NSE companies surrender Sh10.4bn unclaimed shares

Fifteen companies listed on the Nairobi Securities Exchange (NSE) have surrendered shares worth Sh10.4 billion to the Unclaimed Financial Assets Authority (UFAA) in the past 12 months, underlining the extent of wealth whose owners cannot be found.

The Sh10 billion treasure was surrendered in the form of 95 million shares whose owners have not communicated with the companies or claimed their dividends for more than three years.

Listed investment firm Centum surrendered the highest number of shares -- 51 million, worth an estimated Sh2.1 billion at the current trading price of Sh42.25 per share.

The control of the surrendered shares means the UFAA now has a 7.7 per cent stake in the company.

Beer maker East African Breweries Limited also submitted 16,328,031 or two per cent of its issued shares worth Sh4.8 billion while cigarette manufacturer BAT surrendered 1,018,535 units worth Sh840 million.

“We are in the process of opening a Central Depository System Corporation account to hold the shares,” the authority’s chief executive, Kellen Kariuki, said.

The authority has a year to search for the owners of the shares or their beneficiaries, if deceased, after which they can be sold at the prevailing market rates.

Two listed banks submitted shares worth Sh993 million, one insurer Sh625 million while two agricultural firms gave up stocks worth Sh508 million.

There are 64 listed companies, indicating the level of compliance remains below a quarter of the total and that the amount could more than triple at full compliance.

Companies are also required to submit unclaimed dividends associated with the surrendered shares, underlining the bulk of idle resources in the country.

The UFAA has put up a website to help citizens search for their lost wealth with the authority and lay claim to it within the period provided.

The UFAA Act terms unclaimed shares as those whose dividends have not been collected for more than three years and the issuing company has no information on the whereabouts of the owner.

The Act applies to listed and unlisted companies.

The authority has started charging penalties on companies that failed to file returns for unclaimed assets in their custody.

In addition to the stock market shares, the UFAA has received more than Sh6 billion in cash from companies such as banks, which account for 65 per cent of the surrendered cash.

NSE investors have no will

The bulk of the assets is considered to have fallen in the hands of these institutions with the death of the owners who left no will.

A survey by share registry company C&R Group, which keeps shareholder registers for more than 20 listed companies, shows that 92 per cent of investors at the NSE do not have a will.

Out of 586 cases of share transfers due to death, C&R found only 45 had a will, the bulk of which belonged to Kenyans of Asian descent. Of 41 transitions among Kenyans of Asian extraction 30 had wills compared to 10 among 538 deaths of indigenous Kenyans.

“Kenyans of European and Asian decent are more diligent at formally documenting their succession instructions and detailed transmission of their wealth to successive generations,” said James Theuri, the executive director of C&R.

Lack of written wills among Kenyans has been largely attributed to cultural fears around the subject of death, culminating to bruising succession battles in and outside the courts.

Dependents of the deceased are usually eager to follow up on cash in bank and land ownership over other assets such as shares whose existence is hard to know unless voluntarily disclosed by the owner.

Most of the listed companies have recently amended their articles of association to facilitate the surrender of idle assets in the possession to the authority.

Some companies such as listed lender DTB had a constitution that allowed it to plough back unclaimed dividends into the business as it awaited a claimant. Such companies now have to write back the dividends and pay it out to the UFAA.

The transfer of the shares worth Sh10.4 billion puts the authority ahead of its target of receiving assets worth Sh12 billion by June next year.

The authority has received over 1,700 claims for Sh42 million and has started paying out some of the assets to the rightful owners following the recent publication of regulations governing the process.

The payments are expected to boost public awareness of the unclaimed assets agency, resulting in a rise in the number of claims in the subsequent years.

The list of companies that have made huge submissions to the authority includes telecoms operator Safaricom, which has submitted more than 1.5 million entries, Standard Chartered Bank Sh537 million and Kenya National Assurance Sh300 million.

Research in other jurisdictions shows that not more than 40 per cent of unclaimed assets are usually claimed, leaving the rest at the disposal of the government.

The UFAA is bound by law to invest 90 per cent of the funds in government bonds while 10 per cent is to be invested in public listed companies.

The authority is obligated to pay out the unclaimed asset to a claimant as received from the principal holder without loading an interest.