Professional bodies have kicked against plans by the Federal Government to take over unclaimed dividends of public listed companies. They said the move would impact negatively on the capital market as it would discourage investment.
President and Chairman of Council, Institute of Chartered Secretaries and Administrators of Nigeria (ICSAN), Bode Ayeku, urged the government to respect the rights of shareholders as enshrined in the Nigerian Code of Corporate Governance (NCCG) 2018. The Organised Private Sector (OPS) under the aegis of Nigeria Employers’ Consultative Association (NECA) has also cautioned against the move, saying that it would further strangulate businesses.
Expressing concerns on the Finance Bill 2021, Ayeku pointed out Section 39 of the Bill, which stated that “all unclaimed dividends of more than 12 years shall lapse into government revenue and shall be transferred from the Trust Fund to the Federation Account as Federation Revenue”.
He argued that it was an infringement of the constitutional right to property of the shareholders, urging that the section should be expunged as it has huge consequences for the nation’s struggling capital market.
He recommended that the government should focus more on addressing the root causes of unclaimed dividends rather than taking them over.
He said to ensure the safety of unclaimed dividends and enable shareholders to access them indefinitely; companies should be mandated to invest unclaimed dividends only in government securities / gilt-edge securities.
According to him, the unclaimed dividends should not be transferred from the custody of companies that declared them to any institution, whether private or public, corporate or institutional, local or international
The ICSAN boss stated that government should replace Section 39 of the Bill with a provision that unclaimed dividends should be accessible to shareholders indefinitely and not be forfeited by any company after 12 years, but to be kept by the companies as stated in the revised Companies and Allied Matters Act (CAMA) 2020.
He said this was because companies have a contractual responsibility to pay dividends to shareholders, adding that the bill could amount to a breach of such contract.
Meanwhile, the Nigeria Employers’ Consultative Association (NECA) has cautioned against the move, saying that it is a plan to further strangulate businesses.
In his reaction, Director-General of NECA, Dr. Timothy Olawale lamented that section 39 of the draft bill, which seeks to establish an unclaimed dividends trust fund as a sub-fund of the COVID-19 crisis intervention fund was unnecessary.
He called on the government to expunge provisions on the Fund and companies be allowed to manage the unclaimed dividends for and on behalf of its shareholders and in the best interest of both the company and its shareholders.
Olawale said that the government should not, through the Finance Bill, create further burden or issues in corporate Nigeria.
Rather, he said the government should aid businesses to expand and impact the nation’s economy positively, especially as businesses are recovering from the impact of COVID-19 and other challenges.
