Investors flay SEC’s plan to transfer N90b unclaimed dividend into development fund
Say action is inimical to market growth
Discordant tunes have continued to trail the proposed plan by the Securities and Exchange Commission (SEC) to transfer shareholders’ unclaimed dividend into a capital market development fund after 12 years of declaration.
The value of unclaimed dividends had increased to about N90 billion as at the first quarter of 2016.According to the shareholders who spoke in an interview with The Guardian, the decision is contrary to the Companies and Allied Matters Act (CAMA) specifications that dividend which remain unclaimed after 15 months of being declared are supposed to have been returned to the company from which the beneficiary/investor may make a claim not latter than 12 years afterwards.
Subsequently, such unclaimed dividend, according to them is considered statute-barred and thus forfeited by the shareholders.They stated that sections 379 – 386 of CAMA, where dividends are returned to the company unclaimed, the company should send a list of the names of the persons entitled with notice of the next annual general meeting to the members.
After the expiration of three months notice, according to them, the company may invest the unclaimed dividend for its own benefit in an investment outside the company and no interest shall accrue on the dividends against the company.
Such dividends are to be regarded as special debts due to and recoverable by shareholders within 12 years and actionable only when declared.Specifically, the Chairman, Progressive Shareholders Association of Nigeria (PSAN), Boniface Okezie, said unclaimed dividend belong to shareholders; adding that it would remain with the company pending the review of CAMA.
“The unclaimed dividends belong to the shareholders and must remain with the companies until the amendment of the law.”Also speaking, the National President Constance Shareholders Association of Nigerians, Shehu M. Mikail, explained that the proposed plan is contrary to the CAMA, which is the rule that guides the operations of the market.
He pointed out that it would also discourage retail investors’ from participating in the market because the rule stipulates that all unclaimed dividend should be ploughed back into the company to yield more profit for investors.
“SEC is not working for the interest of shareholders because the unclaimed dividend belongs to the shareholders of those companies. Then, if so, why should SEC establish such fund, for whom? And who would manage the fund? Why shouldn’t the unclaimed dividend go back to those companies that bake the cake to further improve these companies?
“We are not going to agree with this moves and this is does not tally with the transparency they are preaching to give confidence to shareholders. It likely push interested companies not to list on our markets,” he added.
The President, Renaissance Shareholders Association, Olufemi Timothy said: “SEC can only set up a committee to prevent, regulate, and control unclaimed dividend not to set up a development fund. The management of shareholders’ funds outside our companies is illegal, fraudulent and a corrupt practice.”The SEC in its effort to stem the rising unclaimed dividend in the market had recently proposed a rule on the application of 12 years and above unclaimed dividends.
A circular released recently by the apex regulator proposed that companies and registrars in custody of dividends, which remain unclaimed by shareholders 12 years after the date of declaration or subsequently attain the 12 years threshold shall upon the coming into effect of this rule transfer such monies into the Nigerian Capital Market Development Fund (NCMDF).
The Commission added that all companies and registrars shall not later than 30 days after the end of every calendar year forward to the Commission a report of unclaimed dividends in their custody, which shall specify compliance with Sub Rule (1) of this Rule. According to SEC, companies shall also disclose details of compliance with this rule in their annual reports.
The Commission, however, urged all comments and input should be forwarded to the Secretariat, Rules Committee of the Commission or through the DG, SEC, not later than two weeks from the date of publication.