Nigeria Content Online

The issue of unclaimed dividends is one
that operators continue to grapple with in the Nigerian stock market.
Dividends are classified as “unclaimed” if they remain so 15 months
after being declared. After this period, the dividend is returned to
the issuing company. Security and Exchange Commission regulations
stipulate that an investor can still make a claim for up to 12 years
after which they will be deemed to have forfeited the dividend.

Unclaimed dividend trust fund

The proposed Unclaimed Dividend Trust
Fund that was opposed by capital market operators and eventually
rejected by the National Assembly in 2005 is being looked at again. The
Senate Committee on Capital Market is currently scrutinising a bill
that seeks to establish a government agency that will be responsible
for managing the billions of naira from unclaimed dividends of listed
companies quoted on the stock exchange.

There is much mistrust from people who
are not convinced that a government agency can efficiently manage and
account for what according to the Securities and Exchange Commission
now stands at well over N20 billion in unclaimed dividends and they are
determined to fight against the passing of the bill. Dividends remain
unclaimed for several reasons including the following:

No bank account

Operating a current account is a basic
prerequisite for cashing dividend warrants, yet some investors such as
students and low-income earners do not have bank accounts; whilst it
may be possible for a shareholder to endorse a dividend warrant to a
current account holder who can then release the cash but this is not
ideal.

Lost in transit

As shareholders addresses change they
often fail to notify the company registrars. In addition, due to
inefficiencies within the postal system and non-functional post office
boxes, some dividend warrants do not get to their destinations within
their validity period. All this contributes to the late or non-receipt
of dividend warrants.

Too meagre to cash

Often, investors ignore their dividend
warrants because they believe that the tiny amounts involved, are not
worth the effort of cashing. Yet it is the sum of thousands of such
warrants that have accumulated to the billions of naira outstanding
today.

Deceased shareholders

A vast number of unclaimed dividends
belong to shareholders who have died. Indeed millions of family members
are unaware that they are entitled to collect unclaimed assets of
deceased relatives who died intestate or without leaving updated
financial records.

In the event of the death of a
shareholder, if he has not referred to his shares in a will or has died
intestate, shares and dividends may be lost. Even when this information
has been provided, the somewhat cumbersome processes involved in making
the claims, are sometimes a deterrent. Several cases exist where
protracted legal battle over the administration of the estate of a
deceased shareholder has resulted in dividends remaining unclaimed for
several years.

Stale cheques

A dividend warrant, like a normal
cheque is valid for period of six months. A stale dividend warrant can
be revalidated by the registrar by issuing another dividend warrant
where the beneficiary meets some basic requirements such as providing
some proof of identity or making a physical appearance at the
registrar’s office.

Some have advocated that dividend
warrants should be regarded as special cheques which should be exempt
from the stipulated six-month period for cheque expiration; this could
reduce the incidence of unclaimed dividends.

Embrace e-dividends

In the wake of increasing complaints
arising from the issue of unclaimed dividends in the Nigerian stock
market, in February 2008 SEC launched the e-dividend payment system. It
has urged investors to embrace this system as one of the ways of
finding a lasting solution to the problem. Through this system,
dividends are credited directly into shareholders bank accounts within
24 hours of their being declared and approved. It saves investors much
time and energy spent depositing physical cheques into their bank
accounts and from bottlenecks in the postal system.

What do you have to do?

All that you need to do is to complete
an e-dividend form with your bank account details and forward this to
the respective registrars to facilitate payment of dividends into your
account when they are due. It is a very useful mechanism with which you
can manage your dividends, but be sure to complete the form properly
with your bank account details recorded correctly and legibly.

Take responsibility for your investments

It is useful to have a general idea of
the dividend history of the companies in which you hold shares
particularly those that you intend to keep for the long term. The
websites of the NSE, the various registrars and quoted companies are a
repository of information on corporate events such as the declaration
of dividends and bonus shares. This way you can forecast the likely
period of payment and look out for the credit to your CSCS account and
thus plan ahead for this income.

Take an interest and try to improve
your general knowledge of investing by browsing through finance columns
of daily newspapers and the electronic media. You have worked hard to
build your wealth and it is your responsibility to be more engaged and
monitor your investments to a degree. Unless you are a significant
investor, no one will do this for you.

The e-payment system has been pivotal to the development,
strengthening and deepening of Nigeria’s capital market. If fully
embraced by all, it should enhance the ability of shareholders to
immediately enjoy access to the proceeds of their investments. This
should provide a much required boost in investor trust and confidence
that the Nigerian capital market so badly needs.