"To Dividend or Not to Dividend During the COVID-19 Pandemic" from Morgan Lewis highlights state and case law considerations boards should assess before declaring and/or paying out a previously declared dividend and potential alternatives in the event liquidity concerns don't accommodate the company's plans. The memo further addresses director liability for improper payment of dividends. Cahill Gordon & Reindel's "Suspension of Dividend Payments and COVID-19" also notes that the company's organizational documents may contain provisions that bear on the board's decision-making. Although the memos specifically address Delaware, California, New York, and Pennsylvania laws, the general concepts are more broadly applicable subject to state-specific provisions.
See our prior report: "Earnings Guidance & Dividends," and these articles: "Companies Are Suspending Dividends at Fastest Pace in Years" (WSJ), "S&P 500 Stocks Keep Cutting and Suspending Dividends in April" (Barron's), and "GM Suspends Dividend, Buybacks in Pivot to Cash Preservation" (Bloomberg). As previously reported (see "COVID-19 Tracker: Responsive Actions, Policies & Practices"), Compensation Advisory Partners is tracking policies and practices companies are implementing - including suspended or reduced dividend payments - in response to COVID-19 based on disclosures in SEC filings, press releases, corporate websites and other reputable news sources. Access additional resources on our Capital Allocation/Capital Structure page. This post first appeared in the weekly Society Alert!