The unclaimed dividends problem is endemic because of the strong vested interests that have manipulated the system.

The value of unclaimed dividends in Nigeria is estimated to be presently in the region of N52 billion. Dividends are classified as ?’unclaimed?  if they remain so 15 months after being declared by the companies. Over the years, unclaimed dividends have continued to increase in spite of efforts to stop the trend. To some extent, this trend has had a negative impact on the confidence of investors. They wonder if they  will continue to have access to their dividends. Under the present regulatory regime, unclaimed dividends will continue to rise as the laws tend to encourage the trend.

Unclaimed dividends arise from several reasons. They include shareholders who died intestate and without information of next of kin, so their dividends cannot be claimed by anybody, multiple applications by applicants during the investment process thereby making it impossible for them to have accounts to pay in different dividend warrants. Banks are not accepting dividend warrants into savings accounts. There are also deliberate actions by companies to deny investors their benefits through various schemes by some registrars and companies who lack the funds to back up their dividend declarations. The loss of dividend warrants arising from the poor postal system, investors change of address, which is not communicated to the registrars and the lack of awareness on issues including stale cheques, bank accounts and meagre dividends have all compounded the unclaimed dividends saga..

The multiplicity of reasons responsible for unclaimed dividends have dwarfed the efforts of the regulatory bodies in the capital market, the registrars and companies to stem the tide. The efforts have also been frustrated over the years by some of the companies which have vested interest in the monies not reaching investors as they continue to make use of them.

Under the provisions of the Companies and Allied Matters Act (CAMA), investors are statute-barred from claiming the dividends after twelve (12) years. The unclaimed dividends are then returned to the companies if the owners cannot be found. And for the period, the dividends are unclaimed, they also make use of the funds. So, why should they be really enthusiastic about investors collecting the dividends?. There have even been accusations that some companies declare dividends and do not have the funds to pay so they create the situations.

Apparently responding to the problems of unclaimed dividends, the Securities and Exchange Commission, through an Executive Bill, proposed an Unclaimed Dividend Trust Fund in 2002. The trust fund would have enabled investors to have access to their dividends and accrued interest whenever they showed up if it had been passed. But it was shot down at the National Assembly by the powerful forces that have vested interest in continuing to have access to the funds.

The regulatory bodies were blackmailed that they wanted to have access to investors funds for use by them and government. The truth was that the funds were intended to be managed by trustees comprising the stakeholders and excluding the regulatory bodies, which were only to have regulatory oversight on it. So after the failure of the bill, it was back to the drawing board for stakeholders.

The Securities and Exchange Commission, the Nigerian Stock Exchange, the Central Securities Clearing System, Registrars, the Tax Authorities and The Nigerian Interbank System moved in an unprecedented cooperation to launch the Electronic Dividend (e-dividend) system. The e-dividend system ensures that accounts of the investors in banks are credited directly within 24 hours after the declaration of dividends by the companies. But how many of such investors are aware and how many have given the required mandates and information for the system to have maximum impact?. Not very many. This is where, in my opinion, the stakeholders have failed. An important new system that has the potential to improve the dividend payment system tremendously and have very positive impact on restoring investors confidence has not been publicised in a sustained outreach programme that should be ongoing for at least three years.

Moving forward

The unclaimed dividends problem is endemic because of the strong vested interests and the long period of time that such interests have manipulated the system. In my opinion, we should pursue the establishment of the Unclaimed Dividends Trust Fund. In Malaysia, for example, such a system has worked very well. The Unclaimed Moneys Registrar in Malaysia is governed by the Unclaimed Moneys Act, which recognises unclaimed dividends as dividends payable to shareholders but have remained unpaid for a period of not less than (12) months as unclaimed dividends. Under the system, the share registrars register the details of any unclaimed dividends and lodge with the Registrar of Unclaimed Moneys based on an annual cycle commencing from January to December of the same year. It is also sent to the National Printers for gazetting in accordance with the provisions of the Unclaimed Moneys Act. By March of the following year, any remaining unpaid or unclaimed dividend will be lodged together with the cheque to the Registrar of Unclaimed Moneys. A shareholder may present a claim through the share registrar for payment of any unclaimed dividend (or request the company to re-issue the dividend warrant). Prior to the expiry of the twelve month period after that period, a shareholder can only request or apply for a refund of any unclaimed divided from the Registrar of Unclaimed Moneys. The shareholder must satisfy the Registrar that he is the rightful owner or has legal right over the dividend, including submission to the Registrar of unclaimed moneys, the original dividend warrant, photocopy of the identity card (for an individual) among others.

To a large extent, the Unclaimed Moneys Registrar in Malaysia ensures that shareholders always have right to their dividends. This is what the Unclaimed Dividend Trust Fund sought to achieve in Nigeria by ensuring that shareholders are not statute-barred from ever collecting their dividends. The rest is history.

In proposing the new Unclaimed Dividend Trust Fund bill, my suggestion is that the regulatory bodies should work closely with stakeholders and the National Assembly to remove the fears that government may hijack the fund for its purposes. There is no doubt that establishing the fund is the ultimate panacea for the unclaimed dividends saga. The e-dividend process should also be stepped up by very aggressive outreach programme targeted at investors and stakeholders over a long period.

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