By Peter Egwuatu
Ahead of the public hearing by the National Assembly on Unclaimed Dividend and Abandoned Property Fund Act scheduled to hold in Abuja Wednesday, shareholders and operators in the capital market have raised fresh protest over the bill.
General Secretary, Independent Shareholders Association of Nigeria ( ISAN), Mr. Adebayo Adeleke in a chat with Vanguard said, “ we are going to storm the National Assembly for the public hearing on the issue. Already our group is against the establishment of the Fund as there is an existing legislation, i.e CAMA that regulates unclaimed dividend.
So why creating another confusion. There are going to be complication if this bill is passed as proposed except if the existing legislation is repealed. We are going to make our case known that there is need for the creation of a fund to manage unclaimed dividend”.
Also, the President of shareholders under the umbrella body of Advancement for the Rights of Nigerian Shareholders, Dr. Farouk Umar condemned the proposed Act, stating that government officials wants to reap where they did not sow.
According to him , “The portion of the unclaimed dividend to be expunged is section 383 of CAMA which states that unclaimed dividend will be forfeited after 12 years.
That potion should be expunged. This is because an orphan, whose parents have invested in his or her name or in their names, will not be able to reclaim the benefit of such investments when he becomes of age because it is statute barred after 12 years. Also, Section 383 does not make provision for payment of interest whenever the shareholder emerges to claim his dividends within the 12 years period. So I would want a situation where the period would be limitless.”
Other stakeholders in the capital market have also queried the rationale for combining Unclaimed Dividend and Abandoned Property in the proposed bill, stressing that both issues should not be confused to mean the same thing.
The controversial Unclaimed Dividend Trust Fund was first proposed in 2006 and was vehemently opposed by stakeholders in the financial market and dumped by the National Assembly. It has now resurfaced following a recent debate on the issues involved.
Specifically, the public hearing has been scheduled to hold from November 24th and 25th 2010 at the National Assembly complex in Abuja. The new bill now include abandoned property.
Operators, who are furious over the latest development stated that capital market is information driven, stressing that the level of investors confidence seen in the capital market is a reflection of the transparency of all activities and level of honesty displayed by operators.
According to them, “ If this bill is allowed to see the light of the day, investors will no longer have confidence in the market and so will look elsewhere to invest their monies. This is because the bill is all about taking and spending the hard earned benefit of shareholders. If the bill is passed into law the level of activities in the capital market will fizzle out fast. This can equally deter Foreign Direct Investment in the Economy
According to the stakeholders, “ Unclaimed dividend is not abandoned property. Unclaimed dividend simply means dividend that has been declared but not yet claimed by the shareholders. Shareholders have the right and privilege to claim it whenever possible”.
The Association of Capital Market Registrars (ACMR) in a recently released memorandum stated that the implementation of the UDAPF will not be in the best interest of the various stakeholders.
The members of the Group explained that the law covering unclaimed dividend as provided by the Companies and Allied Matters Act (CAMA) 1990 part xiii sections 5, 382 and 385 states that dividends are declared from a company’s distributable profit and where they are returned unclaimed, even after sending a list of such dividends with the company’s annual report and accounts, the company may invest the dividend monies for the benefit of the shareholders.
“ Dividends shall be special debts due to, and recoverable by shareholders within 12 years and actionable only when declared. Dividend become unclaimed after 15 months of being declared and paid and become statute barred after 12 years”
The members of the ACMR noted why the UDAPF bill must not be passed into law adding that investors protection will no longer be guaranteed if the bill is passed as dividend monies in the fund will be diverted into other uses. Other reasons why (ACMR) argued that the Act should not be passed are that the bill provides that all dividends declared 12 years preceding the commencement of the Act be paid into the Fund.
According to it, “ Since dividends can only become statute barred after 12 years of being declared, the CAMA (1990) which is the enabling law should be amended before any one can do what the law says, which we believe will be in the interest of investors”.
Similarly, Chairman, Progressive Shareholders Association of Nigeria (PSAN), Mr. Boniface Okezie said, “The position where CAMA said it should be statute _barred after12 years and the money be invested in other investments by the companies that declare them should be removed. The status quo on unclaimed dividend should be removed from CAMA.
We want a situation where beneficiaries could have access to the fund at will. This means that we would want companies to hold on to the unclaimed dividend and use it in running the company pending a time that the beneficiaries or their next of kin would come for claim. So the issue of statute bared should not be there. What we are after is that beneficiaries should have the right to pick up their dividend whenever they are ready.”
In 2006, the National Assembly threw out a proposed bill sponsored by the Securities and Exchange Commission (SEC) to establish the Unclaimed Dividend Trust Fund (UDTF).
Shareholders, with the exception of a few, had vehemently opposed the establishment of the Trust Fund. Their argument then were that : The Securities and Exchange Commission and the government were seeking the control of the fund for their use; that any fund that government initiates or is in anyway involved in will be misappropriated; that SEC has no business getting involved in addressing the problem; that SEC had not exploited other options to address the problem; that CAMA has already made adequate provision for the treatment of unclaimed dividends; that the volume of unclaimed dividend is insignificant with most of it already statute barred.
Mr. Sunny Nwosu, National Coordinator of Independent Shareholders Association of Nigeria (ISAN) said, ” We are opposing the establishment of UDTF because the money involved is not public money but private investors’ money. Government does not respect private sector, so we believe it will be mismanaged. Furthermore, the composition of the Board member is not all encompassing because it did not reflect representative of the entire stakeholders. Most of the shareholders involved were picked from the Zonal shareholders association that was formed by government.”
Continuing, he said, ” No rational investor will let his returns go in vain. If somebody did not steal to invest nor launder money to invest then he will not be afraid to come for the returns on his/her investment. So 12 years is enough to track down someone’s investment.
We have succeeded in forcing companies to publish the names of shareholders that have not claimed their dividend on their annual reports which most of them have been complying with. We believe that this will go a long way to reducing the rising trend of unclaimed dividend in the country.
Meanwhile, the few stakeholders, including the SEC who supported the establishment of UDTF explained that most unclaimed dividends are being used as working capital by companies contrary to CAMA’s provision that it should be invested outside the company.
According to SEC, ” This tends to distort the company’s actual financial position as it is difficult to forecast their performance without such free funds. Moreover, whenever such companies go under, the unclaimed dividend will also be lost. The effect of these on the investor when dividend cannot be claimed is that they are deprived of their rightful earnings. This could dampen their enthusiasm about investing in the capital market with severe implication for the economy.”
The new bill before the National Assembly is seeking for an Act to establish the Unclaimed Dividends and Abandoned Property Trust Fund to be charged with the responsibility for identifying and maintaining database of unclaimed dividends, abandoned property and investment in banks, financial institutions and public companies in Nigeria.
See details of the bill on pages 32 and 33
Provisions of the bill as sighted by Vanguard has it that the fund will be responsible for unclaimed dividends; abandoned bank deposits; and unclaimed or abandoned money or cheques, money order, traveler’s cheque, drafts, deposits, interests, dividends; security deposit, refund, credit balance, unpaid wage or salary or unpaid wage or salary or unidentified remittances ; security certificate or other evidence of ownership of an interest in a business organisation; bond, debenture, note or other evidence of indebtedness; money deposited to redeem shares, bonds, coupons or other securities;
an amount due or payable under the term of an annuity or insurance policy, and ) an amount distributable from a trust or custodial fund established under a plan to provide education health, welfare, severance, share purchase, profit sharing, employee savings or benefits.