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COVID-19: A challenge to Registrars in the Capital Market



Nigeria has come to grips with the human and economic consequences of the COVID-19 pandemic, governments – at both federal and state levels, hurriedly issued varying stay-at-home orders in efforts to contain the spread of the deadly coronavirus and national and as federal and state budgets suddenly become unrealistic estimates in nation-building for the year 2021.  The weak national economy is once more under pressure with COVID-19.  The capital market- a major sub-sector of the financial sector in compliance with government directives, scaled-down their business operations.

Leading private sector business organizations in Nigeria triggered their Business Continuity Programs (“BCP”) to ensure smooth operations and other business necessities during the lockdown.  Banks BCPs ensure efficiency in funds collection and management processes, ATM continuous operations and seamless online banking services; the Corporate Affairs Commission (despite the unfortunate fire incident) and the Nigerian Stock Exchange approved the introduction of victual technology in the conduct Annual General Meetings.  The Securities and Exchange Commission is leading major organizations and individuals to raise N1 billion in funds to help the government in the global fight against the COVID-19.

Lagos State Government in March 2020 led in placing public restriction to contain the spread of the deadly virus.  The Federal and the states of the federation followed immediately.  At the economic front, transactions in the nation’s capital market notably the Nigerian Stock Exchange continued jolted by advancement in technology that made possible stock trading at remote locations

Trading in the secondary market operated as if COVID-19 pandemic has no negative effect on market operations. Not less than seven (7) major annual general meetings took place in the month of April in the midst of the lockdown. These are commendable achievements for which kudos should be given to the regulators – the Central Bank of Nigerian and the Securities and Exchange Commission, operators, directors of quoted companies. This great achievement was never thought possible a decade ago.  It lessens the negative economic effect of COVID-19 and ensured shareholders got paid their dividend declared within the intention of the provision in CAMA 2004, section 382 (4) on posting-out of dividend

In April 2020, nine financial houses (9) paid a total of N220.5 billion to registrars on account of dividend declared.  Of this sum, N198.5 billion will be paid directly to shareholders of those companies while N22 billion is paid to the Federal Inland Revenue Services by way of withholding tax.  The main concern is the doubt; many shareholders would receive the said N198.5 billion in compliance with provisions of CAMA 2004 section 382 (4).  A greater proportion of the sum will end up as unclaimed dividend – no thanks to the poor operations of the registrars charged with the role of paying the shareholder.

The registrars have dimmed the shine out of the remarkable achievement earlier enumerated. They further compounded the COVID-19 induced pain shareholders are in.    Unfortunately, no registrar issued a business continuity plan, as if no AGM can take place or any remote trading in shares possible.  To the registrars, all businesses must wait while they observe the stay at home order.

With COVID- 19 pandemic, the level of unclaimed dividend will worsen by the amount recently paid by quoted companies as dividend this period of lockdown.  In December 2019, the registrars, on the order of the Securities and Exchange Commission returned to various public quoted companies N150 billion in unpaid dividends that have stayed 15 months or more with the registrars.

During the lockdown, Stockbroking firms are able to open and operate CSCS accounts for new shareholders.    The major challenge new shareholders will face is their inability to be paid dividend declared during the period of lockdown.  The registrars never envisaged a situation where their business operations could shut-down and key functions like dividend payment impaired.  This abnormally is a further flaw in the handling of unclaimed dividend in Nigeria.

Registrars must shift from their hardened stance on e-dividend execution.  Currently, registrars require shareholders to complete a Dividend Mandate Form giving personal information of name, surface and electronic contact address, bank detail including BVN and any national means of identification.  Thereafter, he or she affixes his or her passport picture and have his/ bankers endorsed the Form and passport.  Completion and submission of the e-dividend form is no guaranty the dividend will be paid immediately. It takes an average period of two months before the registrar releases any outstanding dividend to the shareholder.  God save the shareholder, where the date of the nominated account was opened is less than six months.  The registrars will out rightly decline receipt and processing the e-dividend for reasons; date of nominated account was opened is less than six months from date of submission to the registrars.

The Company Act and Dividend Declaration

The Companies and Allied Matters Act is the primary statute regulating operations of companies including the declaration and payment of dividend to shareholders.  The Rules and Regulation under the Investment and Securities Acts stipulated that dividend approved at the AGM is immediately paid to the shareholders and evidence of such remittance filed with the Securities and Exchange Commission

Need for Registrars to Effect Change in Operations

COVID-19 pandemic and the attendant lockdown has changed the face of doing business in Nigeria.  In times like this as the saying goes, “necessity is the mother of invention”.  The failing of registrars in the handling of the dividend payment will continue to negatively impact progress in the capital market.  There is a need for urgent changes to be done in registrars’ services.  Before I proffer suggestions, let us consider the following fact: –

1.   The Securities and Exchange Commission (the Commission) in December 2019, ordered registrars to return N150 billion in an unclaimed dividend that stayed 15 or more months to the respective quoted companies. This means that in every 3-4 months’ periods, the registrars have in free and un-marketed funds in excess of N150 billion in their bank accounts in the name of dividend payable to shareholders.  What therefore should motivate them to hasten any payment process?

