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EU plans dividend ban for bailed-out companies

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A man wearing a protective face mask walks past stacked chairs of a closed restaurant in Nice, as a lockdown is imposed to slow the rate of the coronavirus disease (COVID-19) in France. Photo: REUTERS/Eric Gaillard

A man wearing a protective face mask walks past stacked chairs of a closed restaurant in Nice, as a lockdown is imposed to slow the rate of the coronavirus disease (COVID-19) in France. Photo: REUTERS/Eric Gaillard

REUTERS

A man wearing a protective face mask walks past stacked chairs of a closed restaurant in Nice, as a lockdown is imposed to slow the rate of the coronavirus disease (COVID-19) in France. Photo: REUTERS/Eric Gaillard

Firms bailed out by EU governments taking stakes as a result of the coronavirus crisis will be barred from paying dividends or share buybacks under proposed rules, sources have said.

A recapitalisation proposal was put forward by the European Commission last week which it said was part of a strategy to prevent hostile takeovers of strategic firms by foreign buyers.

The EU proposal is the latest loosening of the bloc's state aid rules and is targeted at companies whose market values have tumbled, making it difficult for them to borrow on the public markets.

Any company recapitalised by a state which has undue market power will have to make structural and behaviour commitments under the proposed rules, sources told Reuters.

The recapitalisation plan is similar to one adopted during the 2008 banking crisis, but is broader in scope as it covers the entire economy and not just a single sector.

Reuters

Reuters