Trend Setter

June 05, 2007 (LBO) – Richard Pieris, a Sri Lanka listed firm, has declared a cash dividend and a stock distribution under provisions of a new company law that came into effect last month. A bonus also increased the shares in issue without affecting the assets of the company, which has the same effect as a stock split.

Confusion has reigned in Sri Lanka’s equity markets as investors and company officials struggled to come to terms with the concepts in the new law. Richard Pieris told the Colombo Stock Exchange 453 million rupees out of its retained profits would be “applied to shareholders”.

The firm will pay 59.1 million rupees as a cash dividend at the rate of 50 cents per share.

It would also issue one new paid up share at the rate of 40 rupees per share to shareholders at the rate of one new share for every existing 12 shares.

Richard Pieris traded at 58 rupees Tuesday.

Issuing new shares in this fashion is similar in concept to a stock dividend.

However legal experts say it is unlikely to receive the same tax treatment as a dividend.

“Under the Inland Revenue Act companies can distribute their own shares without paying a withholding tax,” says Naom