The Securities and Exchange Commission (SEC) at the weekend commended the House of Representatives’ resolutions to investigate the increasing `level of unclaimed dividends.
At a plenary session which took place last Wednesday, the House of Representatives passed a resolution mandating its House Committee on Capital Markets and Institutions to investigate the high volume of unclaimed dividends in quoted companies in Nigeria and report to the House within four weeks.
In a statement issued by the SEC and made available to LEADERSHIP, the commission noted that it welcomed the resolution which came about through a motion sponsored by one Akpan Micah Umoh, adding that his motion was predicated on the efforts of SEC which, in his words revealed that “unclaimed dividends were gradually mounting up to over N40 billion”.
The statement read in part “This legislative attention to the intractable issue of unclaimed dividends is a positive development. The size of the problem has since surpassed the N40 billion referred to by Hon. Umoh since as at December 2011, the size of unclaimed dividends was N52.2 billion. Out of this figure, 84.7 per cent i.e. N42.5 billion was held by nine out of 23 registrars who submitted their returns.
It was out of concern for this unfortunate situation in which return on shareholders’ investment by way of dividends is perennially locked in the unclaimed dividends saga that as far back as in 2002, the SEC sponsored a bill in the National Assembly for an Act of Parliament which will set up the “Unclaimed Dividend Trust Fund”. This Fund and the Act of Parliament which set it up were intended to drastically reduce or completely eliminate the incidence of unclaimed dividend by providing alternative domicile for funds deriving from unclaimed dividends to what was stipulated in Section 382(1) of the Companies and Allied Matters Act that:
“Where dividends are returned to the company unclaimed, the company shall send a list of the names of the persons entitled with the notice of the AGM to the members. After the expiration of three months of the notice mentioned in 382(1), the company may invest the unclaimed dividends in an investment outside the company. No interest shall accrue on the dividend against the company”.
If passed into law, the “Unclaimed Dividend Bill” would have removed the point of domicile for unclaimed dividends from their originating companies to another party managed Trust Fund and removed the incentive which feeds the collusion between certain players in the market to frustrate shareholders’ access to dividend accruals on their investment.
If diligently prosecuted, the investigation may well hold the key to unlocking the challenge posed to the Nigerian capital market and the investing public by this phenomenon which contributes to the erosion of confidence in the market by denying investors their rightful returns on investment.