Shareholders of the famous British clothing retailer Next have been called to a meeting after the company committed an accounting error. The procedural oversight committed by the clothing company had infringed the UK law on dividend payments.
Next did not deny such report and admitted to a technical infringement of the UK Companies Act. The retailers failed to file accounts ahead of payouts back in 2014 and 2015, as reported by UK Reuters. The UK Companies Act requires all business people and establishments to demonstrate sufficient reserves for dividends. Companies must file accounts outside the yearly cycle if fresh reserves have been built up that would cover special dividend payments.
According to Financial Times, Next failed to file accounts for one ordinary and three special dividends because of procedural oversight. Next said that it always had sufficient reserves to pay the relevant distributions at the time that they were made. However, the company failed to file accounts.
An analyst at Haitong said the reporting rules were somewhat new for the clothing company. Analyst Tony Shiret said he would imagine it's just gone under the radar since Next didn't start paying special dividends until about a year. Mr. Shiret also stressed that it is just a question of backfilling of the forms and this case is just a minor embarrassment.
Retail Gazette reported that shareholders of Next were already informed of the issue and will have the chance to attend the meeting to solve the problem. The error committed by Next will not affect the company's total financial results or its ranking in the current stock market. There are also reports that suggest further penalties will not be issued.
Next said that the issue is of a historic nature, and there is no change to the financial viewpoint of the British retailer as a consequence of this technical matter. Shareholders will have its meeting this coming February 10 to vote on procedures to rectify the issue.
