Chuks Okocha in Abuja
The Securities and Exchange Commission (SEC) has opposed the amendment in the Finance Bill 2020 that allows the handover of unclaimed dividends worth N150 billion to the federal government.
A representative of the commission, Abdulkadir Abbas, expressed his displeasure at the public hearing of the bill organised by the Senate Committee on Finance yesterday.
According to him, dividends are a reward, cash or otherwise, that a company gives to its shareholders when it is unclaimed.
“Shareholders are required to claim dividend within 30 days of when the dividend are declared”.
Before Abbas’ submission, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, in her presentation while highlighting key reforms intended in the bill, noted that under Companies and Allied Matters Act, the federal government proposes the creation of an unclaimed dividends and unutilised bank Balances Trust Fund.
She explained that the platform would house dividends that were declared but unclaimed and will be owed as a perpetual debt to shareholders
“It is proposed that such unclaimed dividends should be handed over to the government as trustee, in a perpetual fund created under supervision or the CBN and DMO, etc with private sector involvement in the governance of the fund.
“The liability to shareholders of public companies will no longer be extinguished after 12 years as currently provided for in the CAMA”, she said.
Abbas, however, kicked against the government supervising the said platform particularly because the Investment Securities act mandates the commission to protect the interest of the investors.
He said: “We are not against the proposal to set up the unclaimed dividends and balances trust fund. What I said is that we have concerns with respect to the governance structure of that proposed fund and appealing for reconsideration.
“SEC being the capital market regulator and mandated by the Investment securities act to protect the interest of the investors, to be the one to administer or to manage or to supervise the operation of that fund. That is what I stated.”
Responding to SEC’s submission, Ahmed noted that what the government is proposing is in line with the provisions of the 1999 Constitution adding that the Debt Management Office will supervise it.
“Any funds that is lying fallow after a certain period of time cannot be taken over but such funds could be borrowed.
“The Unit Trust is a borrowing arrangement of the government. At the moment, the Debt Management Office issues securities to the registrars in case owners of such unclaimed dividends or deposit in dormant accounts come forward to claim their entitlement.
“The reason the Debt Management Office would be in charge of the unclaimed dividends and deposit in dormant accounts is because it has the mandate to manage debts on behalf of the government.
“That is why we recommend that the DMO as against to SEC, should manage the funds. It is possible that a different arrangement is in place in other jurisdiction but I want to state that in the amended CAMA.
“There is a provision that had modified the section that mandates the registrars to return unclaimed dividends after 12 years to the companies that paid the dividends in the first instance rather than the companies to collect back the money and redistribute, government wanted to manage the funds.”
The Chairman of the Committee, Senator Solomon Adeola, then asked the minister for the next action if the DMO takes over the management of the funds and the owners of the unclaimed dividends or deposits in the dormant accounts show up.
The minister said DMO would give details of the procedure of how the funds would be managed.
The senator however told her to give an explicit explanation in the proposed amendments to allay fears of owners of the unclaimed funds adding that once they apply, the registrar would make a request to the DMO based on the evidence provided by the owners.
Responding, the minister said: “We have funds sitting in the registrars and funds sitting in the banks which are not helpful to the system.
“The government is just trying to make use of the funds in the interest of Nigerians because there is no point having idle funds in the banks whereas government needs money to carry out many developmental projects.
“This is well intended, some shareholders may not be happy. Certainly, no regulator is happy. This is our proposal and we belief that the National Assembly would take the right decisions for the benefit of the greater good of Nigerians.
“ The United Kingdom also have a provision that dividends not claimed after fours years, revert to the companies that issued them..
“We are now proposing to reduce the length of time that the unclaimed dividends could revert to the companies, we are proposing six years. It would be a pool of funds and whoever comes up with a request for refund would have enough to collect.”