The Securities and Exchange Commission is opposed to a proposed amendment in the Finance Bill 2020 that prescribes that unclaimed dividends be handed over to the federal government as trustee.
The Head of Department, SEC, Abdulkadir Abbas, stated this at the public hearing of the bill organised by the Senate Committee on Finance on Thursday.
His submission was in reaction to the presentation of the finance minister, Zainab Ahmed, on the key reforms intended in the bill.
She explained that under the Companies and Allied Matters Act (CAMA), the federal government proposes the creation of an unclaimed dividends and unutilised bank Balances Trust Fund.
She said the platform would house dividends that were declared but unclaimed and will be owed as a perpetual debt to shareholders.
“It is proposed that such unclaimed dividends should be handed over to the government as trustee, in a perpetual fund created under supervision or the CBN and DMO, etc with private sector involvement in the governance of the fund.
“The liability to shareholders of public companies will no longer be extinguished after 12 years as currently provided for in the CAMA,” she said.
Mr Abbas, however, opposed the government’s plan to supervise the platform particularly because the Investment Securities Act mandates the commission to protect the interest of the investors.
“We are not against the proposal to set up the unclaimed dividends and balances trust fund. What I said is that we have concerns with respect to the governance structure of that proposed fund and appealing for reconsideration.
“SEC being the capital market regulator and mandated by the Investment Securities Act to protect the interest of the investors, to be the one to administer or to manage or to supervise the operation of that fund. That is what I stated.”
In response to his concerns, the finance minister said the government’s proposal was in line with the provisions of the Nigerian Constitution, adding that the Debt Management Office will supervise it.
“Any funds that is lying fallow after a certain period of time cannot be taken over but such funds could be borrowed. The Unit Trust is a borrowing arrangement of the government. At the moment, the Debt Management Office issues securities to the registrars in case owners of such unclaimed dividends or deposit in dormant accounts come forward to claim their entitlement.
“The reason the Debt Management Office would be in charge of the unclaimed dividends and deposit in dormant accounts is because it has the mandate to manage debts on behalf of the government.
“That is why we recommend that the DMO as against to SEC, should manage the funds. It is possible that a different arrangement is in place in other jurisdiction but I want to state that in the amended CAMA…”
Mrs Ahmed further explained that there is a provision that had modified the section in the law that mandates the registrars to return unclaimed dividends after 12 years to the companies that paid the dividends in the first instance. Rather than the companies to collect back the money and redistribute, she said, the government wants to manage the funds.
When asked what happens if the DMO takes over the management of the funds and the owners of the unclaimed dividends or deposits in the dormant accounts show up, she said DMO would give details of the procedure of how the funds would be managed.
Why FG should handle unclaimed dividends
The minister was made to further explain how and why the government will supervise the fund to which she said the government only wants to use monies that are lying idle in bank accounts to carry out many developmental projects.
“This is well intended. Some shareholders may not be happy. Certainly, no regulator is happy. This is our proposal and we believe that the National Assembly would take the right decisions for the benefit of the greater good of Nigerians. The United Kingdom also have a provision that dividends not claimed after fours years, revert to the Companies that issued them.
“We are now proposing to reduce the length of time that the unclaimed dividends could revert to the companies, we are proposing six years. It would be a pool of funds and whoever comes up with a request for refund would have enough to collect.
The Deputy Senate President, Ovie Omo-Agege, who was also present at the hearing, called on the government to also claim funds from dormant accounts.
The Finance Bill seeks to amend 12 laws including the Capital Gains Tax Act; Companies Income Tax Act; Personal Income Tax Act; Tertiary Education Trust Fund (Establishment) Act; Customs and Excise Tariff, etc (Consolidated) Act and the Value Added Tax.
Others are Federal Inland Revenue Service (Establishment) Act; Nigeria Export Processing Zone Act; Oil and Gas Export Free Zone Act; Fiscal Responsibility Act; Companies and Allied Matters Act 2020; and Public Procurement Act; in order to make further provisions in connection.
Some objectives of the bills include reforming extant fiscal policies to prioritise job creation, economic growth, socio-economic development, domestic revenue mobilization, as well as to foster closer coordination between monetary and trade policies.
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