UNIVERSITY OF LAGOS SCHOOL OF POSTGRADUATE STUDIES Department Of Accounting ACC 801: ADVANCED ACCOUNTING THEORY THE IMPACT OF UNCLAIMED DIVIDENDS ON CAPITAL MARKET DEVELOPMENT IN NIGERIA BY M. Sc Accounting 2011/2012 (Part-Time) GROUP 14 ADENIJI, YISA OMO-IBRAHIM, YUSUF 119021097 ANTHONY, CLEVER DIBIE, STEPHEN O. AINA, OLUSEYI B. SANNI, OMOBOLAJI LECTURER: DR S.B ADEYEMI
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The Impact of Unclaimed Dividends on Capital Market Development in Nigeria
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UNIVERSITY OF LAGOS
SCHOOL OF POSTGRADUATE STUDIES
Department Of Accounting
ACC 801: ADVANCED ACCOUNTING THEORY
THE IMPACT OF UNCLAIMED DIVIDENDS ON CAPITAL MARKET DEVELOPMENT IN NIGERIA
BY
M. Sc Accounting 2011/2012 (Part-Time)
GROUP 14
ADENIJI, YISA OMO-IBRAHIM, YUSUF 119021097ANTHONY, CLEVER DIBIE, STEPHEN O. AINA, OLUSEYI B. SANNI, OMOBOLAJI
LECTURER: DR S.B ADEYEMI
APRIL, 2012
ABSTRACT
As shareholders unclaimed dividends pile up to over N33 billion as at the third
quarter of 2011, the increasing rise in the volume of unclaimed dividends in the
country is a source of worry and a cause for major concern. From a little over N2
billion in 1999, the figure by the end of 2008 had risen to about N20 billion. And
now market analysts estimate that by the third quarter of 2011, the amount of
unclaimed dividends in the Nigerian capital market would hit N33 billion "The
portion of the unclaimed dividend to should be expunged”. Section 383 of CAMA
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.
Saddled with the primary responsibility of investor protection, SEC as apex regulator
of the Nigerian capital market, has repeatedly said that it would ensure that
investors are not denied their right of investing in the capital market. Of course, the
Investment and Securities Act (ISA) of 1999 gives SEC the power to “Act in public
interest having regard to the protection of investors and the maintenance of fair
and orderly markets”. Based on this premise, SEC said a great deal of effort has
been made to put in place measures that will address the problem of unclaimed
dividends.
Keywords: Capital Market, Dividends, Unclaimed dividends, in Nigeria .
INTRODUCTION
The measure put in place to salvage the untold hardship of investors, the
situation seems to have defied solutions as the problems of investors keeps
aggravating on a daily basis. It seems as if the players in the market have
left investors to their own fate now that the chips are down. The pains
investors go through in the hands of Registrars of the about 220 companies
listed on the Exchange have become too much that some shareholders have
been forced to abandon their shares and dividend.
Nigerian Breweries PLC, Bank PHB, Intercontinental Bank PLC and Diamond
Bank account for N15.3 billion 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 Plc (Now Keystone Bank) is second with N4.1 billion or 23 per
cent , followed by Access 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 who are 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 newspaper called for a new regime of e-dividend
and e-bonus payment which include interest payment on unclaimed dividend
and removal of deadline on unclaimed dividend. Stakeholders also want the
new law to recognized electronic dividend and bonus and dematerialization
of share certificate; harmonization 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 are a whole lot of things to amend
about CAMA as many sections of the Act have 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 harmonize these laws"
The 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 to an extent will now make the
proposed dematerialization 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. The 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.
Further, he said 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. In a
Similar occasion, the 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.
STATEMENT OF RESERCH PROBLEM
It is not an easy task to be an investor or shareholder of quoted companies in
Nigeria these days. the pains that shareholders are going through in the
hands of company registrars in the process of verifying share certificates,
Investing in shares of quoted companies in Nigeria has continued to go with
catalogue of problems. Investors and shareholders are lamenting how they
are being deprived of the benefits of their investments by the registrars, the
companies entrusted with the responsibility of keeping their registers, Even
the so called large corporation such as the likes of Nigeria Breweries, Bank
PHB, Intercontinental Bank, Diamond bank, Law Union, Linkage Assurance
and Oasis making was seen parading large amount of unclaimed dividend in
the last few decade, unclaimed dividend has been mounting while the
accountability, the restoration of investment trust has been greatly lost.
Unclaimed dividend has risen to N33 billion in 2011. What is then the
position of CAMA towards reducing the alarming rate of unclaimed dividend?
OBJECTIVES OF THE STUDY
Unclaimed dividend could be minimized with the following listed
1. Unnecessary delayed in dividend warrants issued to the shareholders should stop2. To improve the efficiency of the postal system.
3. orphan, whose parents have invested in his or her name or in their names, should reclaim the benefit of such investments when they becomes of age 4. A computerised application form of beneficiary should show extensive information such as telephone number and Next-of-kin.5. To intensify drive towards e-dividend and e-bonus.6. Securities and Exchange Commission should show surveillance over formulating principles and protecting the investors. 7. Dividend warrant should be lodged into the savings account, regardless of the status of the account (dormant or not) account dividend payment must be made into bank accounts.
RESEARCH QUESTION
The main research problem was broken down into sub-problems stated as research
questions, which guided the study. Attempts were made in the course of the
research to resolve the following questions which were raised:
1 Does the e-payment system drive home the claiming of dividend of
companies listed on stock market?
