SHAREHOLDERS have decried the plan to set up an unclaimed dividend trust fund to takeover unclaimed dividends.
Shareholders under the aegis of Independent Shareholders Association of Nigeria (ISAN) made a position paper on their objections to the proposed fund at the public hearing of the Senate Committee on Finance, Trade and Investment and Public Procurement on the Finance Bill 2020.
In a statement signed by National Coordinator, Mr. Anthony Omojola and Founder, Sir Sunday Nwosu, ISAN said dividends are private wealth of investors, either individuals or corporate entities and the idea of converting such private wealth to Federal Government’s revenue negates the relevant provisions of the rights to own property and asset as guaranteed by the 1999 Constitution, as amended.
According to the association, to the extent of its inconsistency with the 1999 constitution, the proposed trust fund is null and void as the law expressly states that there shall be no forceful takeover of any private moveable or immovable property of any Nigerian without due and appropriate compensation and or valid court order.
“It is nothing short of expropriation which the constitution forbids. Dividends, including unclaimed dividends, are fund generated by private companies and made available to its shareholders in line with the provisions of Companies and Allied Matters Act (CAMA) and the Company Memart. That these funds are available only after the company has paid a host of taxes, including Companies Income Tax Act (CITA), Educational Trust Fund (ETF) and tax of about 32 per cent of gross profit is paid to the federal government and 10 per cent withholding tax on the shareholders for every dividend declared,” ISAN stated.
Shareholders argued that it was clearly overreaching and unacceptable for government to seek to expropriate the unclaimed dividends under the subterfuge of any revenue, noting that companies and individuals have a right to private properties and assets of which unclaimed dividends funds falls into.
According to the group, the philosophy behind the decision to appropriate unclaimed dividends is wrong, as returns on investments cannot be time barred by any progressive government.
They noted that the thinking that the cancellation of rights after 12 years is unconstitutional and the notion that expropriation is to cure an alleged unconstitutional wrong is also wrong, describing this as an inverse legal thinking that will lead to another unconstitutional mess.
“These unconstitutional wrongs, if the right thinking members of the public accept the argument behind this philosophy, will not make it right. The Memorandum and Articles of Association of a company is a contract between the shareholders and the company. Thus, the rights of the shareholders are contractual, and entered into with their knowledge and cannot be legislated upon to the detriment of the other party,” ISAN said.
The group pointed out that the statute of limitation provides for expiration of debts after six years while CAMA 2020 by Section 432 increased the limitation to 12 years, wondering whether government is by any chance taking the position that the statute of limitation is unconstitutional.
“The unclaimed dividends belong to shareholders of companies and there is adequate provision that in the event of failure to claim; that such fund should revert back to the operations of the company. There are good structures around this position. Further, recovery by shareholders has thus been seamless. Rather than try to expropriate, government should enhance the structures,” ISAN said.
They said with the move to takeover unclaimed dividends, the National Assembly and the Federal Government have shown lack of understanding of the mechanics of business and corporate Nigeria.
They lamented that the structure proposal to have the Minister of Finance to be in charge of unclaimed returns on investments of individuals and not government finances is an anomaly.
They pointed out that the issue of creating unclaimed dividend trust fund and transfer of the unclaimed dividends into the Federation Account is uncalled for as the process will encourage corruption and nepotism to the detriment of the shareholders and beneficiaries of returns on investments.
“Government for years has expressed the desire to borrow from the unclaimed dividends. Until now, former administrations’ desire had been checked constitutionally but the current moves by the present administration to deep their hands into the “cookies jar” to finance Federal Government deficit at the detriments of investors is not only unconstitutional but dangerous in the overall economic space,” ISAN stated.
They noted that contrary to the claims by the National Assembly and the Federal Government, the rising unclaimed dividends and other unclaimed funds are not peculiar to Nigeria, noting that in Nigeria, as in other developed and developing countries where electronic dividend payment system is deployed, regulators have continued to seek enduring solutions toward the mitigation of the hydra-headed problem.
They outlined that as at the end of 2019, United Kingdom has an unclaimed dividend estimated at between £3 billion to £4 billion across stocks listed under the FTSE 100 while Australia has about AS$1.1 billion, Australian dollars, as value of unclaimed dividends.
“We are an association of over 10,000 members spread all over Nigeria. Our avowed interest is the protection of the cherished values and welfare of shareholders in general – members and non-members alike, nationwide. We want to state most emphatically, that the Proposed Bill will not serve our interest now and in the foreseeable future, in fact it could cause unwarranted hardship and misappropriation of our investments. For this and other numerous reasons, we plead that the Finance Bill 2021 (Part V) be expunged,” ISAN stated.
