The Securities and Exchange Commission (SEC) has issued a decisive directive to all public companies listed on the Nigerian Exchange Group (NGX) and their registrars concerning the handling of unclaimed dividends. This directive mandates an immediate halt to the practice of classifying unclaimed dividends older than 12 years as statute-barred, particularly those declared before the enactment of the Finance Act 2020. The SEC’s intervention stems from growing concerns that some companies and registrars have persisted in denying shareholders access to their rightful dividends, incorrectly citing the 12-year statute of limitations despite the superseding provisions of the 2020 Finance Act. This practice effectively disenfranchises shareholders from accessing legally entitled funds, prompting the SEC to clarify the legal framework governing unclaimed dividends and ensure compliance within the capital market.
The crux of the SEC’s directive lies in reaffirming shareholder rights to unclaimed dividends that had not reached the statute of limitations by December 31, 2020, the effective date of the Finance Act 2020. The Commission’s circular explicitly clarifies that the 12-year rule no longer applies to dividends declared prior to this date. Instead, the new regulations stipulated in the Finance Act 2020 govern the treatment of these unclaimed dividends. By highlighting this crucial distinction, the SEC aims to rectify the misinterpretation of the law by certain companies and registrars, thereby protecting shareholders’ entitlements and promoting transparency within the Nigerian capital market. The misapplication of the statute of limitations, according to the SEC, represents a breach of the 2020 Finance Act and undermines investor confidence.
The Finance Act 2020 introduced a significant change in the management of unclaimed dividends by establishing the Unclaimed Funds Trust Fund (UFTF). Section 60 of the Act mandates that dividends left unclaimed for six years or more be transferred to this dedicated fund. The UFTF is designed to serve as a central repository for unclaimed funds, holding them in trust until they are claimed by their rightful owners. This mechanism provides a more structured and transparent way to manage unclaimed assets, ensuring that they are preserved and readily available to shareholders when they come forward. The SEC’s circular emphasizes this new procedure and directs companies and registrars to adhere to it, while recognizing the operational status of the UFTF is still pending full implementation by the Federal Government.
Acknowledging the ongoing development of the UFTF’s operational framework, the SEC has provided interim guidance for handling unclaimed dividends. Until the Federal Government fully implements the UFTF and its associated operational procedures, public companies and their registrars are explicitly instructed to continue honouring all shareholder requests for payment of unclaimed dividends, irrespective of the duration they have remained unclaimed since December 31, 2020. This directive underscores the SEC’s commitment to protecting shareholder rights and ensuring continuous access to their legally entitled funds while the government finalizes the UFTF’s operational structure. It bridges the gap during this transitional period and ensures shareholders are not unfairly denied access to their dividends while the necessary infrastructure is being established.
The directive further reinforces the SEC’s authority by explicitly citing its powers under Sections 3(4)(e) and 93 of the Investments and Securities Act 2005. These sections grant the SEC the power to make rules and regulations for the purpose of protecting investors and maintaining a fair, efficient, and transparent securities market. By invoking these powers, the SEC underscores the mandatory nature of its directive and emphasizes the seriousness with which it views compliance. This adds weight to the circular, making it clear that the SEC’s instructions are not mere suggestions but legally binding requirements that must be adhered to by all relevant parties. Failure to comply could result in sanctions or other regulatory actions.
In concluding its directive, the SEC emphasizes the importance of immediate compliance. All affected parties – public companies and their registrars – are expected to swiftly implement the instructions outlined in the circular and to align their practices with the provisions of the Finance Act 2020. Furthermore, the Commission mandates the submission of periodic reports, in accordance with existing SEC Rules and Regulations, to monitor compliance and ensure transparency. This requirement allows the SEC to oversee the implementation process, track the volume of unclaimed dividends, and address any challenges or issues that may arise. This proactive approach reinforces the SEC’s commitment to investor protection and its resolve to enforce the law, fostering greater trust and integrity within the Nigerian capital market.
