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Finance minister

2020 Finance Act: The unresolved issue of unclaimed dividends, dormant accounts

By on January 9, 2021 0 177 Views

By Oludare Mayowa

President Mohammadu Buhari last week signed into law the 2021 appropriation bill and the 2020 Finance Bill, which effectively empowered the government to spend money from the 2021 budget and implement the new Finance Act to boost its revenue.

In the 2020 finance Act, new measures are introduced to enhance the finance of the government due to the loss of revenue as the Coronavirus pandemic bites harder, disrupting government ability to raise needed funds to finance its business.

Among the provisions in the new Finance Act is the creation of the Unclaimed Funds Trust Fund (UFTF), which was designed to manage unclaimed dividends and remnants of money in dormant customer’s accounts with banks.

The trust fund was proposed under the new act to ensure that government takes charge of the private sector funds owned by individual investors to enable it to have access to the fund for the use of the government as part of its revenue support.

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According to the 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.”

The monies transferred to the trust fund will be a “special debt owed by the federal government to shareholders and dormant bank account holders.” The new Act also states that the original owners of the money can claim it at any time.

The operation of the trust fund will be supervised by the Debt Management Office (DMO) and governed by a governing council chaired by the finance minister and a co-chairperson from the private sector appointed by the president.

Other members of the governing council shall include the governor of the Central Bank of Nigeria (CBN), director-general of the Securities and Exchange Commission (SEC), managing director of the National Deposit Insurance Corporation (NDIC), a representative of the registrars of companies, two representatives of the shareholders’ association, a representative of the Bankers’ Committee and the director-general of the Debt Management Office (DMO) as the secretary of the trust fund.

The move as noble as it seems in the eyes of those in government, is more of a clever way by the government to rob Peter to pay Paul.

Like everything government, the trust fund is an escapist way to address an issue that has remained intractable in the private sector for many years.

For instance, the issue of unclaimed dividend arose from the dubious practice of registrars in collaboration with some of the directors of listed companies to denied investors, especially retail investors the access to their money.

Most registrars made practically almost impossible and difficult for shareholders to gain access to their dividends, either by not sending the warrant in time and made the process of reclaiming the dividend such cumbersome for the owners that such owners would rather abandon it than waste time in trying to claim it.

Consequently, many of the registrars and their collaborators in the listed firms converted the funds to personal use to the detriment of the original shareholders.

The dormant account is another issue that should have been addressed by appropriate legislation to ease the process of access to such funds by beneficiaries of deceased owners of the majority of the money.

Beneficiaries of many people who died intestate, meaning without a valid Will are finding it difficult and hard to access to necessary legal documents of administration of deceased estates.

The same issue also played out with unclaimed dividend where some shareholders died and the beneficiaries of their estate could not get access to their assets due to the cumbersome process of obtaining approval of letter of administrator for the execution of the deceased Will.

The government, which ordinarily would have enacted relevant law to rescue the innocent shareholders from the oppressive capitalists who have found a ready opportunity to hijack the fund through dubious means from the owners for their personal use is now all out to also converted the fund for its own use.

The composition of the trust fund board is an indication of the intention of the government to corner the fund indirectly rather than making efforts to ensure that their real owners or beneficiaries are made to have access to the fund.

It is obvious that the fund will also suffer the same calamities that befall businesses that are associated with government, which have been subjected to the usual abuse and corruption by its managers.

Ready examples are the contribution made to the Housing fund by workers in both public and private sectors since the day of President Ibrahim Babangida and the Nigerian Social Insurance Trust Fund (NSITF), which have remained a cesspool of corruption by public officials.

The attempt by the government to convert the fund into debt showed the desperation of the promoters of the idea to hijack the fund, which has been described by banks and registrars as ‘money belonging to no one’ in particular.

With the new Act, there would no longer be an incentive for the capital market regulator to proffer a viable solution to resolve the lingering unclaimed dividend debacle.

Once the money pool into the so-called Trust Fun and become officially recognized ‘as no man’s money’, that will be the beginning of abuse and corruption by the managers of the funds who will not be accountable to the owners of the money.

Apart from the fear of corruption which may eventually subject the fund to serious abuse and looting by the government appointees and deplete the fund in no time, also borrowing from the fund would amount to the government taking what belongs to individual forceful without their consent.

The unclaimed dividend and dormant accounts are not owned by ghosts but investors and depositors who are either dead but with beneficiaries or alive but have been forced to give up claims to the funds due to the conspiracy of capitalists operating the capital market and banks.

Rather than the government hijacking the funds, the right thing to do is for it to encourage liberal regulations to enable those who have abandoned their claims to the money to be able to have access to them.

The SEC should review its regulations on dividend payment, compel registrars to pay interest on unclaimed dividend to their owners and ensure that proper records of investors are kept to make it easy for them to claim their money.

The government should return the new Act to the National Assembly for amendment to reflect genuine concerns of government in resolving the issues of unclaimed dividends and dormant accounts rather than wanting to hijack the money for its own use.

The action of the government in converting the money could hamper the growth of the capital market and discourage many retail investors from participating in the market in the long run.

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