COVID-19: Temporary changes to the London Stock Exchange’s payment date deadline for dividends

Background 

• Companies with securities listed on the Main Market of the London Stock Exchange ("LSE") or admitted to trading on AIM must take into account the LSE’s Dividend Procedure Timetable when determining the ex-dividend date, the record date, the latest announcement date and the payment date for both final and interim dividends. The Dividend Procedure Timetable is reissued annually by the LSE.   
• The challenges and uncertainties caused by COVID-19, both in regard to issuers’ contingency planning and the practical difficulties of holding AGMs, have resulted in a number of listed issuers and their advisers approaching the LSE with enquiries about deferring or cancelling their dividend payments. 
• On 25 March 2020, the LSE provided issuers with guidance regarding the timing for the payment of dividends, and notified some temporary changes to the Dividend Procedure Timetable for 2020, through Market Notice N07/20, which can be found here.

Temporary changes and guidance

• Before these changes were made, the Dividend Procedure Timetable for 2020 provided that issuers should aim to pay cash dividends within 30 business days of the record date.  However, with effect from 25 March 2020, the LSE will allow the payment date to be deferred by an additional 30 business days. This means that, with effect from 25 March 2020, the deadline for the payment of dividends is 60 business days after the record date. 
• This means that if a dividend has not been paid on or before 60 business days after the record date, the issuer must cancel it.  The guidance does not set out any details as to how the LSE will enforce the 60 business days payment deadline.  However, we understand that a period of more than 60 business days between the record date and the payment date would cause problems with settlement through CREST. 
• In any event, if an issuer proposes to defer the payment of, or cancel, a dividend in respect of which the record date has been announced, it must inform the Stock Situations Team without delay.

Going forward 

• The changes and guidance are expressed to be temporary only; however they will remain in place until further notice. 
• The LSE has stated that it continues to monitor closely the impact of the COVID-19 situation, and is considering all available options to ensure that markets continue to function well and to support market participants.  We should expect to see further guidance issued from the LSE in the coming weeks.   

What this means in practice 

• While the extension to the deadline for the payment of dividends is helpful in that it provides issuers with further flexibility in these uncertain times, the extension of 30 business days is still relatively short.  It may well be that this length of time is not long enough in the context of businesses’ long-term contingency planning, such that a number of issuers will still decide to cancel the dividends they have previously announced, rather than to defer payment of them.

Should you have any questions regarding the temporary changes to the LSE’s payment date deadline for dividends, please contact Kate Ball-Dodd or Harriet Hainsworth.