HSBC HK shareholders mull legal action over dividend suspension
HONG KONG, April 6: HSBC shareholders in Hong Kong are considering calling for an extraordinary meeting with management and taking possible legal action against the bank's decision to scrap dividend payments.
HSBC and other top British banks on Wednesday announced the suspension of dividend payouts after pressure from the regulator to save their capital as a buffer against expected losses from the new coronavirus crisis.
Founded in Hong Kong about 150 years ago as Hongkong and Shanghai Banking Corp, Europe's biggest lender by assets has a large number of small shareholders in the city who have long benefited from the bank's stable dividend payments.
Some of the Hong Kong shareholders have come together and created a dedicated Facebook page, which had more than 3,000 members as of Sunday, to discuss possible action against the London-headquartered bank's dividend halt.
"At this stage, we must call an EGM (extraordinary general meeting) to let the management explain to us," H.T. Chan, a 46-year-old retired driver who holds the bank's stock and is part of the Facebook action group, told Reuters.
"For legal action, it depends on what they respond in the EGM. Hopefully, we can call this meeting."
Shareholders of a company with at least 5per cent of the total voting rights may require it to convene an extraordinary general meeting, according to Hong Kong laws.
As of Sunday, the newly formed HSBC Shareholders Alliance in Hong Kong had registered members with combined ownership of about 2per cent of the bank's stock, Ken Lui, the convenor of the alliance, told reporters on Monday.
"Our goal is to gather 5per cent of shareholding to call for an EGM ... we are very optimistic as we have only set up this alliance four, five days ago."
HSBC Chief Executive Noel Quinn in a letter to Hong Kong shareholders after the decision to suspend the dividend said the bank's board would review the position once the economic impact of the pandemic was better understood.
"We profoundly regret the impact this will have on you, your families and your businesses. We are acutely aware of how important the dividend is to our shareholders in Hong Kong."
Commenting on the possible legal action by the Hong Kong-based shareholders, one London-based institutional investor told Reuters he believed the group had little chance of reversing the decision.
"I see the debate about the banks' dividends as a very short one: regulator tells them what to do and they comply - end of story." -Reuters