Securities Commission Alarmed as..
Billions of cedis pile up in unclaimed dividends
...Shareholder ignorance blamed
As reported by Ghana market Watch Monday August 7,2006. Story by Ebenezer Asare
A study by the Securities and Exchange Commission (SEC)
in Ghana, the key regulator of Ghana’s capital markets has revealed
that billions of cedis in declared dividends of listed companies have
remained unclaimed and unpaid for some time now.
According to a circular letter from the SEC to industry players, chanced on by Market Watch, the SEC has found out in a study into the issue of unclaimed/unpaid dividends that there are “widespread and extensive incidence of accumulated unclaimed dividends owed to shareholders by listed companies in the country”
The Commission noted in the circular that a substantial number of shareholders had over the years either failed or neglected to come for dividends due them annually for a number of reasons. Major among the reasons are “Ignorance of shareholders, wrong address of shareholders and death of shareholders without notification by their next of kin”,
The SEC further stated that “other reasons may include situations where relatives and heirs are not aware of a deceased’s shareholdings, or the beneficiaries may have traveled without leaving a forwarding address, whilst many shareholders fail to monitor their investment.
PROPOSED ACTION
According to the SEC, once dividends have been declared by listed companies, they by law, become debt to those companies and must be paid to their rightful owners which are the investors or shareholders.
Market Watch’s investigations have revealed that whilst the SEC wants all listed companies holding current and outstanding unclaimed dividends to pay them into a special account yet to be set up, some of the listed companies are not pleased with this demand to pay up the dividends into the escrow account as persists in other countries.
For the listed companies, unclaimed dividends represent additional cashflow and are using the excuse of the absence of a clear legislation on the issue to keep the cash, citing the statue of limitations decree of 1972 (NRCD 54).
COLLISION COURSE
`The Limited Decree 1972) NRCD 54) is a rule of public policy which provides for the automatic termination of litigation after a fixed period of time. After this statutory period, a person’s right of action and sometimes little is barred.
A source in the SEC however has made it clear to Market Watch that the Commission has examined how applicable the Limitation Decree 1972 (NRCD 54) will be to unclaimed dividends and has concluded that the law cannot be applicable to declared but unclaimed dividends.
“Since shareholders are in principle and legally acknowledged as part owners of a company, by which they are entitled by right to dividend payments when declared, and also the fact that company annual reports acknowledge liability of such dividend payments (claimed or unclaimed), it stands to reason that the Limitation Decree 1972 (NRCD 54) cannot be applied to unclaimed dividends. This is still so even if the shares are transferred to a third party” the circular stressed.
REMEDY
The SEC has subsequently outlined a number of measures it intends to put in place in order to reduce, if not eliminate completely, the incidence of unclaimed dividends taking into consideration relevant sections of the Securities Industry Law of Ghana.
The measures include a directive of all registrars, listed companies, brokers and advisors to take reasonable steps to trace owners of unclaimed dividends through the use of mass media, house journals, newsletters, websites as well as investor education by the SEC.
Additionally, the SEC will require listed companies and their registrars to furnish it regularly with a list of all unclaimed dividends and names of affected investors. The regulator will also consider directives to all shareholders to update their personal information and the of their next of kin on an annual or regular basis.