2 Why do corporations convert unclaimed dividend to working capital
instead of investing such in an investment outside the company?
3 Does the rejection of the unclaimed dividend trust fund bill as proposed by
the National Assembly deviate from the recommendation of CAMA?
4 Should the status quo after 12 years statute barred on unclaimed dividend
be removed from CAMA?
5 Are the SEC and CBN working in the best interest of the investors?
RESEARCH HYPOTHESIS
A lot of controversy has been raised on the issue of unclaimed dividend. We have
studied this matter fully and feel that there are basically two contentions here. First,
is the companies claiming the right to control the unclaimed dividend and secondly,
SEC claiming that after 12 years the unclaimed dividend should be placed under its
custody just like any other property without a heir is placed under the care of the
government. We are of the view that between these two views is lost the interest of
the heirs of the owner of the unclaimed dividend. We think that the correct
approach is to have an agency which can be SEC with power to investigate and
trace the next of kin of owners of unclaimed dividend.this study will be attempting
to test the following hypothesis.
The null hypotheses stated below, were tested in order to provide answers to the
research questions mentioned.
Ho: Is the null hypothesis
H1: Is the alternative hypothesis
1 Ho: The unclaimed dividend should not be plow back into the companies until the owners come forth to claim it.
H1: The unclaimed dividend should be ploughed back into the companies until the owners come forth to claim it.
2 Ho: keying into the e- dividend platform will not reduce the trend and
the amount of unclaimed dividend in Nigeria
H1: keying into the e- dividend platform will reduce the trend and the
amount of unclaimed dividend in
SIGNIFICANCE OF THE STUDY
Nigeria Breweries topping the list of unclaimed dividend in Nigeria followed by Bank
PHB, Intercontinental Bank, Diamond bank, Law Union, Linkage Assurance and Oasis
making the least From a little over N2 billion in 1999, the figure by the end of 2008
had risen to about N18 billion. But market analysts estimate that by the third
quarter of 2011, the amount of unclaimed dividends in the Nigerian capital market
would hit about N28 billionN2.09 is trend as continue and has been as source of
concern for Nigerian stock Exchange.
This study will be beneficial in the following areas:
1 Publication of details of unclaimed dividends in the annual reports of
listed companies or in a special publication to be distributed to all
shareholders, the SEC and the NSE
2 It will awaken the spirit of good managing of unclaimed dividend of company
listed in Nigeria giving the Nigeria Stock Exchange the Security and Exchange
commission the implementation of these principles.
3 All investment advisers, broker-dealers and other market operators
who may have unclaimed dividends of clients in their possession and have
no authorization from their clients to reinvest or hold such unclaimed
dividends on their behalf, will be required to report and submit a list of such
clients and return the dividends to the registrar of the equity in question.
4 It seeks to show the methods through which the problem of unclaimed
dividend would be solved without necessarily having to liquidate the firm because of
the problem.
5 The SEC will require listed companies to make general announcements in the
mass media- print and electronic and such other investor relations vehicles as
newsletters, house journals, websites etc. to remind shareholders who have not
claimed their dividends in previous dividend declaration years to come forward to
claim.
6 The SEC may direct that such announcements be carried for three to four
successive times after each dividend declaration year
7 It seeks to provide practical advice to assist Nigeria Stock Exchange the
Security and Exchange commission who must act to achieve the set objectives of
reducing the unclaimed dividend ragging for years
8 Listed companies and their registrars and all market operators holding
unclaimed dividends should forward a list of all unclaimed dividends and names of
affected investors to the SEC.
LIMITATIONS OF THE STUDY
There were some limitations experienced during the course of carrying out this
research work. In a research of this kind, the need for reasonable amount of
empirical data in making a meaningful conclusion and generalization cannot be over
emphasized.
The following were the limitations encountered:
1 A sizeable quantity of the information obtained from the financial paper
and internets were in fragments and sometimes complex
2 Most of those interviewed respondents were either biased or not honest.
3 Inability to get a random sample due to concentration only in the west
geographical region
4 Challenges of managing an unclaimed dividend of listed companies in
Nigeria is relatively an endemic problem of unclaimed dividends, complexity,
difficulty in gathering cogent information.
5 An inability to answer your research questions
6 Theoretical and conceptual problems
7 ability to effectively answer your research questions proved cumbersome
8 Several participants in the study expressed the view that they are
undecided
SECTION TWO
REVIEW OF RELATED LITERATURE
Despite the efforts by the Securities and Exchange Commission to erase the
use of paper certificate and replace it with electronic certificate only 30 per
cent of the shareholders have complied, while five per cent of declared
dividends in the past 10 years are unclaimed.
Speaking in Lagos at a forum organized by the Capital Market Correspondent
Association of Nigeria held by Nigerian Stock Exchange, the managing
director of First Registrar, Bayo Olugbemi lamented that two years after the
exercise was flagged off, only 30 per cent of shareholders have complied,
Daily Trust gathered that over N400 billion dividends have been declared by
companies listed in the Nigerian Stock Exchange (NSE) in the past 10 years.
Of the amount, the unclaimed dividends are not more than N20 billion. This
represents about five per cent of over N400 billion.
He said the Unclaimed Dividends Trust Bill initiated by SEC and currently
before the National Assembly did not take cognizance of the shareholders
emphasizing that the bill if eventually passed may not address the problem.
E-dividend payment system requires that shareholders submit their bank'
details to the registrars to enable them process their dividends. Once the
dividends are paid, the shareholders would be alerted within 24 hours.
