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Denmark: No aid for companies which pay out dividends or are reg. in tax havens

bloomberg.com

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Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#21

Post by chrismeller »

> The government also said that companies which pay out dividends, buy back own shares or are registered in tax havens won’t be eligible for any of the aid programs...

Well first off, dividends are a normal method for business owners to make an income... they take all the risk, but reap some limited rewards by taking dividends rather than a salary.

Buying back shares I’m fine with. While that could actually be seen as a form of “reinvesting”, I get the point.

What sense does the “registered in tax havens” part make though? If they’re a foreign-registered company would they ever have been eligible for aid? Plenty of companies in Europe are employing thousands of people, but are “owned” by a company elsewhere, so how do we define that ownership and “tax haven”?

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#22

Post by elric »

ucosty wrote: post #9
Nextgrid wrote: post #2

Maybe I'm not understanding something but why do they consider paying dividends as something bad? They are essentially excluding the majority of businesses using this criteria.

If a company can still afford to pay out dividends it probably isn't really in need of aid.

It's probably a bit more nuanced than that. Dividends are often scheduled months in advance, based on (for instance) last year's profits. Having made a profit last year, and having promised a dividend months before corona doesn't mean you won't be struggling now.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#23

Post by toomuchtodo »

chrismeller wrote: post #21

> The government also said that companies which pay out dividends, buy back own shares or are registered in tax havens won’t be eligible for any of the aid programs... Well first off, dividends are a normal method for business owners to make an income... they take all the risk, but reap some limited rewards by taking dividends rather than a salary. Buying back shares I’m fine with. While that could actually be seen a…

Dividend and share buybacks are the same end result, just different mechanisms for enriching shareholders.

If you didn’t keep enough cash on hand (because you were shoveling profits out the door), you lose your ownership interest (insolvency with no bailout).

These are very reasonable conditions for a nation state bailout.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#25

Post by tartrate »

Nextgrid wrote: post #2

Maybe I'm not understanding something but why do they consider paying dividends as something bad? They are essentially excluding the majority of businesses using this criteria.

Perhaps the aids are to prevent insolvency, and perhaps dividends are illegal during insolvency. Not being sarcastic, I genuinely don't know.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#26

Post by smnrchrds »

chrismeller wrote: post #21

> The government also said that companies which pay out dividends, buy back own shares or are registered in tax havens won’t be eligible for any of the aid programs... Well first off, dividends are a normal method for business owners to make an income... they take all the risk, but reap some limited rewards by taking dividends rather than a salary. Buying back shares I’m fine with. While that could actually be seen a…

I think the "in tax havens" part applies to "pay out dividends" as well. Perhaps someone who speaks Danish can refer to the official sources and confirm?

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#27

Post by Saaster »

It's a good common sense start. Companies that pay dividends or make share buy-backs are more vulnerable in a crisis (not only the current one), meaning they are riskier investments. Risk needs to be inversely correlated with reward for the markets to function. Investors in riskier companies deserve to get wiped out, not propped up.

Companies registered in tax-havens should have no business applying for EU or US aid. I would say, simply barring them doesn't go far enough. If one did apply while being simultaneously registered in the EU/US and any tax haven, that is fraud and should result in jail time.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#28

Post by kilo_bravo_3 »

Nextgrid wrote: post #2

Maybe I'm not understanding something but why do they consider paying dividends as something bad? They are essentially excluding the majority of businesses using this criteria.

There's a lot of misinformation about this out there.

The article does a bad job at explaining it, but companies that take aid cannot pay dividends or buy back stock until they return the aid.

This is so that aid is not redirected into the pockets of shareholders and is instead used to keep people employed.

>The Government and all parties to the Parliament agree that the extended and extended fixed cost scheme introduces a condition in the Compensation Orders that applicants, as a condition of receiving compensation for the extended period, must declare by faith and laws, that the companies will not pay dividends or buy back shares for the financial years 2020 and 2021. The condition will apply to companies that receive more than DKK 60 million. in compensation in 2020 in the compensation scheme for fixed costs. Companies will later be able to free themselves from these restrictions by repaying paid aid under this scheme in excess of DKK 60 million.

Translated from: https://www.fm.dk/nyheder/pressemeddelelser/2020/04/regering...

DKK 60 million is about 8.8 million dollars.

If you have money to pay dividends, you have money to pay back your government aid.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#29

Post by frgtpsswrdlame »

chrismeller wrote: post #21

> The government also said that companies which pay out dividends, buy back own shares or are registered in tax havens won’t be eligible for any of the aid programs... Well first off, dividends are a normal method for business owners to make an income... they take all the risk, but reap some limited rewards by taking dividends rather than a salary. Buying back shares I’m fine with. While that could actually be seen a…

Dividends and share buy backs are effectively the same thing. Treating them differently is what makes no sense.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#30

Post by thisiswarry »

Nextgrid wrote: post #2

Maybe I'm not understanding something but why do they consider paying dividends as something bad? They are essentially excluding the majority of businesses using this criteria.

the market is supposed to understand risks.
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