Treatment of Shareholders’ Unclaimed Dividends Under the Companies Act 2019, (Act 992) and the Constitutional issue that Arises!
Voice Summary:
Introduction
Businesses, be it Limited Liability Companies, Sole Proprietorships, Partnerships etc in Ghana like elsewhere exist with the aim of maximizing profit. Shareholders or persons who invest in such businesses by way of shares have an expectation that the company will keep being a going concern, make profit and declare dividends for the benefit of the shareholders or to be reinvested into the business for the growth and development of the business. Ordinarily, declaration or payment of such dividends is one that shareholders actually look forward to and one would have thought that the phenomenon of unclaimed dividends would be unusual. It however appears there are instances where the Company will declare dividends, yet these dividends will be or remain unclaimed by the respective shareholders for one reason or the other. In this piece, the author shall explore the phenomenon of Unclaimed Dividends, reasons why that happens, discuss how the law treats them under the current legal regime and raise the constitutional issue that arises out of the treatment of unclaimed dividends under the new Companies Act 2019 (Act 992).
Prior to the coming into force of the new Companies Act, 2019 (Act 992) (the current Act), there was no express provision in the Companies Act 1963 (Act 179) with its amendments (the old Act) for how Unclaimed Dividends of shareholders were treated. This left it to be treated as a debt owed by the company to the Shareholder in favour of whom the dividend was declared. This implies that if dividends are declared and remained unclaimed under the previous legal regime, it became a debt, for which the shareholder could ordinarily recover from the company without any hindrance, subject possibly to the Statutes of Limitation.
Unclaimed Dividends arises where a company has declared dividends in accordance with law and ready to pay same to shareholders, but the shareholders have not claimed same or the company has been unable to pay the dividends to these shareholders. Several reasons could account for this phenomenon including but not limited to, death of the shareholder without notification to the company, lack of knowledge by relatives of shareholders of the interest or shares in the company, wrong addresses of shareholders. There are other reasons like insignificant amount of such dividends hence lack of interest of shareholders in claiming or following up on them, some Shareholders may have travelled and left the country without any notice or change of address to the company. These among other reasons make it difficult or impossible for the company that has lawfully declared dividends to make such payments to the shareholders entitled.
The treatment of the phenomenon of Unclaimed dividends is one of the new introductions in the Companies Act 2019 (Act 992). Under the new law, if dividends remain unclaimed for period of three (3) months, the law commands the company to immediately open an interest-bearing Unclaimed Dividend Account into which shall be credited the amount unclaimed. Section 73 (1) of the Act provides in that regard thus, “Where any dividend declared by a company cannot be paid by reason of the dividends being unclaimed by the member entitled to the dividend and remains unclaimed for a period of three months, the company shall forthwith (a) open an interest bearing unclaimed dividend account, and (b) credit to that account the total amount of the unclaimed dividend of its shareholders unless that account has already been opened.”
After opening the said account and crediting same, if the dividend remains still unclaimed for a further period of twelve months, the law requires the company to transfer the amount to the registrar of companies who shall then open an account and pay same into it. Section 73(2) provides that “Where payment of the dividend cannot be made or is not claimed within a further period of twelve months after the transfer made under paragraph (b) of subsection (1), the company shall pay to the Registrar the total amount of the unclaimed dividend plus interest accrued on that account.” Subsection 3 further provides that “The Registrar shall pay into the account under subsection (4) (a) the amount received under subsection (2), and (b) the amount received under subsection (3) of section 74.” Per section 73(4), “The Registrar shall with the approval of the Board open an interest bearing bank account for the safe keeping of monies received from any company under subsection (2)”. When the registrar receives the amount, section 73(5) makes the registrar responsible for the moneys lodged and disbursed from the interest-bearing account.
When the company is making the payment to the Registrar, the Company must notify the respective shareholders or their estate (as the case may be) at their last address known to the company. Section 73(6) in that regard provides that “The company shall on the date of the payment under subsection (2), notify the respective shareholder or the estate of the shareholder at the last address known to the company of the payment made in respect of the dividend.”
The shareholder or the estate upon show of requisite evidence shall be entitled to make a claim for the dividend in issue. This implies that if the shareholder is deceased, the Administrators or the Executors (as the case may be), can lay a claim to the Registrar or company for the unclaimed dividends. Section 73(7) provides that “The shareholder or the estate of the shareholder shall on providing satisfactory evidence, be entitled to make a claim for the dividend and any accrued interest during the period that the (a) company and possession of the dividend under subsection (1); and (b) Registrar had possession of the dividend under subsection (3).” The law places a duty on the Registrar to publish annually in the Companies Bulletin and in a daily newspaper of national circulation the details of all such shareholders whose dividends remains unclaimed and been transferred to the Registrar for safe keeping.
