With an estimated N200billion worth of unclaimed dividends by shareholders of over 100 companies listed on the stock exchange idling away, trading in shares and equities is gradually losing its attraction for many old and prospective investors, reports Ibrahim Apekhade Yusuf
One major albatross to growth in the capital market today is the issue of unclaimed dividends.
Indications are that for many investors, the mere thought of losing their entitlements due to unforeseen circumstances most times scares as well as well make them wary.
Lending credence to the foregoing, Korede Misbaudeen, who is new to the capital market said he has always pondered over loss of dividends.
According to him, “With the benefit of hindsight I have heard about people who lost their investments in the capital market to different reason including non-remittance by the brokers and registrars. This is one fear I live with and I believe many others like me live under such fears.”
Like Misbaudeen, many wearied and tired investors would flinch at the very thought of losing their investments no matter the arguments to the contrary.
How unissued shares come about
While offering a plausible explanation as to what may lead to the issue of unclaimed dividends, some analysts argued matter-of-factly that it is a source of worry to many investors, who believe the problem is beyond redemption.
However, investigation by The Nation revealed that some shares are unaccounted for due to a number of factors from the complex to the superficial.
While giving insight on the issue of unclaimed dividends, the Managing Director of Coronation Merchant Bank, Banjo Adegbohungbe, who spoke with our correspondent on the sidelines shortly after the bank’s AGM recently, recalled that his bank has held over half of its paid up shares of 10billion shares since inception as unclaimed dividends.
According to him, a number of factors could be attributed to it.
Although he was noncommittal as to the specific reasons for the over 4billion shares yet unclaimed under its books, Adegbohungbe assured that the bank was doing everything humanly possible to address the issue as stipulated by the extant regulations of SEC as well as others.
Like Coronation Bank, many other companies listed on the stock exchange have been having a running battle settling out their unclaimed dividends.
Extant regulations dealing with unclaimed dividends
Checks by The Nation revealed that there are regulations and guidelines clearly stipulating the dispensation of unissued shares and dividends as the case may be.
The SEC issued a circular in 2015 requiring business registrars to refund unclaimed dividends kept for up to 15 months to the paying corporations.
Similarly, the Companies and Allied Matters Act (CAMA) 1990 (updated 2020) required corporations to publish a list of unclaimed dividends that included the names of all intended recipients. Unclaimed dividends could then be repurposed for investment purposes.
For instance, some clauses in the Companies and Allied Matters Act (CAMA), Companies Article of Association, Companies Regulation 2021, to mention just a few, show clearly what to do when the issue of unclaimed dividends arise.
Specifically, S. 305 (3) of the Companies and Allied Matters Act (CAMA) 2020 and Article 48 of Companies Article of Association directors are authorised to take steps to comply with the requirements of S. 124 of CAMA 2020 and Regulation 13 of the Companies Regulation 2021 in relation to unissued shares standing to the capital of the company, including but not limited to the allotment or cancellation of such unissued shares.
Besides, Resolution 9 of Companies Regulation 2021 also empowers company directors to enter into and execute any agreements, deeds, notices or any other documents and to appoint any such professional parties and to perform all such other acts and do all such other things as may be necessary or incidental to giving effect to extant regulation on unissued shares.
Road to recovery of unclaimed dividends
Equities investors yet to claim their dividends may face a more rigorous and cumbersome process in recovering them as the Securities and Exchange Commission (SEC) has disclosed that the over N170 billion unclaimed dividends have been remitted to the new Unclaimed Dividend Trust Fund (UDTF). The fund is being managed by the Commission and the Debt Management Office (DMO).
At a virtual post-Capital Market Committee (CMC) meeting held in Lagos, at the weekend, the Director-General of the SEC, Lamido Yuguda, said unclaimed dividends have been moved into the fund and are now managed by both institutions.
He, however, stated that the monies would be released to the owner or beneficiaries with appropriate documents proving ownership.
Yuguda also noted that information that has to do with unclaimed dividends can now be generated from both the SEC and DMO.
“Unclaimed dividend has gone into the unclaimed dividend trust fund and is now managed by the SEC and DMO. SEC is no longer the only institution that has data on the unclaimed dividend. It will remain there until the owner comes forward to claim them. We still have cases of multiple subscriptions but we are working very hard on solutions to tackle them, especially in the area of unclaimed dividends,” he said.
Recall that shareholders had condemned the establishment of a UDTF in 2017 when it was earlier proposed in the capital market, insisting that any fund under the supervision of the government could be misappropriated and converted for other uses.
Implication of Unclaimed Funds Trust Fund
According to the Finance Act 2020 signed into law by President Muhammadu Buhari, unclaimed dividends of a public limited liability company in the Nigerian stock exchange and any unutilised amounts in a dormant bank for at least six years will be transferred as special credit to the federal government through the Unclaimed Funds Trust Fund.
