Dividends are declared from the profits made by a company on the recommendations of the company’s directors. The recommended dividends are approved for each financial year at the company’s Annual General Meeting, AGM, following the end of the financial year. However, the company’s directors may declare an interim dividend, which is paid to the shareholders during the financial year.

Before the introduction of e-divided payment, dividend warrants were issued to shareholders. The dividend warrants should be paid into a bank account within 15 months after their issue otherwise the warrants are declared as unclaimed and the corresponding funds returned to the company.

Dividends which remain unclaimed for over 12 years stand forfeited and the corresponding funds are transferred to the company’s general reserve. These dividends are no longer recoverable or actionable by the shareholders in accordance with the Companies and Allied Matters Act, CAMA.

Recently, the Securities and Exchange Commission SEC issued a directive that henceforth companies should pay dividends as e-dividends and that warrants should no longer be issued. SEC has however postponed the implementation of its directive given the concerns expressed by investors that the reasons why dividends remain unclaimed should be addressed before such a measure is put into operation.

SEC is in the best position to lead a campaign that would make shareholders aware of their unclaimed dividends. In the first place, SEC should publish in the newspapers a list of all companies and the amounts each company is holding as unclaimed dividends.

The list will show which companies have substantial unclaimed amounts and SEC should engage each of these companies on a case-by-case basis such that shareholders would be encouraged to come for their unclaimed dividends. Recently, Resort Savings and Loans Plc showed a good example by placing a newspaper advertisement asking their shareholders with unclaimed dividends to contact the corporate head office, the Registrars, and/or any of their branches. The advertisement has the contact addresses and telephone numbers of the branches and the head office; the office address, contact telephone numbers and the web address of the Registrars were also given.

The previous week, we discussed the non-delivery of company annual reports and accounts and the difficulties that companies may have in reaching their shareholders. We suggested that companies should consider the act of reaching their shareholders an important social responsibility.

Dividends warrants should ordinarily be posted as standard one-page letters at the minimum postage charge of N50 for a letter. The letter conveying a dividend warrant is far smaller than an annual report that runs into several pages. Dividends warrants however have a value and Registrars are reluctant to send warrants by post when the warrants exceed a certain amount.

Although SEC has issued a directive that all dividend warrants should be sent by post, this directive is not being carried out and neither SEC nor the shareholders are any wiser. It is the shareholder who complains to the Registrar that he/she has not received his/her warrant that is asked to come forward for the warrant.

Shareholders have to be made aware that there are dividends that they may not have received. For example, there was a period when Nigerian Breweries, NB, Plc declared 2 interim dividends and one final dividend for the same financial year. A shareholder who received 2 of these dividends may not be aware that there is a third dividend.

NB Plc has delivered good dividends to shareholders in the past few years and the share price has had a substantial increase in the same period. NB Plc is a very strong brand in Nigeria and it is engaged in promotions through adventure, music, dance, acting and family shows throughout the year. NB Plc therefore has the resources and the ingenuity to device a unique promotion that will make their shareholder comes forward for their unclaimed dividends.

The 2012 annual report and accounts of NB Plc gives unclaimed dividends as amounting to N4.2billion. Over a 12-year period, this would give an average of N350million a year. This is a staggering amount to be written back into the general reserve of the company. The company’s shareholding structure also shows that the core investors and nominees hold about 70 percent of the shares and these categories of shareholders would have received their dividends.