Decree Law 163/2018 (OMPF No. 3067/2018 din 10 septembrie 2018) introduced the power for shareholders to approve the distribution of profits formed during the year, precisely quarterly. The novelty thus allows the distribution of quarterly dividends in advance of the final closing of the annual financial statements.
Mode
Those who opt for quarterly dividend distributions must prepare interim balance sheets of the balance sheet and profit and loss account. These statements have the same structure as those of annual financial statements prepared in accordance with accounting law. Revenues and expenses so accounted for shall be cumulatively determined from the beginning of the fiscal year to the end of the quarter for which the entity has opted for dividend allocation.
Risks
The regularization of amounts distributed during the fiscal year will take place after the approval of the annual budget, and dividends distributed and overpaid during the fiscal year must be returned within 60 days of the date of approval of the annual budget. The obligation to make restitution occurs for shareholders who have received dividends on a quarterly basis, and the responsibility to make restitution falls on the directors under penalty of personal liability. In fact, the directors have the obligation to follow up on the recovery of such amounts and to order the necessary measures for this purpose.
Sanction
In order to incorporate the aforementioned changes, the provision of the Companies Act for the illegal distribution of dividends was also amended: this provision now states that directors and shareholders who authorize the disbursement of dividends that result from fictitious profits or are not supported by interim financial statements or who fail to repay the increased profits shown in the annual financial statements are punished by imprisonment for one to five years.
Conclusion
We point out that given the sensitivity of the tax and penalty implications associated with the early distribution of dividends during the fiscal year, it is strongly recommended that you assess specific situations with your advisor on a case-by-case basis.
