The Nigeria Employers’ Consultative Association (NECA), the umbrella body for the organised private sector, has cautioned the Federal Government against plans to further strangulate businesses in the country.
This is against the background of the provisions of sections 38 and 39 in the proposed Finance Bill.
Reacting to this development, Timothy Olawale, director-general of NECA stated that “the draft bill creates a Covid-19 crisis intervention fund which is expected to be utilised to meet Covif-19 related expenditure or other such exigencies.
The bill does not, however, provide information on how the fund will be governed or the persons qualified to govern/manage the fund.
Olawale said “In as much as the bill cannot be expected to provide an exhaustive list of the purposes to which the funds will be applied, it should at least define what is meant by “Covid-19 related expenditure” to reduce abuse”.
Speaking in Lagos, the NECA DG observed that section 39 of the draft bill which seeks to establish an Unclaimed Dividends Trust Fund as a sub-fund of the Covid-19 Crisis Intervention Fund was unnecessary. He called on government to expunge provisions on the Unclaimed Dividends Trust Fund from the Finance Bill 2021 and companies be allowed to manage the unclaimed dividends for and on behalf of its shareholders; and in the best interest of both the company and its shareholders.
Olawale queried “why government which has already collected Companies Income Tax of 30 percent and Education Trust Fund of 2 percent from the profit of each company before dividend was declared, in addition to another 10 percent withholding tax from such dividend, is still interested in taking over the unclaimed dividends.
“This is notwithstanding that it did not invest in the shares of public listed companies that generating these unclaimed dividends”.
He also noted that the proposed section 39 of the Finance Bill overrides sections 429 and 432 of the Companies and Allied Matters Act 2020 which authorises the company declaring the dividend to invest it outside its business after 3 months of publication of unclaimed dividends and to add same to the profit to be distributed to shareholders after 12 years of declaration.
“Dividends are private properties of investors, either individuals or corporate entities. The idea of converting such private properties to federation wealth negates the relevant provisions of the rights to own property as guaranteed by the 1999 constitution. Investors, Nigerians and companies have a right to private properties and assets of which dividends funds are a specie.
Olawale further expressed that several issues and challenges would arise as a result of the current provisions in section 39 of the bill, such as:
Whether the accountant-general of the federation (AGF) would become the registrar of listed companies to process unclaimed dividends and how would he verify information about the shareholders in order to confirm the rightful owners entitled to the unclaimed dividends?
Whether the involvement of AGF would not amount to another bottleneck that would compound the problem of unclaimed dividends with the requirements that payment to rightful owners are based on the approval of finance minister on the recommendation of the AGF?
What is the procedure for the recovery of unclaimed dividends by the rightful owners from the office of the AGF? Where would the unclaimed dividends application be submitted, and money collected by the shareholders – the office of AGF in Abuja or in major cities in Nigeria?
Whether the role of Securities and Exchange Commission would be taken over by the accountant-general of the federation (AGF) as companies are now to send returns on unclaimed dividend to AGF?
Whether section 39 will not be a big disincentive to listing on the Nigerian Stock Exchange by companies and constrained those already listed to delist since the Bill targets listed companies? Even if Section 39 extends to all public companies, would they not be compelled to re-register as private companies as recently done by some companies in order to avoid the take-over of their unclaimed dividends which are private funds?
Would Section 39 of the Finance Bill not cripple the capital market that is just trying to recover from the impact of Covid-19?
As a way out, the NECA Boss stated that provisions on the Unclaimed Dividends Trust Fund should be expunged from the Finance Bill 2021. Rather, government should focus on addressing the root causes of unclaimed dividends by requesting the various state governments to review their complex, unfair and exploitative Probate process; arbitrary valuation of assets of deceased leading to compromise by Probate officials; high estate duty of 10 percent which dependents of deceased are compelled to pay notwithstanding that probate/letter of administration is just a change of name and not sale of assets of the deceased.
Olawale argued that the government should not, through the finance bill, create further burdens or issues in corporate Nigeria. Rather, government should aid businesses to expand and impact the nation’s economy positively, especially as businesses are recovering from the impact of Covid-19 and other challenges.
