Capital market beset by rising unclaimed dividend, loss of shares
The incidence of unclaimed dividend remains one of the perennial issues that continued to rear its head in Nigeria’s capital market.
Indeed, this issue has remained on the front burner of public discourse in the past few years, especially amongst stakeholders.
Dividends are the distributable earnings of a company. The earnings, which are not distributed, constitute retained earnings.
Dividend payout and retained earnings vary according to companies. The decision on whether or not to declare dividend rests in the hands of the board of directors of a company. However, when declared, it becomes a liability on the company, CAMA (1990).
When a dividend is not claimed by the shareholder for any reason, it gives rise to the issue of unclaimed dividend. According to CAMA (1990), dividends are considered unclaimed after 15 months from the date of declaration.
In Nigeria, there has been a lot of worry among regulatory authorities, company executives, registrars of companies and the general public regarding the rising incidence of unclaimed dividends.
If dividends remain unclaimed for whatever reason, they become a disincentive to investment and may erode investor’s confidence in the Nigerian capital market.
With over N90billion accumulated dividends currently unclaimed by shareholders, Nigeria’s capital market is in dire need of measures to stem the tide, to boost investors’ confidence.
This is in spite of measures put in place by the Securities and Exchange Commission (SEC), to check the incidence in the local bourse.
Dematerialisation, which is the conversion of a share certificate from physical to electronic form and credited to investor’s Central Securities Clearing System Limited (CSCS) account, has not helped much, as the failure of registrars to fully adopt the electronic processing technology, is another source of a disincentive to market investors.
The move, instead of boosting transaction processes rather heightened delay, accompanied by irregularities that also encourage fraud, with attendant loss of share certificates, delay in receipt of dividend warrants, notice of meetings, and companies’ annual report.
As a result, many shareholders are not aware of the true status of their shareholding in many of the companies listed on The Nigerian Stock Exchange (NSE), NASD Plc, or Over-the-counter (OTC) also called off-exchange trading market.
Shareholders often say they have lost their investment or that their company has shut down because they have not heard from them for a long time, just as many have shares in companies that closed shop due to failure, merger or acquisition.
Many investors are still holding on to share certificates issued to them many years ago, whereas the underlying shares have been posted in their electronic form to an unknown CSCS account or registrars department in the aftermath of a capital restructuring scheme.
In other cases, the shares have ‘evaporated’ as the business they invested in has been officially liquidated like Nigeria Bottling Company Plc, Nigerian Tobbaco Company Plc, Trade Bank, Afribank, International Merchant Bank, Savannah Bank and a host of others.
As a result, such shareholders are virtually cut off from the companies and do not know what is going on with their investment nor can they participate in the company’s activities as envisaged in the Companies & Allied Act 1990 and Investments & Securities Act 1991.
To this end, a platform has been developed for shareholders, who had lost their investments due to ‘loss of share certificates’ and other irregularities, which is designed as an integrated shares finder (ISF) to aid recovery of shares and revalidation dividends.
Developed by Integrated Trust & Investment Limited, the Group Managing Director of the company, Dele Lawore, said the product would help investors to locate and recover their missing shares, loan stock, and other capital market assets, and enjoy the benefit of the investment.
According to him, ISF’s recent study of the Nigerian stock market revealed that “Many do not know the location of their shares, the number of their shares, the value of the shares, the benefit accrued in terms of unclaimed dividends or bonus shares. Some shareholders do not receive any information from their companies in the form of Annual reports, chairman’s letters, Scheme of arrangement documents, Notices, etc.”
He said it is in response to these challenges that his company develop ISF to help investors to access their investments and the accrued benefits.