The Institute of Chartered Secretaries and Administrators of Nigeria (ICSAN) has called for review of Section 39 of the Finance Bill 2021 over its provision for take-over of unclaimed dividends of public listed companies.
ICSAN President, Bode Ayeku made the call on Thursday in Lagos at the institute’s 44th annual conference, themed: Entrenching the Right Governance Framework for Economic Development and Sustainability.
The News Agency of Nigeria (NAN) reports that the take-over is proposed to be done through the establishment of a trust to be known as unclaimed dividend trust fund.
The Bill provides that unclaimed dividends of public listed companies that remain unclaimed for three years after declaration shall be transferred immediately to the trust fund either by the company or its registrar.
In addition, all unclaimed dividend of more than 12 years shall lapse into government revenue and shall be transferred from the trust fund to the federation account as federation revenue.
Any company that fails to transfer its unclaimed dividend to the fund commits an offence and was liable to five times the value of the unclaimed dividends with accumulated interests at the Monetary Policy Rate of Central Bank of Nigeria.
Ayeku said the section was a big disincentive to listing on the Nigerian Stock Exchange by companies and constrained those already listed to delist since the Bill targeted listed companies.
He noted that Principle 23 of the Nigerian Code of Corporate Governance 2018 (NCCG) provides for the “Protection of Shareholder Rights”.
Ayeku said that the right to dividend by the shareholders was one of the rights that companies and stakeholders must protect.
He, therefore, urged a review of the Section to make unclaimed dividends accessible to shareholders indefinitely and not forfeited by any company after 12 years, but be kept by the companies as stated in CAMA 2020.
This, he said, was because companies had contractual responsibility to pay dividends to shareholders and the Finance Bill had the implication of inducing a breach of such contract.
The ICSAN president urged government to focus on addressing the root causes of unclaimed dividends by requesting the various state governments to review their complex, unfair and exploitative probate processes.
He listed the processes to include the arbitrary valuation of assets of deceased leading to compromise by probate officials, high estate duty of 10 per cent which dependents of deceased were compelled to pay notwithstanding that probate.
Ayeku called for the creation of a timeframe maximum of two months for issuance of probate after receipt of complete documentation by the probate registry of each state to enable quick claim by executors of deceased shareholders.
“We request the Securities and Exchange Commission to further simplify the procedure for accessing unclaimed dividends by the shareholders such that one form can be used by affected shareholders to access all unclaimed dividends in PLCs.
“Existing shareholders should be allowed to update their information by nominating default beneficiaries with bank account numbers that dividends should be paid in case of death or disability of the shareholders.
“A section in the new Share/Bond application form (through the primary and secondary markets), Stockbroker/ CSCS account opening forms for default beneficiaries to be stated by investor in order to proactively reduce the volume of unclaimed dividend in future should be included.
“To ensure the safety of unclaimed dividends so that they can be accessed by shareholders indefinitely, companies should be mandated to invest unclaimed dividends only in government securities / gilt edge securities.
“The unclaimed dividends should not be transferred from the custody of companies that declared them to any institution, whether private or public, corporate or institutional, local or international.”
Speaking on the theme of the conference, Ayeku said it reflected the realities that the nation’s economy was undeniably challenged on many fronts with many concerned stakeholders already being apprehensive of another recession.
“At the moment, we are experiencing shrinking of socioeconomic enterprises, rising inflation, fall in the value of Naira, low capacity utilisation in the real sector, retrenchment, among others.
“All these are aggravating the already very high rate of unemployment and the negative economic indices affecting national growth.
“Therefore, this year’s conference has aptly brought to the front burner the imperative of creatively exploring all avenues for finding solution to the nation’s socioeconomic regression through the right governance framework.”