To solve the problem, SEC said it advised shareholders to subscribe to
electronic dividend payment system. In order to reduce the amount of
unclaimed dividend in the country, shareholders have been advised to
embrace the e-dividend platform that has been introduced to the capital
market. The managing director, First Registrars Limited, Mr. Bayo Olugbemi
pledged that shareholders should key into the e- dividend platform, stressing
that this will go a long way in reducing the amount of unclaimed dividend.
According to him, less than 30 per cent of shareholders had keyed into the e-
dividend which is not encouraging. Mr. Olugbemi disclosed that banks have
been ordered to honour dividend warrants that are paid into savings
accounts. According to him, “what shareholders need to do to key into the e-
dividend is to pick the e-dividend authorization form and fill it and submit it
to the bank. In that way the bank will have no reason why it should not
honour dividend warrant paid into the account.” He said further that
shareholders who do not receive their dividends fall among those with
outdated data. According him, “the outdated data include change of
residence, change of bank accounts, and change of name and to worsen the
situation, the intended bill on unclaimed dividend was not on how to reach
the shareholders but institution that would manage the money.
Furthermore, Olugbemi noted that despite the support given to dematerialization,
share certificates are still relevant adding that in South Africa where there are
greater compliant to e-transactions in the capital market share certificates still
operate.
He stated that the jobs of the Registrars are hampered by many challenges that
bother on investors’ resistance to change, expensive system on the shareholders’
side, regulatory policies, and poor investors’ enlightenment. Others he noted
include; slow pace of national payment system, banks’ reluctance to accept
investors’ dividend in saving accounts, sale of unauthorized stocks that have
become rampant, lack of transparency among operators and shallowness of the
Nigerian capital market.
He therefore, called on shareholders to embrace e- transactions since the process
makes
transactions and payment faster to reduce the alarming rate of the unclaimed
dividend in Nigeria.
In World War 11 thousands of Jewish families living in Germany and German
territories transferred their wealth to Swiss banks in an attempt to safeguard their
possessions from the Nazis. After defeat, the Swiss Banks made it difficult for either
survivors or heirs to reclaim their assets. To avoid returning this wealth, the banks
required detailed information from claimants about bank accounts, life insurance
policies and other financial data to process claims filed by heirs. Because survivors
were unlikely to have documentation of assets ownership and because death
certificates were not issued at concentration camps, Swiss banks took the threat of
escalating sanction against the Swiss bank by the World Jewish Congress (WJC) to
get the Swiss bank to succumb to demands by the survivors and heirs. Even till date
many claims have still not been perfected.
This is closely related to the likelihood of the issue of unclaimed dividends in
Nigerian stock market. A recent study of the dividend records of 183 companies for
the period 1999 to 2002 revealed that over N7.2billion was still outstanding as
unclaimed dividend and there is no cherry news in the offing on this issue.
In Nigeria, the recommendation of CAMA which has already made adequate
provision for the treatment of unclaimed dividends that the volume of unclaimed
dividend is insignificant with most of these already statute barred. Investigation by
Financial Vanguard however revealed that companies have continued to
treat unclaimed dividend as stipulated in the Companies and Allied Matters Act
(CAMA) 1990.
The CAMA states that dividends which remain unclaimed after fifteen months of
being declared are supposed to have been returned to the company from which the
beneficiary/investor may make a claim not later than twelve years afterwards.
Subsequently, such unclaimed dividends are considered statute-barred and thus
forfeited by the shareholders.
According to sections 379 and 386 of CAMA:
(a) Where dividends are returned to the company unclaimed, the company shall
send a list of the
names of the persons entitled with notice of the next Annual General Meeting to the
members,
b) After the expiration of three months notice, the company may invest the
unclaimed dividend
for its own benefit in an investment outside the company and no interest shall
accrue on the
dividends against the company.
c) Such dividends are to be regarded as special debts due to and recoverable by
shareholders
within 12 years and actionable only when declared.
The above true life story could be likened to the issue of unclaimed dividends in the
Nigerian stock market and the politicking surrounding same. A recent study of the
dividend records of 183 companies for the period 1999 to 2002 revealed that over
N7.2billion was still outstanding as unclaimed dividend and there is no cherry news
in the offing on this issue.
A summary of the provision of Companies and Allied Matters Act (CAMA) 1990 part
xiii, section 5(382) and (385) explains that dividends are declared from a company’s
distributable profit and where they are returned unclaimed, even after sending a list
of such dividends with the company’s annual report and accounts, the company
may invest the dividend monies for the benefit of shareholders.
Dividends are recoverable by shareholders within 12 years and actionable only
when declared. Dividends are said to be unclaimed after 15 months of being
declared and paid. But it is statute barred after 12 years.
Some public quoted companies allow their Registrars to keep their statute barred
dividend accounts as the shareholders concerned still trickle in to collect their
dividend
Nigeria’s growing unclaimed dividends
According to Odion Makinde, who has been working with the Nigerian Postal
Service for the past 20 years, realized that dividend warrants were among
the numerous documents for delivery that receive little or no attention from
staff. For more than one year, a large heap of them (meant for dispatch) to
no fewer than 30,000 investors in the eastern part of the country occupied
one corner in his expansive office in Marina, central Lagos. The documents
were not only gathering dust, but very many got swept away as no one was
committed to ensuring their safety or eventual delivery to the owners.
