ABSTRACT

Stakeholders in the nation's financial sector have called for a new legal framework to

govern the affairs of corporate managing of “unclaimed dividend in Nigeria entities in the

country” They 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, called for a new regime of dividend 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

As shareholders unclaimed dividend pile up to over N28 billion as at the third quarter of

2009, The increasing 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 N20 billion. and now market

analysts estimate that by the third quarter of 2009, the amount of unclaimed dividends in the

Nigerian capital market would hit N28 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: Dividends, Unclaimed dividends, in Nigeria .

INTRODUCTION

The measure put in palace 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 bn 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 is second with N4.1 billion or 23 per cent , followed by Intercontinental 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 which is

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 is 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 homonise 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, irregular signatures, unclaimed dividends, missing

mails, impersonation among others.

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 as been mounting while the accountability, the restoration of investment trust as been

greatly lost. Unclaimed dividend as rising to N28 billion in 2009. 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 stop

2. 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 lodge into the saving account, limitless of the dormant

account dividend payment 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 drives home the claiming of dividend of companies listed

in stock market.?

2 Why does corporation 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 Does the purported single registry SEC and CBN in the 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 plow 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 toping 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 2009, 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 manner with which unclaimed dividend problem would be solve

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 limitation that were experience while 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 are the limitation 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 respondent 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

CHAPTER 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 key into the e-dividend which is not encouraging. market correspondents in

lagos,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, 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, Oluggemi 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 War 11 thousands of Jewish families living in Germany and Germany territories

transferred there 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 these 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 2009, 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 N28 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, irregular signatures, unclaimed dividends, missing mails,

impersonation among others.

Investing in shares of quoted companies in Nigeria has continued to grow 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. delayed dividend warrants, among others.

The company major problem, according to observers was the huge volume of investors

shareholders under its management. It has been moribund for several years, with investors

activities whittled down considerably. It has however been battling with a major problem of

reconciling investors registers of African Petroleum (AP) Plc, since it took over few years ago.

Shareholders of the petroleum marketing company had registered their protest over the inability

of the company to verify shareholders certificates on public offer undertaken by the oil company

for more than seven years. “In the past three years, there has been an unprecedented increase in

the activities of the capital market. This affects not only the Registrars, but also all the other

operators in the capital market. However, because of the key roles of the Registrars, most

especially both at the primary and the secondary market levels of the capital market, this beamed

the searchlight on Registrars capability to handle the surge. Along this line of thought, the

Registrars are responding positively to meet up in terms of processes and procedures re-

engineering which include Information Technology, strategy, and even quality human capital

composition. All these geared towards meeting up with the increase in the volume of activity in

the capital market and unclaimed dividend as major challenges. “

Due to the alarming rise in the rate of unclaimed dividend, companies as been faced with

challenge which are consistently evolving; better and faster ways of doing leading to the

claiming of unclaimed dividend by the investors, This relentless quest has incrementally paid off

in the last 18 months with various innovations. “Before now, verification process of claiming

dividend takes an average of six months and now it has being whittled down to 72 hours, then 48

hours.  At the moment we are almost perfecting the strategy for a 24 working –hour verification,

but this is possible if the dividend warrant sent to the shareholders are received, claimed and paid

into the bank with the use of the e-dividend and the e-bonus measures in place,.

Addressing the issue on pile up of unclaimed dividend, the National Coordinator of the

Renaissance Shareholders Association of Nigeria (RSAN), Mr. Timothy Olufemi disclosed that

the real issue relating to shareholders non receipt of dividend warrant and bonus shares issued to

them, several years or months after being awarded by the companies, was because the registrars

kept making lot of mistakes during allotment process, by misplacing certificates to subscribers,

stating that there was a need for the companies whose shareholders had not received the share

certificates and dividend warrants to find out where the faults lied. The National Coordinator of

Progressive Shareholders Association of Nigeria (PSAN), Mr. Boniface Okezie stating further

that what had given credence to the ugly incidence was the inability of the apex regulatory

authority of the capital market, the Securities and Exchange Commission (SEC),

While the Managing Director of First Registrars Limited, Mr. Bayo Olugbemi admitted

however, that serious challenges had been associated with managing investors and shareholders

in terms of dividend warrants and share certificates.“Firstly, he confess that this is a very big

problem, the rate of unclaimed divided warrants is very traumatic. The challenges he highlighted

were changes in address or residence without informing the registrars. Secondly, we have seen

instances whereby some shareholders don’t pay for their Post Office boxes, and when they fail to

pay NIPOST and after a while remained dormant, dividends warrant are sent to the same box,

and what happens is that, it is either they are sent back sometimes as unclaimed or not even

returned to us at all.

Thanks to the e-dividend payment option. As a matter of fact, all registrars are on their

knees now praying fervently that the e-dividend payment should be a success, because what it

means is that after the declaration of the dividends at the annual general meetings, everyone can

go to sleep, with their two eyes closed. And like we preach in the Institute of Capital Market

Registrars when we have executive meetings and what we tell our staff is that, if you are not

ready to invest in information technology, then you better forget this business. And presently, if

you go to any one of them, you would find out that we are all working on how we can improve in

our information technology, because of the e-offer, e-dividend, e-bonus, e-allotments, we have

all appreciated the need to have a robust Information Technology because this is key among the

issues we discuss at our executive meetings.

Apex regulator sidetracks postal system in dividend payment The Securities and Exchange Commission (SEC) is set to strengthen e-dividend

payments in the Nigerian capital market, (NCM). This has become necessary with the level of

unclaimed dividends in the system increasing on a yearly basis. Since the beginning of the year

the apex regulator has been worried over the increased number of unclaimed dividends; querying

the registrars whose responsibility it is to dispatch warrants to beneficiaries.

Presently, an estimated N17.9 billion is said to have accumulated over the years as unclaimed

dividend. The regulator is obviously worried over this situation and has been doing everything

within its power to achieve a reduction of this figure by ensuring the funds get o their rightful

owners.

Addressing the issue last week at a seminar organised by Price Waterhouse Coopers

(PWC), a senior SEC official, Bala Usman told stakeholders that among other measures to

ensure improved dividend administration, SEC has directed that registrars of companies should

make direct remittance of dividends to shareholders via a schedule to banks.

Collecting banks should be responsible for the collection of dividend warrants for their

customers without negligence.�To facilitate the efficiency of operations and meet this mandate, SEC further recommends

full computerization of operations of registrar departments in the shortest possible time. The

shareholders are also required to maintain bank accounts whether current or savings.

It however needs be pointed out that by this directive SEC seeks a more investor-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 2009.

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?

CHAPTER THREE

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,

Using SPSS to analyze and Chi-Square test x² which is a statistical tool of SPSS that

enables the researcher to establish if their in any relationship between two variables in the total

population. 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

their in 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, intercontinental 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 be plowed back to the companies in an investment other

than the company.

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 be removed

from CAMA and the years be 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.

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 plow 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 plowed back to the companies in an investment other

than the company.

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 6.66 3.34 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 plow 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

to 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 1112

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

RC 22=70*47

210

RC 23=70*47

210

=15.66 =15.66 =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 fall 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.

CHAPTER 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 N28 billion over

the years in the mid 2009, 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 in2009 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 empower 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

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