A Macau government proposal to introduce limitations on the distribution of dividends by casino dealers to their shareholders has no parallel example in Macau’s legal framework, as the stated policy goals are likely to be achievable through others. mechanisms available in the legal system, according to a new document. by MdME Avocats.
The controversial dividend proposal was one of the most notable to emerge from possible amendments to Macau’s gambling law announced by the government on September 14. While these changes are currently subject to a 45-day public comment period until October 29, the details in the consultation document were sufficient to send the share prices of the Hong Kong-listed entities of the six Macau dealers. plummeting, dropping 26% or US $ 18.4 billion in just 24 hours.
In the first of a series of articles exploring in more detail the proposed amendments to the gambling law, Rui Pinto Proença and Rui Filipe Oliveira of MDME note that the proposed dividend limit is “difficult to harmonize with the legal framework of Macao ”, such a requirement having never been introduced even though they concern contracts for the concession of essential public services such as water and electricity supply.
Although the stated objectives of the proposal – to ensure a better application of the benefits to promote the sustainable and diversified development of Macau – are considered legitimate, MdME asserts that it “creates a significant deterrent effect on private investment and does not guarantee not that the retained profits will be used. to make other investments.
“Ultimately, the trade uncertainty introduced by the measure (as evidenced by recent market sentiment) may undermine the ability of dealers to remain competitive, thus affecting their ability to achieve exactly the same policy goals that the proposal seeks to achieve. . “
Instead, MdME suggests finding alternatives within Macao’s legal framework to achieve the proposed goals without affecting the fundamental rights of shareholders under a free enterprise system, as provided for in Macao’s Basic Law.
Those alternatives, he said, could include listing specific investment obligations or spending targets for non-gaming activities in dealer licensing contracts – allowing dealers to better allocate their resources. They could also include the imposition of prudential rules concerning the debt-to-equity or asset-to-equity ratios of each company.
“It is doubtful whether the proposed measure effectively accomplishes its underlying policy objectives,” says MdME.
“It is also clear that such objectives, being legitimate, are potentially best achieved by other mechanisms available in Macao’s legal system which do not interfere with the equally legitimate right of shareholders to distribute dividends.”
The full MdME article can be found here.