The result is a continued rise in the volume of unclaimed dividends in the
country. From a little over N2 billion in 1999, the figure by the end of 2008
had risen to about N18 billion. But market analysts estimate that by the third
quarter of 2011, the amount of unclaimed dividends in the Nigerian capital
market would hit about N28 billion, Investigations shown that the majority of
investors pay little attention to their dividend warrants because they believe
that the amount involved is not worth going through the cumbersome
process of cashing them. Many retail investors, some of them well educated,
do not find the small amounts, usually three to four figure dividend warrants,
attractive enough to pursue. “It is the sum of these small amount unclaimed
dividend that have increased to N33 billion today,” said Rose Ubong, a stock
market analyst based in Lagos stating that another class of investors
comprising largely of students and low income earners is also not aware that
operating a current account is a basic prerequisite for cashing one’s dividend
warrants. There is an alternative standard practice that shareholders who do
not operate current accounts could use to claim the value of their dividends,
which is also not known to many of this class of retail investors. After
receiving a dividend warrant, the shareholder simply endorses it to a current
account holder who will in turn release the cash equivalent to the
shareholder. Adding to the above point, she said that there are other
constraints too; incorrect addresses, non-functional post office boxes and
inability to update contact addresses upon relocation, all contribute to the
late or non-receipt of dividend warrants. A large chunk of unclaimed
dividends also belong to shareholders who are dead without any record of
their next of kin. Often, even when this information has been provided, the
difficult processes involved in making the claims serve as another hurdle.
There are cases where protracted legal battle over the administration of the
estate of a deceased shareholder has resulted in unclaimed dividends for
several years. Again, this contributes largely to the rising cases of unclaimed
dividends.
Further, she said, due to inefficient postal services and laxity on the part of
some shareholders, some dividend warrants do not get to their destinations
within their validity period. A dividend warrant, like a normal cheque, carries
a validity period of six months, but a dividend is classified as unclaimed after
15 months upon issue. After this period, the dividend is supposed to be
returned to the issuing company from which an investor can still make a
claim but not later than 12 years.
By the regulation of the Securities and Exchange Commission (SEC), it is only
after 12 years that an investor is deemed to have forfeited his dividend. But
a stale dividend can be revalidated by the registrar by issuing another
dividend warrant where the beneficiary meets some basic requirements,
which include physical appearance at the registrar’s office. However, market
operators still contend that this SEC provision is a major flaw that must be
reviewed to make way for solving the unclaimed dividend problem.
By SEC records, Nigerian Breweries tops the list of quoted companies that
have a case of unclaimed dividends with N4.42 billion. Bank PHB is next on
the list with N4.15 billion followed by Intercontinental Bank, which has N3.5
billion and Diamond Bank with N3.34 billion, to mention but a few.
The SEC has found out that most unclaimed dividends are being used as
working capital by companies contrary to the provision of Companies and
Allied Matters Act (CAMA), which stipulates that such monies should be
invested outside the company. When a company uses unclaimed dividends
as capital, aside from distorting that company’s actual financial position,
whenever such a company goes under, the unclaimed dividend will also be
lost.
Steps are being taken to resolve the problem of unclaimed dividends. The
President of Shareholders Solidarity Association of Nigeria, Timothy Adesiyan,
has suggested that the Central Bank of Nigeria (CBN) regards dividend
warrants as special cheques, which should not go stale. He said if the law is
made to exempt warrants from the stipulated six-month period for cheque
expiration, the volume of unclaimed dividends will be drastically reduced.
There is also the need for enlightenment of the investing public, from
regulators of the capital market and government agencies to all categories of
shareholders, to acquaint them with the workings of the capital market. It is
also expected that the soon-to-be-operational electronic e-dividend payment
system will assist in solving the problem.
The Pains of Investors unclaimed dividends
It is not an easy task to be an investor or shareholder of quoted companies in
Nigeria these days. Shareholders are continually going through pains in the
hands of company registrars in the process of verifying share certificates,
friendly capital market where all players irrespective of class would be able to reap
the fruits of their investments without going through unnecessary difficulty. SEC is
coming with this measure after a careful assessment of the factors that had
contributed to the problem of unclaimed dividend in the stock market. Usman
identified these causes to include low dividend amount, lack of investors’
knowledge about the system, wrong addressing, incomplete addressing and change
of address by investors without notifying the registrar. Others are delay of the
postal system, bank minimum deposit requirement which small investor are not
able to meet and death of an investor.
When dividend warrants get to their owners six months after the date of issue, they
would have expired and therefore will not be honoured for payment by the receiving
bank. When this happens, the shareholder is expected to take the warrant back to
the registrar for re-validation. This delay is however rampant due to the inefficiency
of the postal system. If SEC in partnership with other regulators especially the CBN
gets this latest measure enforced to the later, then cases of expired dividend
warrants would also be a thing of the past.
However, this latest move by the regulator is seen in furtherance of electronic share
transaction agenda such as e-dividend, e-bonus and others. The e-dividend has
been delayed by a number of factors which border on the investors and the
registrars. Direct remittance of dividend warrants has always been in the system
but less utilised by investors while some registrars find reasons not to adopt it. The
difference between this method and e-dividend is in the routing. While the former
has to do with taking the physical dividend warrants to the banks for crediting
shareholders accounts the later is a seamless method and would normally involve
bank clearing system. This also ensures money get to the accounts of beneficiaries
within 24 hours of the payment date.
According to Usman, in order to take care of the above loopholes SEC has decided
that every investor should maintain an account while banks have been mandated to
accept dividend warrants into savings account. Before now, dividend warrants were
only accepted into current accounts. However, it is a fact that many small investors
and illiterates usually do not operate current account.
