May 7, 2020 / 12:58 PM / a month ago

Sweden to deny state pandemic support for dividend-paying companies

STOCKHOLM, May 7 (Reuters) - Sweden will not provide state aid to companies paying dividends to shareholders and could claw back funds from recipients that have already done so, the agency charged with disbursing the emergency support during the pandemic said on Thursday.

Facing tumbling demand and ruptured supply chains due the novel coronavirus outbreak, the government offers to temporarily cover up to 86% of wage and labour tax costs for furloughed workers in scheme estimated to cost as much as 127 billion Swedish crowns ($12.9 billion).

The agency handling the financial support for the short-time work schemes said companies should be aware that decisions to grant aid were preliminary and that the firms had assured in their applications that they were in financial distress.

“If we see that a company that has received aid is acting in a way that shows that it is not in a difficult financial situation, for example by paying dividends, we will regulate the aid and demand that they pay back,” the Agency for Economic and Regional Growth said in a statement.

However, it added it would further review what the new guidelines meant for small businesses.

Swedish government ministers and parliamentarians have called on companies to show restraint in paying dividends to gird for the fallout of the crisis, and to stop them altogether if they wished to take part in state support schemes.

Many listed Swedish companies have opted to withdraw dividend proposals for 2019 due to the pandemic, while others have chosen to reduce or maintain shareholder payouts.

SKF, the world’s largest bearings maker, has paid out 1.3 billion crowns in dividends though it cut the amount due to the coronavirus crisis. It still applied for about 40 million crowns in state support, but said it would now withdraw its application.

“We respect their new assessment,” a company spokesman said concerning the new guidelines from the agency.

$1 = 9.8381 Swedish crowns Reporting by Johannes Hellstrom and Johan Ahlander; editing by Niklas Pollard

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