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

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

#51

Post by toomuchtodo »

chrismeller wrote: post #37
toomuchtodo wrote: post #23

Earlier quoted context omitted.

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.

No, I don’t think the two are the same. Like I said, dividends are usually the “salary” an employer takes at the end of the year. It could be $1, it could be $100,000, but it all depends upon how the business did. This is exactly how everyone is constantly complaining that a business should be operating - pay all the employees, then the owner/CEO/etc. takes part of what is left over.

Depends on scale. American Airlines in the US used 80 percent of their profits for several years for share buybacks ($12.5 billion from 2010-2019). Not R&D, not salary increases for workers. Does that deserve a bailout that preserves existing ownership? That’s the target. That sort of behavior should be nuked from orbit.

I’d agree it’d be different if your business is small (less than $10M/year in turnover); you’d look at the books with a less critical eye.

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

#52

Post by rvnx »

Saaster wrote: post #36
smnrchrds wrote: post #26

Earlier quoted context omitted.

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?

Firms applying for Danish state aid must promise not to pay dividends or make share buy-backs in 2020 and 2021. Companies would be allowed to pay dividends again if they pay back the aid. This makes perfect sense, otherwise it's a textbook case of socializing the losses and privatizing the profit. Paying dividends (and stock buybacks) is a trade-off that companies make, that makes the company less resilient. Risk/rew…

Can't say it better.

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

#53

Post by MereInterest »

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…

> Well first off, dividends are a normal method for business owners to make an income... they take all the risk

I'd disagree strongly on that account. The business owners take the monetary risk, but that is a small portion compared to the overall risk of the workers. If somebody moves across the country, that is a risk. If somebody invests time in learning a skillset, that is a risk. If somebody is going to need to choose between rent and groceries if they are laid off, that is a far bigger risk than the monetary investment of a venture capitalist.

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

#54

Post by C1sc0cat »

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…

Like other EU countries :-) the Isle of Man is still part of the EU

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

#55

Post by moron4hire »

toomuchtodo wrote: post #23
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.

>> mechanisms for enriching shareholders

It's important to point out that "shareholders" could include "managed retirement plans", especially when talking about stocks that pay dividends.

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

#56

Post by benburleson »

elric wrote: post #22
ucosty wrote: post #9

Earlier quoted context omitted.

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.

So, the business then has the choice to use last year's profits to keep the business afloat or pay investors. Seems like an easy choice unless your only motivation is lining investor pockets.

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

#57

Post by econ_nut »

benatkin wrote: post #19

It could be sanity prevailing, or it could be they're counting in the US to foot the bill for international conglomerates their economy depends on.

No need to worry. A trillion here, and a trillion there, and the US is headed for a default in the next 24 months.

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

#58

Post by nemetroid »

gfodor wrote: post #32

The dividend rule is dumb. Companies who pay out dividends are actually more responsible businesses, who return capital to shareholders. Just because they generate profits doesn’t mean they are also not in need of aid to maintain operations. Certainly it makes sense to prevent them from issuing future dividends based on aid, but why a businesses ability to return profits to shareholders implies anything about their c…

> Certainly it makes sense to prevent them from issuing future dividends based on aid

...which is exactly what the rule is about, see the press release from the Danish Ministry of Finance:

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

> Regeringen og alle Folketingets partier enige om, at der i den forlængede og udvidede ordning for faste omkostninger, indføres en betingelse i kompensations-bekendtgørelserne om, at ansøgende virksomheder som en forudsætning for at modtage kompensation i den forlængede periode på tro og love skal erklære, at virksomhederne ikke vil udbetale udbytte eller foretage aktietilbagekøb for regnskabsårene 2020 og 2021. Betingelsen vil gælde for virksomheder, der modtager mere end 60 mio. kr. i kompensation i 2020 i kompensationsordningen for faste omkostninger. Virksomheder vil senere kunne frigøre sig fra disse begrænsninger ved at tilbagebetale udbetalt støtte efter denne ordning ud over 60 mio. kr.

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

#59

Post by chrismeller »

MrBuddyCasino wrote: post #33
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…

> 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. Shareholders should not just profit from the upside, but eat the downside too, which his exactly what this is. You can't take the dividends, claiming "I took all the risks", and then expect the state to bail you out. No upside without…

Yes, on the surface. You’re assuming that the business owner is some uber wealthy person that doesn’t mind missing the dividends because he’s happy on his yacht.

While that is true for a lot of large companies (kind of like the ones that shouldn’t be asking for state aid), for the small ones it’s very different.

As a small business owner myself, it matters hugely - if the company makes $100,000 in profit and I have to pay two employees $40k each, I’m barely making ends meet.

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

#60

Post by smnrchrds »

Saaster wrote: post #36
smnrchrds wrote: post #26

Earlier quoted context omitted.

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?

Firms applying for Danish state aid must promise not to pay dividends or make share buy-backs in 2020 and 2021. Companies would be allowed to pay dividends again if they pay back the aid. This makes perfect sense, otherwise it's a textbook case of socializing the losses and privatizing the profit. Paying dividends (and stock buybacks) is a trade-off that companies make, that makes the company less resilient. Risk/rew…

Thank you for the explanation.
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