Cash Dividends

A cash distribution may be declared by the board of directors as either a dividend or return of capital. This guide will walk you through the planning and communication requirements and other considerations for a cash distribution. Review this information carefully and well in advance of the cash distribution payable date.

Planning for a cash distribution should include the following steps:

1. Setting the Record and Payable Dates: Plan to provide at least 10 business days and preferably 15 business days between the record and payable dates. Record and Payable should be on business days. If either are normally set on a date that is a non-business day, adjust the date to the preceding or following business day.
2. Provide Early Notice: Provide an initial alert of the distribution as early as possible by e-mailing a notice to your account executive as soon as the board declaration is passed. Include with this notification the type of action, the record date and payable dates.
3. Provide Complete Formal Notification: It is essential that a formal notice be provided to ensure accurate communication of the details of the distribution. This can be accomplished by completing the Cash Dividend/Distribution Notification Form [link], by providing a scanned copy of the Board Resolution declaring the distribution or by providing a letter on company letterhead including the same information regarding the distribution.
4. Check Stock and Investor Communications: Commerce Financial Printers (CFP) has 6 different check formats that allow issuers to tailor their communications from simple check stubs to combined check and stockholder letters. Early communications is required to ensure typesetting and formatting is completed at least 3 business days prior to the mail date.
5. Setting a Mail Date: Distribution checks are often mailed one business day in advance of the payable date to facilitate timely receipt by the registered shareholders. Issuers electing to mail early must include this instruction with their notification to R&T and must wire the funds to R&T on the date the checks are to be mailed. Issuers must provide the Fed Wire Reference Number for confirmation that the wire was sent so the wire can be confirmed and mailing commenced.
6. Payment of Street Holders: R&T is required to provide a fed funds wire to DTCC on the payable day for receipt by DTCC by 2 p.m. Therefore, if the mail date is the payable date, issuers must ensure that funds are received by R&T not later than 12 noon on the payable date.
7. Special Instructions: Any special instructions regarding the distribution should be clearly noted. Special instructions may include waiving the distribution on unvested shares, tax treatment or any special delivery instructions.