2.   As the registrars returned the N150 billion to the companies, another set of free-funds is paid to them in the current year dividend to be treated in a similar manner as the funds before it.

To address the issue of intractable unclaimed dividend, this write-up proffers the following changes were accepted, will bring positive change in operations and administration of dividend payment to meet the interest of shareholders in the capital market: –

  • E-Dividend Mandate Form and the Share Transfer form should be merged into one single document. The Share Transfer Form is the oldest Statutory Form in the capital market and is stated as a necessary document in matters of transfer of shares, under the Companies and Allied Matters Act and in respective Memorandum and Articles of Association of companies.  The Share Transfer Form is completed by the investor and submitted to the stockbroker who upon purchase of the shares on behalf of the investor; forwards the executed Share Transfer from through the CSCS to the Registrars for their record.  It’s the Share Transfer Form the Registrars use to authenticate any correspondence with the shareholder.

The e-Dividend Mandate Form however is a creation of the Registrars.  The registrars require a shareholder to complete (before any dividend is paid) by supplying such information as personal, surface and electronic addresses, national document of shareholder identity and the bank account details including BVN.

Going forward, the information in a Share Transfer Form should be updated to include the bank details of the new/existing shareholder and processed to the Registrars for record keeping.  The e-dividend Mandate Form be then cancelled or done away with.

This suggestion conforms to the changes that has taken place in the primary market where “Application or Subscription Form” (another old form in the market) has been updated to include the bank details of the subscriber that the Registrars use as enough for the purpose of return money or dividend payment

  • The Securities and Exchange Commission should open the dividend-paying function to the like of the Central Securities Clearing System Plc. The CSCS has proven to have the capacity to handle large live date of a-high financial consequences as a dividend payment.  It is the CSCS that provides information to the registrars on shareholders that met the cut-off dates for dividend payment.  Secondly, information the CSCS obtain from shareholders during account opening processes include the bank details of the shareholders.  Accepting this recommendation means Company Secretaries to separate the dividend due to shareholders on the CSCS platform and pay the same through the CSCS.  There is nothing in the CAMA that recognizes the Registrars as a paying agent (not to mention sole agent) in matters of dividend payment to shareholders.
  • The audited annual Financial Statements to include by way of notes to the accounts, an Analysis of movement in Unclaimed Dividend. The amount declared as annual dividend runs into billions of Naira in major quoted companies on the NSE. Same time a sizeable amount running in billions will remain unclaimed.  There is a need for the SEC and/or the Financial Regulatory Council to demand information on the movement in the dividend showing amount paid, amount returned to the company secretary and the amount in the hands of the registrars.  Many quoted companies failed to follow up with the registrars and retrieve Unclaimed Dividend in compliance with Section 382 of CAMA 2004
  • There is a need for registrars to abolish the minimum age of 6 months for an account to qualify to receive any dividend due to the shareholder.  Which is most important, the principal sum which the shareholder paid through the bank account for the shares or the dividend he is to be paid into the same account
  • Registrars that handle and benefits from public funds (unclaimed dividend) be made to publish their annual audited financial statements. This will show proper accountability in the management of dividend paid to shareholders
  • The CAMA Section 382 requires companies to send a list of unclaimed dividend to persons entitled to receive notice of next annual general meetings. The practices these years where companies make passing statements for shareholders to contact the registrars vide some electronic contact forms worsen matters. The intention desired by compliance of section 382 CAMA 382 is lost.
  • The Securities and Exchange Commission need to revise Rule 204 of its Rules and Regulation. Rule 204 (1), (5) and (5) give the registrars un-necessary days to hold on to dividend payment in this times of online banking.  A rule that is outdated if not revised makes easy the current registrars inertia.

The suggestions, if implemented, will be beneficial to shareholders and the capital market in general.  Investment decisions in trying times like the COVID-19 pandemic are largely based on what cash returns is readily available.  That an investor is denied immediate receipt of dividend due to him or her in this era of advancement in the funds settlement system is really a drag on the efficiency of the capital market.  The Nigeria capital market will benefit from its large population where registrars can show and demonstrate they have the capacity to manage prompt and timely payment of dividend. Timing differences that exist between receipt of AGM approval of dividend and the actual payment of the dividend to the shareholder will come to a naught.  The objective for all shareholders to receive their dividend on due date must stand achievable.


***Dodo, an independent financial & investment analyst, wrote in this piece from Masaka, Nasarawa State. He can be reached via; [email protected]
Nicodemus V. Dodo (fca)

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