By Omodele Adigun
THE fate of the over N90billion unclaimed dividend, hanging like an albatross on the capital market, has, undoubtedly, thrown the stakeholders into a dilemma.
The confusion arose as a result of babel of voices attempting to drown one another on how best to utilise the fund. While some advocate that it should be ploughed back into the operations of the paying companies, others reason that the huge sum should be channeled towards revitalizing the capital market. Another school of thought argues that the registrars of the paying companies should bend over backwards and locate their owners painstakingly with a view to making them take up their entitlements.
To paper over these cracks, the Securities and Exchange Commission (SEC), the apex regulator of the market, quickly whisked out an elixir, e-dividend, from its magic box, just to curb the wild growth of this corporate reward. Yet, the controversy still rages.
Recall that the trigger was a directive, not long ago, from SEC that registrars should return all unclaimed dividends of 15 months and above to the paying companies.
Hardly had the circular landed than the shareholders launched an all-out war against its author.
To start with, they accused the Commission of acting in contrary to the provisions of the Companies and Allied Matters Act (CAMA). According to Chief Timothy Adesiyan, the President of the Nigerian Shareholders Solidarity Association (NSSA), CAMA stipulates that once dividend is declared, the money does not belong to the companies again but to the shareholders until after 12 years when it becomes statute barred.
He added: “Unless SEC is telling us that the law of CAMA has become obsolete. Even at that, SEC alone has no right to change it. And if that is the case, the Commission should involve all the necessary bodies and change the laws in its entirety like in other countries. But in case this has not happened, the Commission is acting outside the confines of the law and we are going to challenge it”.
Corroborating him, Sir Sunny Nwosu, the National Coordinator of Independent Shareholders Association of Nigeria (ISAN), described the decision as unconstitutional and unfair to the shareholders.
Nwosu stated that SEC would be acting outside the current laws if it gave such instruction. He noted that once a company declares dividend and is approved by shareholders, the money no longer belong to the company and there is no law that gives SEC the authorization for such monies to be returned, until after 12 years.
“Sometimes, regulators in this market behave as if they don’t know what they are doing. What gave SEC the authority to ask the registrars to return such money?” He queried.
He advised shareholders affected by the action to seek redress in the court, adding that his association will not hesitate to take such action should the Commission carry out the decision.
Boniface Okezie, another shareholder activist, explained that SEC was relying on section 372 of CAMA which states that “in a situation where dividends were not claimed, it may be returned to the company for investments. And when the owners come for it, the company will return the money.” But this, he said, would be a bottleneck to shareholders because of the red tape involved. He advised the regulator to apply caution, threatening that the shareholders would tango with SEC on the issue.
This impending clash of titans might not be unconnected with the astronomical growth, over the years, of this class of returns. For instance, in the last 15 years, it has grown by leaps and bounds at over 600 per cent. Explaining the cause of the huge pile, Mr. Henry Rowlands, the Head of Market Development Department of the Commission, said: “We discovered that when dividends are declared by the companies where shareholders invest, they(dividend warrants) are sent by post, which takes time. And sometimes, they do not even come at all because investors change addresses, some of the dividend warrants do not even get to them.”
Investigation even shows that some of the shareholders fail to inform their company registrars about their new mailing addresses, thereby making it difficult or even impossible for them to receive their dividend warrants.
The death of some shareholders and the inability of their next of kin to claim the dividends did not even help matters. Rather, it has worsened the already bad situation.
For instance, available statistics show that, currently, it stands at about N90 billion, and still counting. In 1999, it was put at about N2billion; 2008, N8billion; 2011, N41billion; N60billion in 2013 and N80 billion at the end of 2014.
Meanwhile, defending SEC on its controversial directive, its Director General, Mounir Gwarzo, ironically, equally based his argument on the same CAMA. He explained that the directive was in compliance with the law so as to protect the investing public.
He added that CAMA states that unclaimed dividend should revert to the companies after 15 months and that the companies should not invest the monies in their operations. But CAMA’s position on the matter is that unclaimed dividends, which it refers to as dividends not claimed within six months after a declaration, are to be returned to the company, from where the investors can make claims up till, but not later than, 12 years.
However, to find a way round the problem, the Commission launched the electronic dividend portal and it is busy criss crossing the country to drum support for the initiative.
Electronic dividend simply refers to an online system of paying dividends to investors whereby when companies declare dividends, rather than sending it by post, they will just wire it to the investor’s bank account. To get enrolled for the e-dividend platform, Gwarzo said investors should go to any banks or to a registrar. “They will give you an e-dividend form to complete. The moment they give you the data, you write your Bank Verification Number (BVN), your Clearing House Number (CHN) and fill the rest. The moment you complete it and they input it into the system, it will automatically go to the Central Securities Clearing System (CSCS). So this is an excellent initiative and we think, it is something we should propagate so that investors will take advantage of it. We are determined to see that for the first time, e-dividend issue is going to be through implementation. Unclaimed dividend will be sorted out; investors will be able to come back to the market. If you ask, some investors would tell you that, I have not got my dividend warrants for so so number of years; or somebody that is living in Mararaba or Ajegunle and he has a dividend of N1,000 and it will cost him or her N1,000 or N2,000 to come to Lagos Island to collect dividend warrant or cash dividend. By the time you compare that with what you are earning, you will decide to just leave it. But this time around, dividend will be paid directly into the clients’ accounts.”
Just before the start of the e-dividend registration, the exercise was thoroughly ribbed and riven apart by cynics.For instance, when the idea was first mooted, Mr.Tola Mobolurin, the Chairman of Capital Bancorp, pooh poohed it and described it as a recipe for identity problems.
According to him, the promoters of the initiatives may find it difficult to identify the real owners of unclaimed dividend from thousands of people with common names.
As if to liken such scenario to the now rested TV series, Fuji House of Commotion, Mobolurin said: “That is a very ambitious initiative. Let me pose a problem for you. For those who bear similar names, I can tell you that if you say Ayo Ajayi, it would produce in Lagos alone over a thousand. So into which Ayo Ajayi’s BVN account are they going to pay the unclaimed dividend. Do they have the finger prints to match the names?”
But as it now known, the e-dividend registration procedures has taken care of such concerns.
This notwithstanding, Mobolurin, however, advised the registrars to go extra mile to do what is needful by pursuing the shareholders and get them to take their unclaimed dividend.
Meanwhile, as the arguments rage, other stakeholders are clamouring that the N90billion unclaimed dividend should be injected into the capital market as bailout. For instance, Mr.Emeka Madubuike, the Chairman of Association of Stockbroking Houses of Nigeria (ASHON), suggested that SEC should consider structuring the accrued dividend to shore up the market.
Hear him: “The N90billion unclaimed dividend should be used for the purpose of intervention. The money will be returned when the market rebounds.”