As the controversy of unclaimed dividends continues unabated, stakeholders in the financial industry believe that negligence and complicity of registrars are the bane. NGOZI AMUCHE takes a look at the current status of unclaimed dividends in the Nigerian capital market.
The rising rates of unclaimed dividends in the Nigerian stock market has become an agonising issue that seems to have defied all remedies, despite the aggressive drive by the regulators and the National Assembly to find a lasting solution to the menace.
The figure of the unclaimed dividend which was put in the region of N158bn in 2019 by the regulatory authorities has been traced to the negligence and selfish interest of some registrars whose corrupt attitudes deprived investors of their return on investments.
Registrars are expected to ensure that the amount of shares outstanding in the market matches the number of shares authorised by the company.
A dividend is the distribution of a portion of the company’s earnings, decided and managed by the company’s board of directors, and paid to a class of its shareholders. Unclaimed dividend is recorded when a shareholder fails to claim an already paid dividend after six months.
Causes of unclaimed dividends
Apart from the lackadaisical behaviour of some registrars, unclaimed dividends also arise from other reasons which include shareholders who died intestate and without information of a 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.
Another reason is banks 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 in the past was also a factor.
Then, investor’s 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.
Stakeholder’s comments
The Managing Director of First Registrars and Investors Services Limited, Bayo Olugbemi, said the solutions and strategies are being developed to ensure every shareholder receives their dividends.
He, however, noted that a major factor that accounts for the astronomical rise in unclaimed dividends value is the recently-introduced Central Bank of Nigeria’s Unified Bank Account Number and investors’ rising apathy towards the collection of dividends with insignificant amount.
The Managing Director Lambeth Trust & Investment Company Limited, David Adonri, explained that unclaimed dividends were increasing every year due to several factors that included shareholders’ multiple subscriptions in fictitious names and whose signatures they could not remember.
He noted that the affected shareholders were also unable to open bank accounts in these fictitious names for the purpose of e-dividend collection.
“Unclaimed dividends were statute-barred and forfeited to the companies in which case recovery by the affected shareholders might not be possible in the absence of means of identification,” Adonri.
Managing Director, Lancelot Ventures Limited, Adebayo Adeleke, said more efforts were on to ensure that source documents for share transactions contain bank details of investors, the hike in unclaimed dividends might be due to the recent listings of highly capitalised stocks such as MTN, Airtel Africa, BUA Cement, among others, which may have pushed the figures upward.
He said companies should be encouraged to publish the list of unclaimed dividends in newspapers, especially those years that were close to being statute-barred, calling for more enlightenment for shareholders to embrace the e-dividend payment platform.
Securities and Exchange Commission’s Head, Office of the Chief Economist, Okey Umeano, attributed unclaimed dividends to a large number of unclaimed shares.
He said, “The quantum of unclaimed dividends would always be on the increase as long as there were unclaimed shares. Many investors during the banking consolidation bought shares with different names as well as other people’s names which they were yet to rectify.”
He said the commission introduced a forbearance window for multiple accounts to enable investors that bought shares with different names to regularise their accounts in order to reduce the quantum of unclaimed dividends.
“Some have not been able to prove to their stockbrokers that they are the owners of the shares. So, we still have a large chunk of those shares, and anytime dividends are paid, those shares are not claimed and those people don’t get their dividends,” Umeano added.
On the way forward, he said the commission would continue to put pressure on people involved in order to curb the problem of unclaimed dividends, urging investors to go and prove ownership of their shares.
SEC proffers solution
To curb the reoccurrence of unclaimed dividends, the SEC directed the registrars to immediately commence the use of the e-Dividend Mandate Management System portal recently introduced by the commission to curb the growth of unpaid dividend in the capital market.
SEC advised the registrars to exercise caution while validating names generated by the system to avoid dissimilarity with the physical forms.
SEC stated that directives be issued to banks to discontinue the verification of paper mandates presented to bank branches by investors.
It further explained that all registrars’ offices and accredited outlets will be points of upload of completed e-dividend mandate forms by investors who may alternatively approach their banker to process their completed e-dividend mandate forms.
Shareholders reactions
Shareholders, who spoke with Financial Street, explained how e-dividend works and its benefits over paper dividends.
For instance, Bello Olowonikoko of the Nigerian Shareholder’s Solidarity Association said the e-dividend helps to reduce unclaimed dividends, and that is the one advantage.
He, however, pointed out, “Remember, some shareholders have been shouting that they don’t get their dividend. One of the reasons is that when they change their place of residence without notifying their registrar, they cannot get the dividend warrant because the registrar would have posted it to their former address.
“But with the e-dividend mandate, the moment the e-mandate form is filled and signed by the bank after verification and returned to the registrar for implementation, once the dividend is declared by a company, the registrar will just post the dividend accruing to a shareholder directly into his bank account.”
The Companies and Allied Matters Act
The Companies and Allied Matters Act 1990, stipulate that dividends which remain unclaimed after 15 months, should be returned to the firm from where the beneficiary or investor may make a claim not later than 12 years. Afterwards, such unclaimed dividends are considered statute-barred and thus forfeited by the shareholders.
Challenges of unclaimed dividends
Unfortunately, the challenge is that most of the unclaimed dividend victims lack the prerequisite knowledge of how to go about it to enable the money to come out.
Today, it is not certain the exact financial value of unclaimed dividends in Nigeria. But the regulator put the figure at N158bn in 2019.
The multiplicity of reasons responsible for unclaimed dividends has dwarfed the efforts of the regulatory authorities, 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.