According to the SEC source, total sum of unclaimed dividend by companies with
large holdings amounts to N15.4 billion while the sum by companies with minimal
holdings stands at N16 million which sums up to N15.5 billion as at December 31,
2008.
Of these figures, Nigerian Breweries has the highest amount with N4.4 billion
representing 24 percent of the entire unclaimed divided in the system. The next is
Bank PHB with N4.1 billion, Intercontinental, Bank plc holds N3.5 billion while
Diamond Bank has N3.3 billion.
As SEC drives its efforts at ensuring reduction in incidences of unclaimed dividend,
the management of this accumulated fund remains another source of headache
which it is still trying to find solution to in conjunction with shareholder associations.
Unclaimed dividends are the rewards of investment made in securities of public
quoted companies, paid out by the various companies but remain unclaimed by the
rightful owners 15 months after being declared.
Addressing the endemic problem of unclaimed dividends,
The Securities and Exchange Commission (SEC) sponsored an executive bill
in 2004 seeking to establish common trust funds for unclaimed dividend to
be managed by a government agency. While introducing the bill, the
Securities and Exchange Commission (SEC) had argued that the proposed
law would give necessary legal protection to the pool of unclaimed dividends
that had accumulated over the years. The amount is estimated at about N20
billion as at the end of 2011.
SEC as apex regulator of the Nigerian Capital Market has repeatedly said
that it would ensure that investors are not denied their right of investing in
the capital market. Of course, the Investment and Securities Act (ISA) of
1999 gives SEC the power to “Act in public interest having regard to the
protection of investors and the maintenance of fair and orderly markets
which is saddled with the primary responsibility of investor protection. Based
on this premise, SEC said a great deal of effort has been made to put in
place measures that will address the problem of unclaimed dividends. Since
2004 when the bill first appeared in the lower chamber of the national
assembly through 2005 when it was subjected to public hearing, the bill has
faced numerous hurdles as informed stakeholders mounted opposition
against its passage into law.
At the May 2005 public hearing at the Hearing Room 1 of the House of
Representatives, views of operators and the general public had weighed
heavily against passage of the bill simply introduced as “Unclaimed
Dividends Bill”.
In consideration of superior arguments canvassed by stakeholders and informed
general public, the proposed law was eventually stood down only for it to resurface
recently as “Unclaimed Dividends and Abandoned Property Bill”.
If passed into law, the bill would have resulted in establishment of a “Trust Fund”
for unclaimed funds accruing to the coffers of public companies, thereby bringing an
end of retention of unclaimed funds by registrars which ordinarily return the money
to the coffers of originating public companies after the unclaimed dividend becomes
statue barred.
But if the proposed bill is passed into law, owners of unclaimed dividends are likely
to lose it to the trust fund as the new bill provides that after about six months,
unclaimed dividends become statue barred and will be reverted to the trust fund
going to be managed by government agency.
This is a sharp departure from the current practice where unclaimed dividends are
kept in custody for 12 years before it is regarded as status barred and returned to
the company from which the dividends are paid.
CAMA STATUTORY STANDING ON ISSUE OF UNCLAIMED DIVIDEND
The Companies and Allied Matters Act (CAMA) 1990, stipulate that dividends,
which remain unclaimed after 15 months of being declared, should be
returned to the firm from where the beneficiary/investor may make a claim
not later than 12 years. Afterwards, such unclaimed dividends are
considered statute-barred and thus forfeited by the shareholders.
According to sections 379 - 386 of CAMA:
Where dividends are returned to the company unclaimed, the company shall
send a list of the names of the persons entitled with notice of the next yearly
general meeting to the members;
after the expiration of three months notice, the company may invest the
unclaimed dividend for its own benefit in an investment outside the company and
no interest shall accrue on the dividends against the company; and
Such dividends are to be regarded as special debts due to and recoverable by
shareholders within 12 years and actionable only when declared.
In line with this provision the commission has spearheaded the agitation for the
amendment to the CAMA. To this end it has set up committee to critically look at
and proffer solutions to the issue of unclaimed dividend. In an authority stated by
Investment and Securities Act (ISA) 1999 mandate the Securities and Exchange
Commission to protect the interest of investors in the capital market?
SECTION THREE
METHODOLOGY
INTRODUCTION
The issue of unclaimed dividends is therefore of current concern of the
Commission. In the light of this, and in the interest of investor protection, the
SEC wishes to propose the following actions for the comments of market
operators. These comments will form the basis of the final set of principles,
guidelines, regulations or legislations on the treatment of unclaimed
dividends that the SEC intends to issue to the market soon. Saunders et al.,
(2007) stated that studies that establish causal relationships between
variables may be termed explanatory studies. They emphasized that this has
to do with studying a situation or a problem in order to explain the
relationships between variables. Since this study is on managing unclaimed
dividend of quoted companies in Nigeria,
population of the study is made up of companies listed on the floor of the Nigerian
Stock Exchange (NSE). A sample consisting of companies listed on the NSE was
considered a good representation of quoted companies in Nigeria since the ultimate
test of a sample design is how well it represents the characteristics of the
population it purports to represent sample of Seventy (75) was used.
Data collection and analysis refers to the totality of all actions or activities relating
to the management, presentation or combination of units of data already collected
in order to show relationship between them,
SPSS was used to analyze our date. Chi-Square test x², which is a statistical tool of
SPSS that enables the researcher to establish if there is any relationship between
two variables in the total population, was adopted as our hypothesis test. It is
clearly one of the simplest and most popular non parametric tests in applies
statistics, the computation of chi-squared is based on the formula
The researcher chose to use the Chi-Square test as the research tool because of its
simplicity. The Chi-Square test x² is a statistical tool that enables the researcher to
establish if there is any relationship between two variables in the total population.
