Vanguard (Lagos)

21 September 2009

Nigeria: Unclaimed Dividend Mounts to N17.9 Billion, NBL N4.4 Billion, Bank PHB N4.1Billion, Intercontinental N3.5 Billion

Nigerian Breweries PLC, Bank PHB, Intercontinental Bank PLC and Diamond Bank account for N15.3 bn or 85 per cent of the N17.9 billion unclaimed dividend in the Nigerian capital Market.

Shareholders of these four companies have N15.3 billion dividend declared by the companies that have not been claimed.

The value of unclaimed dividend dropped however to N17.9 billion in 2008 from N19 billion in 2007. Investigation revealed that Nigerian Breweries has the highest amount of N4.4 billion representing 24 per cent of the entire unclaimed divided in the system.

Bank PHB is second with N4.1 billion or 23 per cent , followed by Intercontinental Bank Plc with N3.5 billion (19.5 per cent) and Diamond Bank has N3.3 billion (18.4). Unclaimed dividend has in the last five years pinched capital market operators against regulators which is seeking to set up Unclaimed Dividend Trust Fund (UDTF) . Securities and Exchange Commission the apex regulatory body in the capital market had proposed a legislation to annex the unclaimed dividend into a pool to be managed by it. But shareholders have kicked against such a legislation insisting that the money rightly belongs to them.

But stakeholders in the nation's financial sector have called for a new legal framework to govern the affairs of corporate entities in the country. They said that the present framework represented by the Companies and Allied Matters Act (CAMA) has been rendered obsolete by recent development in the corporate world and by international best practices.

Among other things, a cross section of finance industry operators interviewed by Vanguard, called for a new regime of dividend payment which include interest payment on unclaimed dividend and removal of deadline on unclaimed dividend. Stakeholders also want the new law to recognised electronic dividend and bonus and dematerialisation of share certificate; harmonisation of CAMA with other laws like Banks and Other financial; proper recognition of capital reduction and share reconstruction.

A company secretary in the banking industry who spoke on condition of anonymity said that there is a whole lot of things to amend about CAMA as many sections of the Act has been overtaken by events and development in recent times. She said for example some segment of CAMA conflicts with provisions of some laws enacted after it.

"A classical example is the issue of annual general meeting. CAMA said that the annual general meeting must hold three months after the end of the operating year but a law like BOFIA says four months. So there is need to homonise these laws"

Managing Director, Lambeth Securities Limited, David Adonri said, " CAMA still feels that the share certificate is the prima facie evidence of ownership of shares of the company. But because of advancement in information technology and the fact that we are in a paperless world, it is now important to amend that section, such that something that is kept only in the books and online document can be seen as sufficient evidence of ownership of shares of a company.

This will now make the proposed dematerialisation of shares certificate in the market to be in compliance with the laws of the country."

On the issue unclaimed dividend, shareholder groups said that Section 383 of CAMA, which makes unclaimed dividend statue barred after 12 years, should be expunged. They also advocated for interest payment on such dividend whenever the beneficiary comes for it.

They noted that CAMA has a lot of loopholes especially with respect to dividend payment, which companies exploit to the detriment of shareholders.

Chairman, Advancement for the Rights of Nigerian Shareholders, Dr. Farouk Umar said, "The portion of the unclaimed dividend to should be expunged. Section 383 which states that unclaimed dividend will be forfeited after 12 years. That potion should expunge. This is because an orphan, whose parents have invested in his or her name or in their names, will not be able to reclaim the benefit of such investments when he becomes of age because it is statute barred after 12 years.

Also, Section 383 does not make provision for payment of interest whenever the shareholder emerges to claim his dividends within the 12years period. So I would want a situation where the period would be limitless."

Similarly, Chairman, Progressive Shareholders Association of Nigeria (PSAN), Mr. Boniface Okezie said, "The position where CAMA said it should be statute -barred after12 years and the money be invested in other investments by the companies that declare them should be removed. The status quo on unclaimed dividend should be removed from CAMA.

We want a situation where beneficiaries could have access to the fund at will. This means that we would want companies to hold on to the unclaimed dividend and use it in running the company pending a time that the beneficiaries or their next of kin would come for claim. So the issue of statute bared should not be there. What we are after is that beneficiaries should have the right to pick up their dividend whenever they are ready."

Joining the campaign for review of CAMA Chairman, Ibadan Zonal Shareholders Association of Nigeria, Chief Aderemi Oyepeju, called for a review that empowers the audit committee of companies to be more assertive in their oversight responsibilities as well as a new provision to mandate board members to declare their assets.

He said, "It is expedient that CAMA is reviewed to take care of current realities. CAMA has been in operation for close to twenty years, so reviewing it might be appropriate at this time. We would want CAMA to address the role of audit committee members. We would want especially the shareholder members in the audit committee to be empowered to monitor the board of directors. And for that to be effective, we would like a member of the chairman of the audit committee to be a member of the board to ensure that there is transparency in the activity of the board.

A situation where members of the audit committee cannot see the entire books of the company in the course of their oversight duty should not be tolerated. At the moment what happens is that shareholders in the audit committee only see the books that the board wants them to see.

Also, we would want shareholders in the audit committee to have a maximum of two terms to serve in their capacity. Continuity is very essential, just like what is obtained with the board of directors. The audit members should be allowed to stay along side with the directors to ensure consistency of policies that leads to growth and development of the entity.

The chairman of the committee should also serve on the board so that he or she can benchmark the success of the organisation.

Furthermore, the tenure of the audit committee members should be extended to at least three or more years. This will ensure that no vacuum is created. If one of two person(s) retires, the other one or two member(s) remains. I advocate a six year tenure for the audit committee members.

Also the new CAMA should incorporate that the board of directors should declare their assets both at the time of entry and exit. This is to ensure that the asset of the company is not misappropriated. This will reduce or element the level of fraud with corporate entity.

The new CAMA should include that managing directors of any company should not spend more than eight years. Whether the person is the owner of the company or not, eight years should be the maximum term to be spent under such capacity."

A top Banker in the legal department of one of the leading banks said that certain aspects of CAMA have become stumbling blocks to business activities in the industry. "For example CAMA requires all that all companies doing business in Nigeria must be registered in the country with the exemption of foreign companies invited by the federal government for specific business relations. But in recent times there have been foreign companies operating in the country not invited by the federal government.

Some are operating based on contractual relation with other Nigerian companies or State government. Most times the contract they are here for is a one off thing and hence not necessary to register as a business in the country. Banks however find it difficult doing business with such company especially opening of accounts because of the Know-Your-Customer requirements. So there is need to expand the list of foreign companies excluded from requirement to register in Nigeria."

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