In a move aimed at protecting shareholder rights and correcting widespread misinterpretations of dividend entitlements, the Securities and Exchange Commission (SEC) has directed all public companies and Registrars to discontinue the practice of classifying dividends older than 12 years as “statute-barred.”
A “statute-barred” claim refers to a situation where legal action can no longer be initiated because the prescribed limitation period has expired.
The SEC clarified that dividends declared before the enactment of the Finance Act 2020 must still be governed by applicable legal provisions, emphasizing that shareholders remain entitled to claim such dividends, regardless of their age.
In a statement issued on Tuesday, the Commission reinforced the importance of adhering to Section 60 of the Finance Act 2020, which outlines the procedures for handling unclaimed dividends. According to the legislation, any dividends unclaimed for more than six years must be transferred to the Unclaimed Funds Trust Fund (UFTF), where they are held in trust until the rightful owners come forward.
Clarification on Dividend Eligibility
SEC Director-General Emomotimi Agama stressed the importance of the new directive, highlighting the incorrect practice by many public companies and Registrars of treating dividends older than 12 years as time-barred. This, he said, has unjustly prevented some shareholders from receiving payments due to them.
“In response to ongoing inquiries, the Commission wishes to clarify the correct interpretation and handling of unclaimed dividends,” Agama stated.
He further explained that any dividends issued up to 12 years before December 31, 2020, remain eligible for claims. This directly challenges prior assumptions made by some market participants regarding time limitations.
Agama also reiterated that, under the Finance Act, unclaimed dividends beyond six years are to be transferred to the UFTF. However, these funds remain accessible indefinitely for legitimate claims, rather than becoming forfeited or invalid.
“The Finance Act mandates that unclaimed dividends exceeding six years must be moved to the UFTF, ensuring they remain accessible for legitimate claims at any time in the future,” he emphasized.
Enforcement and Compliance
Although the UFTF is not yet fully operational, the SEC has made it clear that public companies and Registrars must, in the interim, honor all valid dividend claims dating back to the 2020 cut-off.
The Commission expects full and immediate compliance with this directive to prevent the denial of entitlements based on flawed legal interpretations. It also requires that affected entities submit periodic reports documenting their compliance with the directive, in line with ongoing regulatory expectations.
By implementing these measures, the SEC aims to uphold investor rights, improve accountability, and reinforce trust in Nigeria’s capital market framework.
What Shareholders Should Know
- The directive guarantees that shareholders can still claim dividends previously marked as statute-barred.
- Investors are advised to carefully review their dividend histories and reach out to the relevant companies or Registrars if they suspect they are owed payments.
- The SEC’s intervention underscores its commitment to enforcing accurate compliance with the Finance Act 2020 and ensuring that no shareholder is unjustly deprived of their earnings.
