On 26th July 2008 – the national independence day which is a public holiday, the Capital Market Development Authority (CMDA) announced that it had asked the Maldives Tourism Development Corporation (MTDC) to suspend paying dividend to its shareholders.
CMDA announcement referred to the payments as “payments made in the name of dividend” of 2007. The first paragraph of the press release said that the suspension was because the payments in contravention to the ordinary practise of dividend payouts. And that such disbursement of payments in the name of “dividends” (implying that it was not legal dividend) would confuse the shareholders and the (stock) market.
The third paragraph said that CMDA believes that a payout that is more than the net profit of the company for the year, should be explained to the market. And that the suspension was to investigate the matter, following the decision by (MTDC) to declare the dividend.
Being a shareholder of MTDC affected by the unfounded and illegal CMDA decision that did not follow accepted standards anywhere in the world, I looked up what the investopedia and britannica said about dividend and found nothing abnormal about the dividend declared by MTDC. And it is funny that infact the Bank of America is said to have decided on a divident which meant the bank practically will have to pay out virtually everything it earns.
There is no legal provision in Securities Act or the Companies Act that gives the CMDA the authority to stop dividend payments as adopted legally by shareholders of a company. By law, the shareholders at the Annual General Meeting of the Company is the highest and most powerful organ of the institution.
It is very interesting that the five member board of CMDA think that they are an ultimate authority who can act above the law. The board is chaired by Mr. Abdul Ghafoor Abdul Latheef of the Maldives Monetary Authority.
CMDA has made no public announcement, but it seems to have released the suspension after coming to its senses about the wrong it has done.