Fuxing China Group Limited Unveils Scrip Dividend Scheme: What Investors Need to Know

Fuxing China Group Limited has released the terms of its Scrip Dividend Scheme, offering shareholders a strategic choice in how they receive dividends. This announcement is highly relevant for current and prospective investors, as it may influence both the company’s share price and the value perception of its stock.

Key Features of the Scrip Dividend Scheme

• Option to Receive Shares Instead of Cash Dividends: Registered shareholders can elect to receive new fully paid ordinary shares in lieu of part or all of their cash dividend (interim, final, special, or other dividend), after applicable income tax deductions.
• Eligibility: All members are eligible, except certain overseas members due to international securities regulations. Overseas shareholders must ensure compliance with their local laws if they wish to participate.
• Level of Participation: Shareholders may choose to participate for part or all of their holdings for a particular dividend, or make a permanent election for all future qualifying dividends. However, permanent elections can only be made for the entirety of the shares referenced in the Notice of Election.
• Director’s Discretion: The Board of Directors has absolute discretion to determine the application of the Scrip Dividend Scheme to any particular dividend. If not applied, the dividend will be paid in cash as usual.
• Allotment Terms: New shares issued will rank pari passu with existing shares, except for the right to participate in the specific dividend or any concurrent distributions.
• No Transaction Costs: Under current Bermuda and Singapore law, there are no brokerage, stamp duty, or other transaction costs for shareholders receiving shares under the scheme.
• Participation Process: Shareholders must complete and return a Notice of Election to the company or, if shares are held through CDP, to CDP, by the specified deadline. If no action is taken, dividends will be received in cash.
• Permanent Elections and Cancellation: Permanent elections can be cancelled at any time by submitting a Notice of Cancellation. Changes in registered address from Singapore to overseas may result in automatic cancellation of participation unless a new Singapore address is provided.
• Calculation of Share Entitlement: The number of new shares allotted is based on the formula:
  
  N = (S x D) / V
  Where:
  • N = Number of new shares allotted
  • S = Number of participating shares
  • D = Dividend amount per share after tax
  • V = Issue price of a new share, determined by the Board (not more than 10% discount to, nor exceeding, the average closing price during the ex-dividend period)

  New shares will not be issued below par value; if the formula produces a lower price, the dividend will be paid in cash.

• Fractional Shares: The Board will determine how to handle fractional entitlements, including rounding or other methods deemed in the company’s interest.
• Statements and Documentation: Participants will receive statements detailing share allotments and relevant transactions.
• Taxation: There is no tax advantage or disadvantage for participating in the scheme under current Singapore law. The company will deduct applicable income tax from dividends as required.
• Take-over Code Implications: Shareholders should be aware that electing to receive shares may have implications under the Singapore Code on Take-overs and Mergers. Acquiring over 30% of voting rights, or increasing holdings by more than 1% within six months if already between 30%-50%, could trigger mandatory offer requirements.
• Directors’ Rights: The Board may modify, suspend, or terminate the scheme at any time, and reserves wide discretion in administering its terms.
• Liability: The company and its agents accept no liability for losses related to the scheme, including delays or changes in procedures.

Important Implications for Shareholders

• Potential Impact on Share Price: The issuance of new shares instead of cash dividends may increase the company’s share float, which could impact share price depending on market demand and investor participation.
• Take-over Risk: Shareholders need to carefully consider the implications of the Take-over Code, as increasing their holdings via scrip dividends could inadvertently trigger mandatory offer obligations.
• Overseas Member Restrictions: Investors with non-Singapore addresses may be excluded from the scheme unless they update their records and comply with supporting documentation requirements.
• Director Discretion and Scheme Modification: Since the Board can suspend or alter the scheme at any time, future dividends may not always include the scrip option, introducing an element of uncertainty for long-term planning.

Investor Actions and Considerations

• Evaluate whether to participate in the Scrip Dividend Scheme based on personal tax and investment objectives.
• Monitor announcements from the company regarding which dividends will be eligible for the scheme.
• Consult professional advisers regarding potential take-over implications, especially for larger shareholders or those acting in concert.
• Overseas shareholders should ensure their eligibility by updating their mailing address to Singapore if they wish to participate.
• Be aware of deadlines for submitting or cancelling Notices of Election or Cancellation.

Contact for Enquiries

For further information or clarification, shareholders can contact:
Boardroom Corporate & Advisory Services Pte. Ltd.
1 Harbourfront Avenue, Keppel Bay Tower, #14-07, Singapore 098632

Disclaimer

The above article is for informational purposes only and does not constitute financial or investment advice. Shareholders are advised to consult their professional advisers regarding the implications of participating in the Scrip Dividend Scheme, including but not limited to taxation, take-over obligations, and regulatory compliance. The company and its agents accept no responsibility for any losses or liabilities arising from participation in the scheme or reliance on this information.

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