Adecoagro currently intends to retain any future earnings to finance operations and the expansion of its business and does not intend to declare or pay any cash dividends on their common shares in the foreseeable future. The amount and payment of dividends will be determined by a simple majority vote at a general shareholders’ meeting, typically but not necessarily, based on the recommendation of the board of directors. All shares of Adecoagro´s capital stock rank pari passu with respect to the payment of dividends. Pursuant to the company´s articles of incorporation, the board of directors has the power to distribute interim dividends in accordance with applicable Luxembourg law. Dividends may be lawfully declared and paid if our net profits and distributable reserves are sufficient under Luxembourg law.
Under Luxembourg law, at least 5% of Adecoagro´s net profits per year must be allocated to the creation of a legal reserve until such reserve has reached an amount equal to 10% of its issued share capital. If the legal reserve subsequently falls below the 10% threshold, at least 5% of net profits again must be allocated toward the reserve. The legal reserve is not available for distribution.
Adecoagro S.A. is a holding company and has no material assets other than its ownership of partnership interests in IFH. IFH, in turn, is a holding entity with no material assets other than its indirect ownership of shares in operating subsidiaries in foreign countries. If we were to distribute a dividend at some point in the future, we would cause the operating subsidiaries to make distributions to IFH, which in turn would make distributions to Adecoagro S.A. in an amount sufficient to cover any such dividends.
Adecoagro´s subsidiaries are subject to certain restrictions on their ability to declare or pay dividends. For example, the loan agreement with the Inter-American Development Bank prohibits Adeco Agropecuaria S.A. and Pilagá S.R.L. from paying dividends or other restricted payments if such payments would cause these two subsidiaries to exceed certain financial ratios or in the case of an event of default. The Angélica Prepayment Export Facility also imposes similar limitations on the ability of their Brazilian subsidiaries to pay dividends.