What could be the main reason for an individual to buy shares of a company? The simple answer is to get dividends. Most companies credit their investors’ accounts with dividends after making a profit in the industry to encourage more shareholders and share a portion of their piece of cake. But there are a few cases where certain organizations announce dividends but do not transfer them to their stockholders which is why investors place a request for unpaid dividend transfer to iepf. Now, speaking of unpaid dividends, do you know why a company does not make a payment to its creditors? If yes, start reading the below content without further ado!
Reasons
Here you need to understand that this article applies to situations where the company has lately stopped transferring the dividend or made a partial payment to their investors.
- Reinvestment focus
- Debt Restrictions
- Financial issues
- For acquisition
- Meet unexpected costs
Reinvestment focus: An entity that aims to reinvest its profit will stop transferring the dividend to its respective owners. Most companies that follow this method are more focused on financing new growth opportunities alongside expanding their operations. That doesn’t stop ambitious investors from investing in such companies as they also aim to partner with entities that are concerned about value creation and investment growth.
Debt Restrictions: This is no brainer; how could any person sponsor an orphan’s education if their own children are struggling to attend school because of financial issues at home? Nah, it is stupid to expect and even silly to dream of becoming a sponsor in such conditions. In the same way, a company cannot transfer dividends to its shareholders if it has unpaid lines of credit or a bank loan.
Financial issues: A person without money cannot afford to eat in a restaurant. Similarly, an entity that has no or little cash flow in its bank account cannot repay its investors
This is the most common reason for a company to suspend dividend payments. The entity keeps trying to save its financial reserves for future expenses. In short, the unfavourable financial condition is the primary reason for the failure of an organization to pay dividends.
For acquisition: A company that has a thing for expansion and desires growth in the industry hoards its cash to acquire another entity. The acquisition is done with the hope of making more profits due to synergy. The ultimate goal of the company is an expansion that promotes producing more value for shareholders.
Meet unexpected costs: Just like road accidents take place causing people to suffer from injuries and medical bills. A company can come across an unexpected situation like the failure of one of its production lines. It suspends the dividends until the production line is taken care of.
Final thoughts
From the above, it is evident that a company does not intentionally delay or suspend dividend payments to disappoint their investors but it can have genuine reasons such as reinvestment focus, debt restrictions, acquisition, and meeting unexpected costs. Please note that every organization aims to make money to help itself and its shareholders/owners/investors grow. But that doesn’t mean that you cannot contact an authority for the unpaid dividend transfer to iepf.
A few companies get penalized by high courts if a case is filed by the investor against the entity. The regulatory bodies can send a notice to the company requesting reasons for the suspension of dividends. The notice may also include a warning for the board members to transfer the dividend along with the interest to their shareholders within a stipulated time. Failure to do so can attract severe consequences for the company.