Echoing similar sentiments, analysts have further argued that the over N200billion estimated to be trapped in the pool of unclaimed dividends, may be appropriated by the government.
Thus it is clear that as soon as the provision is fully applied and implemented, no shareholder will be able to claim their unclaimed dividends of at least six years old in the pool, in the short/medium term, as the funds would have been transferred to CBN under Unclaimed Funds Trust Fund to be borrowed by the federal government.
Revolt against UDTF
It may be recalled that some shareholders had taken a class act suit against the federal government last year as part of efforts to voice their protest against the planned implementation of the UDTF.
Specifically, the shareholders under the aegis of Palm Wealth Shareholders, PWSA, had approached a federal high court sitting in Abeokuta, Ogun state, where it obtained an interim order restraining the federal government from borrowing unclaimed dividends of shareholders in the Nigerian capital market.
However, PWSA (applicants) sued the Attorney-General of the Federation; Minister of Finance, Budget and National Planning; and Accountant General of the Federation as respondents and representatives of the federal government in suit No. FHC/AB/FHR/14/2021.
According to them, the provision is contrary to Nigeria’s constitution (1999, as amended), the African Charter on Human and People’s Rights Act, and laws of the federation.
In an affidavit in support of their application, PWSA observed that they are “intimidated, in fact, psychologically traumatised and threatened by the provisions of the Finance Act, 2020”, arguing that it would inflict grievous harm on the shareholders if the provision is allowed to come into operation and the dividends, which the shareholders are working seriously to claim, taken over.
In his ruling, Obehi Abdulmalik, the judge, on July 23, granted interim orders restraining the respondents from bringing into force the “proposed new rules on unclaimed dividends (E-dividend mandate) or any new rules on unclaimed dividend not in force before 31st December, 2020.”
The court also restrained the federal government from harassing, intimidating, inviting and/or ordering public limited liability companies or their registrars for questioning for the purpose of taking or giving accounts of the unclaimed dividends, pending the determination of the motion on notice.
Shareholders react
As to be expected, tempers rose soon after the federal government announced plans to securitise unclaimed dividends and inactive account balances in the country for up to six years.
The management of unclaimed dividends and dormant account balances has been included in the recently assented 2020 Finance Bill, along with many other provisions intended by the federal government of Nigeria to mitigate Nigeria’s fiscal frailties and economic crunch caused by the emergence of Covid-19 pandemic.
The funds realised will be placed in a trust fund, managed by the Debt Management Office (DMO). The DMO’s responsibility also includes payment of claims for such dividends and the accompanying compensation for accrued interest.
Reacting to the deployment of unclaimed dividends in a trust fund, the Co-founder of the Noble Shareholders Association, Timothy Adesiyan said the decision is a disincentive to investment, insisting that previous trust funds were marred by corruption.
He expressed fear that the growth of the capital market would be threatened if a major incentive for investment like dividend payout is no longer attractive to retail investors.
Also reacting to the development, National Coordinator, Progressive Association of Nigeria (PSAN), Boniface Okezie, said the Commission had been playing pranks all these while adding that the National Assembly are culprits of the ongoing situation.
His words, “This money clearly belongs to us and not the government or even the SEC. Regulators are now competing with operators and if you say you are embarking on investor protection programs and people are rightly calling for their money and these dividends are not getting to the registrars to give these investors their unclaimed dividend, then something is or has clearly been wrong from the start.”
A member of the Shareholders United Font, Rotimi Idowu said it is inappropriate for a trust fund to be created by the government, saying it would not be effectively managed.
He pointed out that the action had created another opportunity for wasteful spending, adding that the unclaimed dividends should go back to the companies.
Idowu explained that ploughing it back into the company that declared it aligns with the intention of the original investors to put their money with the companies who will use it to enhance profitability.
According to him, when the money goes to these companies, it will grow its reserves for the benefit of its shareholders.
He pointed out that the preponderance of unclaimed dividends was due to multiple subscriptions by investors. Multiple subscriptions happen when investors subscribe to the same public offer with multiple names.
He therefore urged the regulators to simplify letters of administration for the families of deceased persons to facilitate access to dividend claims.
How to redeem unclaimed dividends
From available information, a number of steps can help individuals to redeem their unclaimed dividends that are less than six years old in the pool:
Step 1: Check your names using the link – http://sec.gov.ng/non-mandated/ to obtain the list of shares relating to your names from SEC. It will display all the companies you have shares in and the registrars in charge.
Step 2: Take note of the registrar’s name for each of your company’s shares. A registrar is the company that keeps details of your shares/shareholdings.
Step 3: Download and fill your registrar’s form which is usually beside the company’s name on the website.
Step 4: Submit your form to the registrar, with acknowledgement, most times, through your bank.
Also quite a number of the companies would require that you visit your bank and get a bankers’ confirmation to be able to initiate e-dividend form for you. With e-dividend in place, your dividends can be automatically credited to your designated bank account.
