Shareholders in Nigeria can breathe a sigh of relief as the Securities and Exchange Commission (SEC) has moved to protect their rights regarding unclaimed dividends. In a significant directive issued on Tuesday, the capital market regulator instructed all public companies and their registrars to cease treating unclaimed dividends older than 12 years as statute-barred, particularly those declared prior to the enactment of the Finance Act 2020. This move aims to rectify a practice that has seen many shareholders denied access to their rightful earnings.
The SEC's decision comes in response to persistent concerns that certain companies and their registrars have been unjustly refusing to pay out unclaimed dividends, citing their age as a barrier. This practice directly contradicts the provisions of the Finance Act 2020, a legislation designed to bring clarity and fairness to the handling of such funds.
According to the circular published by the Commission, shareholders retain their entitlement to claim dividends that had not become statute-barred as of December 31, 2020. This date is crucial as it marks the effective date of the Finance Act 2020. The SEC explicitly stated that it had become aware that "paying companies and their registrars have continued to treat unclaimed dividends of public companies that are older than 12 years as being ‘statute-barred’ without recourse to the provisions of the Finance Act 2020."
The core of the SEC's argument lies in Section 60 of the Finance Act. This section stipulates that dividends remaining unclaimed for six years or more are to be transferred to the Unclaimed Funds Trust Fund (UFTF). The critical point here is that these funds are not forfeited but are to be held in trust within the UFTF, awaiting claims from their rightful shareholders. This provision fundamentally alters the previous understanding that after a certain period, unclaimed dividends would revert to the company or become inaccessible to the shareholder.
Furthermore, the SEC clarified the interim arrangement concerning these funds. The Commission emphasized that until the Federal Government fully operationalizes the Unclaimed Funds Trust Fund, companies and registrars are obligated to continue honoring all shareholder requests for the payment of such unclaimed dividends.
The circular explicitly stated, "Pending the setting up and operationalisation of the UFTF by the Federal Government, pursuant to its powers under Sections 3 (4) (e) and 93 of the Investments and Securities Act 2025, the Commission hereby directs public companies and their registrars to continue to honour all requests by shareholders for the payment of unclaimed dividends as described above, with effect from December 31, 2020."
This directive is a significant win for investors and underscores the SEC's commitment to investor protection and market integrity. It brings much-needed clarity to the issue of unclaimed dividends and ensures that shareholders are not unfairly dispossessed of their rightful earnings.
The Commission has also mandated all affected parties to ensure immediate compliance with this directive and to submit periodic reports, indicating a strong supervisory stance to ensure adherence to these new guidelines. This decisive action by the SEC is expected to facilitate the recovery of substantial amounts of unclaimed dividends by rightful owners, fostering greater confidence in the Nigerian capital market.