DECISION RULE.
The calculated value of is compared with the table value (critical
value) of x² for the given degrees of freedom at a certain specified level of
significance.
If the calculated value of x² is more than the value of x² the difference
between theory and observation is considered significant, in other words, were the
computed value is greater than the critical value, the null hypothesis is rejected
which the alternative hypothesis is accepted.
If the computed value of x² is less than the table value of x² the
difference between theory and the observation is considered less significant.
Therefore the null hypothesis is accepted while the alternative hypothesis is
rejected.
DATA ANALYSIS
INTRODUCTION
Presenting the results of the analysis performed on the data collected to test
the propositions made in the study and answer the research questions. Analyses
were carried out with the aid of the Statistical Package for Social Science. It is
pertinent to note that the presentation and the analysis of the raw data collection is
the means by which the research question raised are answered.
The data used were gathered 75 copies of the questionnaire that was
administered and also from the listed companies used as sample are the
Nigeria breweries, Access Bank, Oasis Insurance. Data analysis is done with
the use SPSS using Chi-Square test and in the overall context of the objective
of the study.
DATA REPRESENTAION
The data resulting from the research instrument are now presented,
analyzed and discussed in order to arrive at a conclusive conclusion.
QUESTION 1: Single registry outfit by SEC and CBN collaboration will reduce the
alarming rate of unclaimed dividend
TABLE 4.1
Options No of %
Respondent
Strongly
agree
30 43
Agree 20 29
Not sure 5 7
Disagree 7 10
Strongly
disagree
8 11
Totals 70 100
Source: researcher’s field (2011)
The result of the research stated above showed that 72% (43%+29%) hold
the view that Single registry outfit by SEC and CBN collaboration will reduce the
alarming rate of unclaimed dividend , 21%(10%+11%) totally disagrees with the
statement, while 7% are not sure.
QUESTION 2: Unclaimed dividends should be ploughed back to the
companies in an investment outside the company's own investments.
TABLE 4.2
Options No of
Respondent
%
Strongly
agree
33 47
Agree 13 19
Not sure 10 14
Disagree 9 13
Strongly
disagree
5 7
Totals 70 100
Source: researcher’s field (2011)
The result of the research stated showed that 66% (47%+19%)
agrees with the statement, 20% (13%+7%) disagrees with it while 14% are
not sure. It is concluded here that, Unclaimed dividends be plowed back to
the companies than have government take investors' monies
QUESTION 3: Listed companies and their registrars and all market operators
holding unclaimed dividends will be required to forward a list of all unclaimed
dividends and names of affected investors to the SEC.
TABLE 4.3
Options No of
Respondent
%
Strongly
agree
55 79
Agree 10 14
Not sure 5 7
Disagree 0 0
Strongly
disagree
0 0
Totals 70 100
Source: researcher’s field (2011)
As much as 73%(79%+14%) are of the opinion that Listed companies and
their registrars and all market operators holding unclaimed dividends will be
required to forward a list of all unclaimed dividends and names of affected
investors to the SEC, and only 7% are not sure.
QUESTION 4: Publication of details of unclaimed dividends in the annual reports of
listed companies or in a special publication to be distributed to all shareholders, the
SEC and the NSE
TABLE 4.4
Options No of
Respondent
%
Strongly
agree
43 61
Agree 20 29
Not sure 7 10
Disagree 0 0
Strongly
disagree
0 0
Totals 70 100
Source: researcher’s field (2011)
As much as 73%(79%+14%) are of the opinion that Publication of details of
unclaimed dividends in the annual reports of listed companies or in a special
publication to be distributed to all shareholders, the SEC and the NSE and only 7%
are not sure.
QUESTION 5: CAMA recommendation renders the best solution to unclaimed
dividend within 12 years
TABLE 4.5
Options No of
Respondent
%
Strongly
agree
25 36
Agree 16 23
Not sure 13 18
Disagree 9 13
Strongly
disagree
7 10
Totals 70 100
Source: researcher’s field (2011)
The result of the research stated showed that 59% (36%+23%) are of the
opinion that CAMA has specified better treatment of unclaimed dividend, 23% (13%
+10%) totally disagrees with the statement, while 18% are not sure.
QUESTION 6: E-dividend and E-bonus will reduce unclaimed dividend
TABLE 4.6
Options No of
Respondent
%
Strongly
agree
44 63
Agree 18 26
Not sure 5 7
Disagree 2 3
Strongly
disagree
1 1
Totals 70 100
Source: researcher’s field (2011)
As much as 89% (63%+26%) is of the view that E-dividend and E-bonus will reduce unclaimed dividend, 4% (3%+1%) is of the view that will not reduce the unclaimed dividend while only 7% are not sure.
QUESTION 7: The status quo after 12 years statute barred on unclaimed dividend
should be removed from CAMA and the years are limitless.
TABLE 4.7
Options No of
Respondent
%
Strongly
agree
38 54
Agree 9 13
Not sure 7 10
Disagree 5 7
Strongly
disagree
11 16
Totals 70 100
Source: researcher’s field (2011)
As much as 67%(54%+13%) of the respondents are of the opinion that the
status quo after 12 years statute barred on unclaimed dividend be removed from
CAMA and the years be limitless, 29%(16%+7%) disagrees with the statement,
while 10% are not sure.
