Criticism for Macau’s casino dividend disbursement proposition

In Macau and local legislators may reportedly be forced to utilize existing legal means so as to implement a proposal that would limit the amount licensed casino operators are permitted to pay their shareholders in dividends.

According to a report from Inside Asian Gaming, the disbursement proposition is one of the more controversial ideas being touted as part of the enclave’s ongoing endeavor to update its existing casino regulatory framework. The source detailed that this suggestion is contained within a series of amendments that are currently going through a 45-day public consultation due to end on October 29.

Concluding concessions:

Macau is currently home to an estate of 41 casinos run under 20-year licenses issued to six operators encompassing Sands China Limited, MGM China Holdings Limited, Melco Resorts and Entertainment Limited, Galaxy Entertainment Group Limited, SJM Holdings Limited and Wynn Macau Limited. However, all of these enterprises are to see their existing franchises expire from next June with any subsequent certifications set to include an obligation to follow updated rules that could well encompass the dividend proposition.

Unique undertaking:

In the first of a series of papers exploring the proposed regulatory framework changes and Hong Kong-headquartered law firm MdME Lawyers reportedly asserted that the dividend proposition has no parallel example within existing local laws and would be ‘difficult to harmonize with Macau’s legal framework’. Lawyers Rui Filipe Oliveira and Rui Pinto Proenca purportedly also argued that such a stipulation could also prove hard to enforce as no comparable model has ever been present in the former Portuguese enclave even when it comes to the contracts awarded for the supply of essential public services such as electricity and water.

Critical consequences:

The pair reportedly went further to disclose that the dividend proposition is aiming to ensure any profits made by the local casino industry are reinvested into the city so as to improve the range and attractiveness of its entertainment offerings. But they moreover declared that the industry’s recent reaction to the idea highlights the fear of ‘creating a significant disincentive to private investment and does not guarantee that the profits retained will be used to make further investments.’

Reportedly read a statement from Oliveira and Proenca…

“Ultimately, the business uncertainty the measure introduces as reflected in recent market sentiment may compromise the ability of concessionaires to remain competitive thus affecting their ability to achieve the exact same policy objectives the proposal intends to accomplish.”

Substitute suggestions:

Oliveira and Proenca reportedly instead proclaimed that Macau could bring in the proposed dividend scheme via existing rules so as not to upset the fundamental rights of casino shareholders under the free enterprise system that is guaranteed by Macau’s foundational Basic Law. They purportedly divulged that the government could alternatively insert specific investment obligations or non-gaming spending targets into any future gambling licenses or include prudential rules regarding concessionaires’ debt and asset to equity ratios.

Oliveira and Proenca’s statement reportedly read…

“It is questionable if the proposed measure will efficiently accomplish its underlying policy goals. It is also clear that such goals, being legitimate, are potentially better achieved by other mechanisms available under Macau’s legal system that do not interfere with the no less legitimate shareholders’ right to distribute dividends.”