The disquiet in the Nigerian capital market following the reported Federal Government’s plan to take control of unclaimed dividends, which stood at N158 billion as at the end of the 2019 financial year, is deplorable. It has been estimated that unclaimed dividends will hit the N200billion mark at the end of the year. The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, at a recent virtual conference organised by KPMG, an accounting and auditing firm, disclosed that the fund (dividends) would be owed as a perpetual debt to shareholders. According to her, the plan is to correct what she called the anomaly in the Company and Allied Matters Act (CAMA).
The Act provides, among other things, that shareholders will lose their rights to unclaimed dividends after 12 years. However, through Part V of the Finance Bill 2020, the government wants to set up Unclaimed Dividends Trust Fund. Section 39 (a) of the bill clearly states that “from the commencement of this Act, any unclaimed dividends of a public limited liability company quoted on the Nigerian Stock Exchange (NSE) or any other stock exchange, which has remained unclaimed for a period of not less than three years from the date of declaring the dividend shall be transferred immediately to the Unclaimed Dividends.” Many stakeholders in the capital market have opposed the bill because of its violation of Section 44 of the 1999 Constitution (as amended). They also pointed out that the new bill conflicts with CAMA that guarantees a 12-year statute of limitation on unclaimed dividends, after which the fund will be ploughed back into the company that declared it.” In view of strident opposition against the finance bill, there is need for the government to expunge the obnoxious section of the bill before it is passed.
The move by the government to take control of unclaimed dividends is unacceptable because the money in question belongs to the shareholders and not the Federal Government. We believe that any attempt by the government to take control of the unclaimed dividends will amount to robbing the shareholders of their hard-earned money. Dividends, as distributable earnings of a company to its investors as determined by the company’s Board of Directors, is unarguably one of the expectations of shareholders when they invest in the shares of companies listed in the stock market.
It is unfortunate that the issue of unclaimed dividends has remained a major challenge to the development of the Nigerian capital market. Perhaps more regrettable is the fact that the Securities and Exchange Commission (SEC) has not done enough to resolve the problem of unclaimed dividends. Sadly, thousands of registered shareholders had not been given their dividends on account of the death of the investor, change of address and other challenges. These factors have significantly increased the volume of unclaimed dividends. Without doubt, government’s tampering with unclaimed dividends will invariably erode investors’ confidence in the capital market.
Although unclaimed dividend is recorded when a shareholder fails to claim an already paid dividend after six months, that does not warrant that government should take control of the money. Available statistics show that the financial services sector has the highest number of dividend paying companies within the period. However, over the last 10 years, the number of companies that promptly pay dividends to shareholders has dropped by over 10 per cent because of low return on investment. Figures from SEC have revealed that unclaimed dividends are still on the increase despite the e-dividends registration introduced by the capital market regulator in 2015.
A breakdown of the N158.44billion shows that unclaimed dividends with companies (15 months and above) stood at NN119billion. The ones with the Registrars of companies amounted to N14.64billion, while unclaimed dividend less than 15 months old stood at N24.77billion. Until investors prove ownership of their shares, unclaimed dividends will continue to accumulate. The accumulation of many unclaimed dividends, according to SEC, began during the banking consolidation when many investors bought shares with different names and postal addresses which they were yet to rectify. A lot of stockholders have also failed to make use of the forbearance window introduced by SEC to enable those with multiple accounts to regularise them. Over N100 million worth of the unclaimed dividends was reportedly due to the failure of many shareholders to utilise the forbearance window, especially those shares that were close to being statute barred. According to the Director-General of SEC, LamidoYuguda, only about N29billion of the unclaimed dividends had been claimed by investors following the introduction of regularisation of multiple accounts in 2015.
To restore confidence in the capital market, we urge SEC to ensure that all unclaimed dividends are transferred to capital reserves of the quoted companies to avoid being tampered with. Alternatively, unclaimed dividends should be reinvested in companies as retained earnings to grow their businesses and generate employment. Besides, affected companies should publish the names of shareholders of unclaimed dividends in the newspapers so that their owners can claim them. Also, relatives of deceased shareholders can claim the dividends on their behalf. On no account should the dividends be forfeited. We call for due process in resolving the issue of unclaimed dividends.