Chile: legislative wrangling over the ban on state-supported companies from paying shareholder dividends

Will shareholders of companies receiving Covid-19 related state aid be prohibited from receiving dividends? The debate has been raging in Chile since the 06 May Parliamentary Joint Committee approval, of a new article in the Employment Protection Act, which guarantees access to short-time working for employees of companies forced to close their doors during the pandemic (c.f. article No.11797). Article 30 prohibits companies benefiting from this employment protection provision from paying dividends to their shareholders. A few days before the Parliamentary Joint Committee vote, the case of Chile’s largest retail company, Cencosud had caused a scandal. The Chilean giant owns many shopping centres and supermarkets throughout Latin America, and had announced the payment of 80% of its 2019 profits, i.e. $220 million dollars, to its shareholders. The announcement however came only a few weeks after having suspended salary payments while benefiting from the State aid provided for by the new law. In an attempt to avoid the adoption of the controversial amendment at all costs, Sebastián Piñera’s (right-wing liberal) government failed to reach agreement on a proposal that shareholder dividend payments should not exceed 30% of company profits. The executive intends to use its vetoing power in order to prevent the promulgation of the amended law. It will thus either take the matter to the Constitutional Court, or table a new bill to limit the scope of Article 30.