SPSS TESTING OF HYPOTHESIS USING CHI-SQUARE STATISTICS
A hypothesis is a probabilistic statement about the relationship between variables.
The statistical tool used for this hypothesis testing is the Chi-Square test.
x=∑|( ƒo- ƒe) |
ƒe
Where: ƒo = observed frequency
ƒe = expected frequency
x = pressure of the departure of obtained frequencies from the frequencies
expected by chance
Hypothesis 1
Ho: The unclaimed dividend should not be plow back into the companies until the owners come forth to claim it.
H1: The unclaimed dividend should be ploughed back into the companies until the owners come forth to claim it.
For the purpose of this study, question 1, 2 3 will be used for the hypothesis
testing
QUESTION 1: Single registry outfit by SEC and CBN collaboration will reduce the
alarming rate of unclaimed dividend
QUESTION 2: Unclaimed dividends be ploughed back to the companies in
an investment other than the company's own investments
QUESTION 3: Listed companies and their registrars and all market operators
holding unclaimed dividends will be required to forward a list of all unclaimed
dividends and names of affected investors to the SEC.
No of respondents
Options Q1 Q2 Q3 Total
Strongly agree 30 33 55 118
Agree 20 13 10 43
Not sure 5 10 5 20
Disagree 7 9 0 16
Strongly
disagree
8 5 0 13
Totals 70 70 70 210
Source: researcher’s field (2011)
Calculation of expected frequency (fe)
RT *CT
GT
Where : TR = Raw table
CT =Column total
GT= Grand total
RC 11=70*118
210
= 39.33
RC 12=70*118
210
= 39.33
RC 13=70*118
210
= 39.33
RC 21=70*43
210
=14.33
RC 22=70*43
210
=14.33
RC 23=70*43
210
=14.33
RC 31=70*20
210
=6.66
RC 32=70*20
210
=6.66
RC 33=70*20
210
=6.66
RC 41=70*16
210
=5.33
RC 42=70*16
210
=5.33
RC 43=70*16
210
=5.33
RC 51=70*13
165
=4.33
RC 52=70*13
165
=4.33
RC 53=70*13
165
=4.33
Chi-Square (x) Computation
ƒ0 Ƒe ƒ0 – ƒe (ƒ0 – ƒe) ( ƒ0 – ƒe)
ƒe
30 39.33-9.33 87.05 2.21
20 14.335.67 32.15 2.24
5 6.66-1.66 2.76 0.41
7 5.331.67 2.79 0.52
8 4.333.67 13.47 3.11
33 39.33-6.33 40.07 1.02
13 14.33-1.33 1.77 0.12
10 6.663.34 11.16 1.68
9 5.333.67 13.47 2.53
5 4.330.67 0.45 0.10
55 39.3315.67 245.55 6.24
10 14.33-4.33 18.75 1.31
5 6.66-1.66 2.76 0.41
0 5.33-5.33 28.41 5.33
0 4.33-4.33 18.75 4.33
X 31.58
Source: researcher’s field (2011)
DECISION RULE:²
Accept Ho if empirical X2<table X2
Table X2 at 20% significant level
Degree of freedom = (R-1) (C-1)
(5-1) (3-1)
(4) (2) =8
At 20% significant level = 11.030
The computed value of 31.58 is greater than the critical value of 11.030 and not falls into the acceptance region. Therefore the null hypothesis is rejected and the alternative hypothesis is accepted. It is concluded that the unclaimed dividend should be ploughed back into the companies until the owners come forth to claim it.
Hypothesis 2
Ho: keying into the e- dividend platform will not reduce the trend and the
amount of unclaimed dividend in Nigeria
H1: keying into the e- dividend platform will reduce the trend and the
amount of unclaimed dividend in
For the purpose of this study, question 4, 6, 7 will be used for the hypothesis
testing for proceeds of their investments in unclaimed
QUESTION 4: Publication of details of unclaimed dividends in the annual reports of
listed companies or in a special publication to be distributed to all shareholders, the
SEC and the NSE
QUESTION 5: CAMA recommendation renders the best solution to unclaimed
dividend within 12 years
QUESTION 6: E-dividend and E-bonus will reduce unclaimed dividend
QUESTION 7: The status quo after 12 years statute barred on unclaimed dividend
be removed from CAMA and the years be limitless.
No of respondents
Options Q4 Q6 Q7 Total
Strongly agree 43 44 38125
Agree 20 18 947
Not sure 7 5 719
Disagree 0 2 57
Strongly
disagree
0 1 11
12
Totals 70 70 70210
Source: researcher’s field (2011)
Calculation of expected frequency (fe)
RT *CT
GT
Where : TR = Raw table
CT =Column total
GT= Grand total
RC 11=70*125
210
= 41.66
RC 12=70*125
210
= 41.66
RC 13=70*125
210
= 41.66
RC 21=70*47
210
=15.66
RC 22=70*47
210
=15.66
RC 23=70*47
210
=15.66
RC 31=70*19
210
=6.33
RC 32=70*19
210
=6.33
RC 33=70*19
210
=6.33
RC 41=70*7
210
=2.33
RC 42=70*7
210
=2.33
RC 43=70*7
210
=2.33
RC 51=70*12
165
=4
RC 52=70*12
165
=4
RC 53=70*12
165
=4
Chi-Square (x) Computation
ƒ0 Ƒe ƒ0 – ƒe (ƒ0 – ƒe) ( ƒ0 – ƒe)
Ƒe
43 41.661.34 1.80 0.04
20 15.664.34 18.84 1.20
7 6.330.67 0.45 0.07
0 2.33-2.33 5.43 2.33
0 4-4 16.00 4.00
44 41.662.34 5.48 0.13
18 15.662.34 5.48 0.35
5 6.33-1.33 1.77 0.28
2 2.33-0.33 0.11 0.05
1 4-3 9.00 2.25
38 41.66-3.66 13.40 0.32
9 15.66-6.66 44.36 2.83
7 6.330.67 0.45 0.07
5 2.332.67 7.13 3.06
11 47 49.00 12.25
X2 29.24
Source: researcher’s field (2011)
DECISION RULE:
Accept Ho if empirical X2<table X2
Table X at 20% significant level
Degree of freedom = (R-1) (C-1)
(5-1) (3-1)
(4) (2) =8
At 20% significant level = 11.030
The computed value of 29.24 is greater than the critical value of 11.030 and
not falls into the acceptance region. Therefore the null hypothesis is rejected
and the alternative hypothesis is accepted. It is concluded that keying into
the e- dividend platform will reduce the trend and the amount of unclaimed
dividend in Nigeria.
