Unclaimed dividend/Dormant accounts: FG, Shareholders at war over N895bn loan proposal
…SERAP warns FG to shelve plan
…Loan proposal to cripple banks- President, BCAN
By Kayode Tokede
Shareholders of listed companies on the Nigerian Stock Exchange (NSE) have vowed to sue the federal government over proposed plan to borrow N895billion from unclaimed dividends and dormant account balances.
President Muhammadu Buhari recently signed into law Finance Act 2020 into law, which clearly provides that the government can borrow from the unclaimed dividends and dormant account balances under the Unclaimed Funds Trust Fund.
The funds are made available as a special debt owed by the federal government to the respective shareholders and the dormant bank account holders.
Nigerian NewsDirect in July reported that the total unclaimed dividend figure in the Nigerian capital market stood at N158.44 billion as of December 2019,
Reacting to proposed plan by federal government, National leader emeritus, Independent Shareholders Association of Nigeria, Sir Sunny Nwosu said investors are going to take legal action against the federal government.
In his words, “Our shareholder association has one of the highest unclaimed dividends in some of these companies and we are warning them not to release any money to the government until the matter is settled in the court.
He maintained that shareholders do not trust the government when it comes to peoples’ money.
Nwosu argued: “If you want to take a loan, raise a debenture. After all, government has been having oversubscription on its debenture. Why do they want to take from shareholders?
“As it is now, it is forcefulness because if you’re passing a law without the consent of the owner, it is like you forcing it on them that you must take the money.
“What is stopping government from continuing to raise debenture which has always oversubscribe?”
He maintained that shareholders have been fighting the government for over 20 years and won in court, stressing that the legislature compromised and passed the Act into law.
“For us which is our money, we will have to fight. If they eventually defect us, then we will stand by it but we cannot allow it to pass without fighting.
“We are sure justice must be served on issues like this.”
He maintained that there was no engagement between shareholders and the federal government.
Also speaking, the Chairman, Progressive Shareholders Association of Nigeria, Boniface Okezie, said the proposed plan of the government tends to amount to stealing from shareholders, stressing that government does not have business to borrow from shareholders investment.
According to him, “Government across the globe give loan to their citizens and even finance. Either the past or present government have borrowed their citizens money to start business. We provide medical, power, among others to survive in this country.
“What has the government provided for its citizens thst it wants to borrow from them. Government of today wanted to steal where they did not sow.
“The finance Act 2020 amounts to robbery and wanting to pose peoples’ investment.
“We are going to challenge the government over borrowing from unclaimed dividend in the capital.
“Unfortunately, the judiciary are playing to the gallery. The judiciary are supposed to protect the weak rather than aiding government to steal.
“The Finance Act 2020 moves to access unclaimed dividend in the capital market is subject to shareholders challenge.”
Speaking from a different perspective, President, Bank Customers Association of Nigeria (BCAN), Dr Uju Ogubunka said government cannot be trusted with customer deposits.
According to him, the federal government has not been a good borrower of money.
“If you look at it holistically, we are going to create problems for the banks. If the deposits in the banking are taken away, you’re increasing the credit portion and reducing the deposit portion which automatically leads to an imbalance in the banking sector.
“It will affect First Bank of Nigeria Limited and Union Bank of Nigeria with huge dormant account holders.
“We may need to look at it very carefully as this policy may crash some banks. If the money is emptied in some banks, there will be a shift in balance sheet of some banks.
“Imagine government does not pay back on time, these banks will run into trouble.”
Professor of capital market, Professor Uche Uwaleke of Nasarawa State University does not see anything wrong with the government borrowing from unclaimed dividend and dormant deposits sitting in bank accounts.
According to him, “the transfer of unclaimed assets (unclaimed dividends and dormant account balances) to an unclaimed funds Trust Fund is in line with what obtains in many parts of the world.”
“The practice of transferring the funds to the government after a dormancy period is also consistent with what is done in countries like the USA where State governments exercise such powers.”
He added that “the composition of the Governing Council of the Fund which accommodates the key stakeholders such as the CBN, SEC, NDIC, DMO Company Registrars and Shareholders will address many of the concerns of listed companies, their shareholders and the banks. That way, any negative fallout will be mitigated.”
Professor Uwaleke noted that “the fact that the money will be transferred with interest to the real owners as soon as they are established should boost investors confidence.”
However, Socio-Economic Rights and Accountability Project (SERAP) has asked President Muhammadu Buhari to shelve government’s plan “to borrow N895billion of unclaimed dividends and funds in dormant accounts using the Finance Act.”
SERAP is asking the government to jettison the planned borrowing “to ensure respect for citizens’ rights”.
According to SERAP, “borrowing unclaimed dividends and funds in dormant accounts amounts to an illegal expropriation, and would hurt vulnerable Nigerians who suffer under reduced public services, and ultimately lead to unsustainable levels of public debt.”
SERAP is insisting that “the right to property extends to all forms of property, including unclaimed dividends and funds in dormant accounts. Borrowing these dividends and funds without due process of law, and the explicit consent of the owners is arbitrary, and as such, legally and morally unjustifiable.”
The group noted that “the borrowing is neither proportionate nor necessary, especially given the unwillingness or inability of the government to stop systemic corruption in MDAs, cut waste, and stop all leakages in public spending.”
SERAP also argued that the planned borrowing is “clearly not in pursuit of a public or social interest.”
Another reason for kicking against government borrowing of unclaimed dividends and untilised funds in dormant accounts according to SERAP is because “the borrowing also seems to be discriminatory, as it excludes government’s owned official bank accounts, and may exclude the bank accounts of high-ranking government officials and politicians, thereby violating prohibition of discrimination against vulnerable groups.”
According to the Finance Act, “Any unclaimed dividend of a public limited liability company quoted on the Nigerian Stock Exchange and any unutilised amounts in a dormant bank account maintained in or by a deposit money bank which has remained unclaimed or unutilised for a period of not less than six years from the date of declaring the dividend or domiciling the funds in a bank account shall be transferred immediately to the trust fund.”
However, the official bank accounts owned by the federal government, state government, local governments or any of their ministries, departments or agencies are specially exempted by the Act.
The borrowed funds by the FG shall be available for claim with the appropriate yield by the shareholders and the bank account holders at any time.
Failure by any company or deposit money banks (DMBs) to transfer such funds to the Unclaimed Funds Trust fund shall be considered as an offence and liable upon conviction to a fine of not less than five times the value of the funds plus accumulated interest on the amount not remitted to CBN, at the monetary policy rate.
The trust fund shall be supervised by the Debt Management Office (DMO) but governed by a governing council chaired by the Minister for Finance, with the co-chairperson from the private sector that is appointed by the president.
Such a person from the private sector shall be recommended by the Minister for Finance and duly confirmed by the Senate and must be of irreproachable integrity to serve in such capacity.
Other members of the Governing council include the CBN Governor, DG of Securities Exchange Commission, MD of NDIC, a representative of the Registrars of Companies, 2 representatives of the Shareholders Association, a representative of the Bankers Committee and DG of Debt management Office as the Secretary of the Trust Fund.
