By Henry Uche, Lagos
As mixed reactions trail the Finance Bill 2020 forwarded to the National Assembly for consideration and passage by the President, particularly in section 39, the President/Chairman of Council, Institute of Chartered Secretaries and Administrators of Nigeria (ICSAN), Bode Ayeku, has maintained that government’s proposed takeover of unclaimed dividends of around N200 billion belonging to shareholders is uncalled-for and the proposal should be jettisoned.
Speaking in an interview with Channels TV (Capital market news hour) over the weekend, Ayeku urged the government to instead make the processes and steps involved to access the dividends to be seamless for beneficiaries.
According to him, the proposal will not only affect the capital market adversely, but the poverty level of the shareholders in the country would skyrocket when listed companies delist from the Nigerian Stock Exchange (NSE) to avoid the problems that the proposal would create for them.
He noted that the companies would just re-register as private companies and the dividends that are currently shared by larger number of shareholders would now be shared by just 50 shareholders. This would deprive majority of the shareholders from sharing in the dividends declared by these companies in future and block their major source of regular income, particularly, for the retirees who are not paid their monthly stipends regularly.
He noted that delisting by these companies, following recent practice by some big companies, would further reduce the number of shares available for trading; loss of revenue on shares traded on the Floor of the NSE by the government (stamp duty and VAT); loss of commission by Securities & Exchange Commission (SEC), NSE and Central Securities Clearing System (CSCS) on every trade and brokerage due to the brokers. He noted that these listed companies have alternative sources of raising funds and listing on NSE have cost implications and do not confer any advantage on them of increasing their turnover or grant any incentives or tax rebates.
ICSAN president noted that the federal government has no right to claim dividends of private persons which are private funds under section 44 of the 1999 Constitution. He recommended that the federal government should work with the state governments to simplify the current complex, exploitative and unfair probate system which requires the payment of 10% Estate duty on both the balance in the bank account of the deceased notwithstanding that government has collected tax on the money. He observed that the dependance are also required to pay additional 10% on the value of the shares of the deceased despite the fact that they have no intention to sell these shares, but only to obtain probate or letters of administration (just technically change of ownership). In the process, several dependance are forced to abandon the dividends, since in some cases, the amount to be paid to the government to get the probate (which they cannot afford) to collect the unclaimed dividends is more than the value of the unclaimed dividends. He advised that SEC should further simplify the e- dividend payment system to allow one form to be used by a shareholder to claim all unclaimed dividends in all companies instead of filling one form for each company.
He recommended that every current and future shareholder should be required to nominate a default beneficiary into whose account the dividend would be paid in case of death or problem with the bank account of the shareholder.
‘Government should remove all the bottleneck involved in claiming dividend. For instance, the total amount to be paid to the government to obtain letters of administration / probate should be five thousand (N5,000) maximum and there must be a timeline for issuing letters of administration / probate after submitting all documents by the dependance.
‘We found it extremely strange for government to take over any unclaimed dividends after 12 years. These dividends belong to the shareholders who have invested in these companies. The government has no investment in these companies through purchase of their shares and so, the government has no right to claim what does not belong to it. Hence this move is an infringement of section 44 of 1999 Constitution of Nigeria which guarantees the right to property to every person. In addition, principle 23 of the Nigerian Code of Corporate Governance 2018 deals with the protection of shareholders’ right which this proposed takeover would affect.
‘Government proposal in this matter is strange because these companies that declared dividends have already paid the government 42% of the profit as taxes: 30% corporate tax, 2% education tax and 10% as withholding tax. It is not fair to the shareholders for the government to now propose to takeover the remaining 58%.
‘Government should not think that unclaimed dividends have no owners. The dividends belong to the people (or their dependance/beneficiaries), these beneficiaries should be traced and invited to claim these dividends,’ he advised.
He noted that most shareholders are extremely poor and deserve palliatives from the government and not otherwise. Therefore, the federal government in conjunction with the state governments must draw the attention of the High Court Probate Registry in every state to remove the 10 % Estate duty on the cash and physical assets of the deceased and make the whole process less difficult for beneficiaries of deceased shareholders to get the probate and claim the dividends.
Meanwhile, the head, Research, at United Capital, Wale Olusi, who spoke at the same platform on CNB Special Bill Issuances(impact on Capital market) said aside an additional outlet for fund, the special bill has no significant impact in market though it would improve the liquidity of the banks. He noted, “We don’t expect much change for the stock, but let’s see what happens within the benchmark, if the government will keep their words,”
He added that the recent launch of sukku fund by United Capital is an opportunity for investors to access other options and earn bigger, noting that even the government can take advantage of it to fund infrastructure.
Olusi said: ‘The United Capital Sukuk Fund is an open-ended mutual fund that will be invested in Naira denominated Sharia-Compliant securities and investments products, floated by the Federal Government of Nigeria (“FGN”), and other qualifying Corporate entities whose securities are approved by the Commission and permissible under Sharia principles, in varying proportions.
‘It is aimed to provide investors with a low-risk investment with stable and competitive returns through investments in short, medium and long-term Sharia-Compliant securities and investment products, whilst ensuring the preservation of capital and maintaining a reasonable degree of liquidity.’
According to him, It was designed to provide its Unitholders with halal profits on the growth of their capital over the long-term in accordance with the principles of Islamic finance. It aims to provide its Unitholders with halal profits on the growth of their capital over the long-term in accordance with the principles of Islamic finance.