SECTION FIVE: SUMMARY, FINDING, CONCLUSION AND RECOMMENDATIONS.
The SEC intends to take measures to reduce the incidence of unclaimed
dividends in the capital market. The contentious issue of unclaimed dividend
has been a long standing one. The Securities and Exchange Commission
(SEC) has proposed to set up a body to take the funds off the books of the
companies to be managed separately. The amount has risen to N33 billion
over the years in the mid 2011, although, the last attempt to set up the fund
was rejected by the National Assembly due to bone of contention by the
capital market analyst in2011 in a public outcry.
The latest move seeks to lump the unclaimed dividend with other funds
under the Unclaimed Dividends, Dormant Accounts and Abandoned Property
Bill, for which a public hearing was held which generated much criticism by
both the capital market analyst and the shareholder in large. The moves by
the House of Representatives committee on capital market to revisit the
unclaimed dividends issue has been describe d as overzealous, in the light of
more pressing national issues.
I am of the view that the Capital Market Solicitors Association (CMSA)
decision on the issue should be resolved with consideration for the interest of
the heirs of the owners of the unclaimed dividends. The correct approach is
to have an agency, which can be SEC, with power to investigate and trace
the next of kin of owners of unclaimed dividend. The company with claimed
dividend is to be made obliged to refer to SEC or the agency for investigation
once the unclaimed dividend is outstanding for six years.
CONCLUSION
The Securities and Exchange Commission views the issue of unclaimed /
unpaid dividends with serious concern. Is high time SEC should wake to
regulate the flow of the unclaimed dividend in the listed companies, SEC
aforementioned proposals as part of its consensus building policy to solicit
the views of all concerned in the securities market before the Commission
commits itself to making definite rules which will be binding on all market
operators and should mandate company’s listed to pay dividend within 30
days from the date of declaration to every shareholder who is entitled to the
payment of the dividend. Section 205A of the Act requires a company which
has an unpaid or unclaimed dividend lying with it to be transferred to a
separate bank account within seven days after the expiry of the said period
of thirty days. It should be noted that such an account has to be opened only
in a scheduled bank.
RECOMMENDATION
SEC, NSE and the CBN should regulate the flow of unclaimed dividend,
unclaimed dividend within 12 years that are unclaimed, however SEC should
be empowered to investigate and trace the next of kin of owners of
unclaimed dividend. The company with claimed dividend is to be made
obliged to refer to SEC or the agency for investigation once the unclaimed
dividend is outstanding for six years, "Unclaimed Dividend" should be
identified immediately following the name of the broker or dealer and the
total dividends claimed by the investors in the year, dividend received by
the broker or dealer, the name of the dividend-paying corporation
. A more appropriate course of action will be to focus on the following.
Unnecessary delayed in dividend warrants issued to the shareholders
should stop
The postal system should be improve, efficiency and operational
orphan, whose parents have invested in his or her name or in their
names, should reclaim the benefit of such investments when they
becomes of age
A computerised application form of beneficiary should show extensive
information such as telephone number and Next-of-kin.
An intensify drive towards e-dividend and e-bonus should be highly
embraced
Securities and Exchange Commission should show surveillance over
formulating principles and protecting the investors.
Dividend warrant should be lodge into the saving account, limitless of the
dormant account dividend payment into bank ac
REFERENCE
Nimi Akinkugbe (Published: Sun, 24th Oct 2010) “The Challenge of Unclaimed Dividends” - Source: NEXT , 234next.com/- retrieved on 15-3-2011
Akinonla Ajibade (Published:Mon, 27th Dec 2010) “Only N20b out of
N400b dividend are unclaimed” Source: The Nation
www.thenationonlineng.net retrieved on 2011-3-14
Kelechi Mgboji (Published: Mon, 13th sep 2010) “Resolving The 20B
Unclaimed Dividends Challenge”-source: Daily sun
www.nigeria70.com, retrieved on 2011-3-15
Prince Business (Published: Mon, 13th Jan 2010) “Why Unclaimed
Dividend Bill can’t benefit investors”-source: business news,
www.allnewsnigeria.com, retrieved on 2011-3-15
Modestus Anaesoronye (Published: Wed, 23th Jun 2010) ”Capital
market investors vow to stop Bill on unclaimed dividends”
www.proshareng.com/news/singleNews, retrieved on 14-3-2011
Kelechi Mgboji (Published: Mon, 22th Nov 2010) “Controversy Trails