from the previous year’s profit. Given this rights issue is in FY17, some are questioning if it should qualify at all for dividends from FY16 profit. 

But some major shareholders stand to benefit. For example, Malaysia Land Properties Sdn Bhd (Mayland), which is L&G’s largest shareholder, could be one such beneficiary.

Mayland is entitled to more than 550 million shares in its own right and has undertaken to subscribe to just under another 270 million rights shares (up to 820 million in total). 

Based on its own rights shares entitlement, Mayland stands to earn RM11 mil from the special dividend. Given that it had undertaken to accrue as much as 820 million shares, it was perhaps never at risk of losing out on the special dividend. 

The relevant authorities must look into whether it was fair for the dividend entitlement date to be announced after the rights issue shares began trading, denying minorities the chance to make a fully informed decision. 

More importantly, what recourse is there for those who sold their shares? In fairness, perhaps the rights should not be entitled to the special dividend.