By Peter Egwuatu
A fresh protest by shareholders and operators in the capital market over the reintroduction of the Unclaimed Dividend Trust Fund and Abandoned Property Act (UDTFAPA) by the National Assembly has emerged.
The stakeholders in the capital market have queried the rationale for combining Unclaimed Dividend and Abandoned Property in the recently proposed Act, stressing that both issues should not be confused to mean the same thing.
The controversial Unclaimed Dividend Trust Fund which was opposed by stakeholders in the capital market and eventually rejected by the National Assembly in 2005 has resurfaced following a recent debate on UNDTFAPA.
Operators, who was 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 and the 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 UDTFAPA will not be to 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 UDTFAPA Bill must not be passed in 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.
The ACMR enumerated that the Board of Directors of the Fund, for instance, will have the powers to give loans to Small and Medium Scale Enterprises (SMEs) under a loan guarantee scheme. “This is not necessary as the banks have been directed by the Central Bank of Nigeria (CBN) to make adequate provision for the financing of SMEs. We still have bulk of SME funds in banks not yet disbursed. Investors monies must be protected” it added.
Another reason why it stated that the Act should not be passed was the fact that the Board of Directors will have the powers to promote and develop Capital Trade Points. “This has always been the duty of SEC. The promotion and development of Capital Trade Points cost a lot of money. If the bill is passed into law such expenditures will eat deep into the fund and render the entire arrangement meaningless” it added.
The ACMR observed that the bill provides that all expenditures will be defrayed from the Unclaimed Dividend Trust Fund.
According to it, “ All expenditures include but not limited to staff salaries, pensions, travel expenses, housing allowances, administrative expenses and asset acquisitions. It can never be right to shamelessly use the dividend monies of shareholders which the bill claims to be protecting. This provision to say the least makes the whole bill suspect”.
Other reason why it argued that the Act should not be passed was 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”.
On its part shareholders on 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 the National Chairman for Advancement of the Rights of Nigerian Shareholders, Dr. Farouk Umar “The portion of the unclaimed dividend to should be expunged. Section 383 which states that unclaimed dividend will be forfeited after 12 years. That potion should expunge. 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 12years period. So I would want a situation where the period would be limitless.”
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.”