Management and Disposal of Unclaimed Dividends
If after all the above processes, the dividends still remain unclaimed, for a period of seven years after same is transferred to the Registrar, the law mandates the Registrar after the expiration of seven years to transfer 50% of the said dividend to the Consolidated fund and donate the other 50% to specified purposes. Section 74(1) provides that, “The Registrar shall keep unclaimed dividends lodged in the account under subsection (4) of section 73 for seven years.” The seven-year period therefore becomes a limitation period after which the shareholder or the estate of that shareholder cannot lay claim to the dividends, more so when the dividends are disbursed as provided under subsection2 of section 74. Under section 74(2) “The Registrar shall on the expiration of the seven year period referred to in subsection (1) (a) transfer to the Consolidated Fund fifty percent of the total amount of money lodged in the interest bearing account under subsection (4) of section 73, and (b) donate or apply fifty percent of the total amount of money lodged in the interest bearing account under subsection (4) of section 73 for the purpose of investor education, research, entrepreneurial development and advancement of company law.” So essentially once the Registry has transferred the unclaimed dividends in the manner under section 74, the door is closed for any claims to be made by any shareholder or the estate of such shareholder. Cumulatively therefore, one can suggest that the limitation period from the time of unclaimed dividends from the company to the time of disposal by the registrar is eight years and three months. The law therefore gives some f window of opportunity for any such person to claim any unclaimed dividend the person may be entitled.
Constitutionality or Otherwise of Section 74(3) of Act 992
The general principle of law is that every law must be consistent with the 1992 Constitution of the Republic of Ghana, because the 1992 Constitution is supreme law of Ghana. The law is that “This Constitution shall be the supreme law of Ghana and any other law found to be inconsistent with any provision of this Constitution shall, to the extent of the inconsistency, be void.“[1]This Implies that any enactment that is not consistent with or contravenes the Constitution risks being declared as such and struck down by the Supreme Court for sinning against the Constitution. There are several instances where their Lordships have struck down legislation as being unconstitutional. A case in point is Adjei-Ampofo v Attorney General and President of the National House of Chiefs[2] which had to do with section 63(d) of the Chieftaincy Act, 2008 (Act 759) which provision made it an offence for a person to deliberately refuse to attend to the call of a chief. The Supreme Court found it unconstitutional and held thus “The provision in section 63(d) of Act 759 namely “deliberately refuse to honour a call from a chief to attend an issue” would be expunged, deleted and struck out from the Act on the ground that it was unconstitutional in the exercise of parliament’s power under Article 2(2) of the 1992 Constitution…” In this case the Plaintiff had proceeded to the Supreme Court for remedies including a “declaration that subsection (d) of section 63 of the Chieftaincy Act 2008 (Act 759) is an encroachment on the liberty generally and freedom of movement in particular of citizens and accordingly in contravention of and or inconsistent with the spirit and letter of Articles 14 and 21 of the Constitution of the Republic of Ghana 1992”. The impugned provision read thus “A person who (d) deliberately refuses to honour a call from a chief to attend to an issue, commits an offence and is liable on summary conviction to a fine of not more than two hundred penalty units or to a term of imprisonment of not more than three months or to both and in the case of a continuing offence to a further fine of not more than twenty-five penalty units for each day on which the offence continues.” Article 14(1) of the 1992 Constitution is as follows “Every person shall be entitled to his personal liberty and no person shall be deprived of his personal liberty except in the following cases and in accordance with procedure permitted by law”. The contention of the Plaintiff in this case was that section 63(d) of the Chieftaincy Act sinned against certain provisions of the Constitution 1992. The Supreme Court has the exclusive jurisdiction to strike down such legislation. “The Supreme Court’s power to strike out Legislation which is made in excess of Parliament is exercised to ensure that Parliament operates within the powers conferred on it by the Constitution and does not behave like an octopus” [3]
The author is of the view that Section 74(3) of Act 992 offends a provision of the 1992 Constitution in particular Article 107 and to the extent of that inconsistency it is void and of no effect. Under Section 74(3) of Act 992, Upon the commencement of the new Act, all unclaimed dividends must be immediately transferred to the Registrar and the funds transferred by the Registrar to the Consolidated Fund or donated. The section 74(3) provides that “Where a company on the commencement of this Act has in the possession of the company unclaimed dividends, the company shall immediately transfer the total amount of the dividends to the Registrar to be applied in accordance with subsections (1) and (2).” This means that upon the coming into force of the New Act, the opportunity of such Shareholder of Unclaimed Dividends to have their dividends kept by the Company under sections 73 (1) for three months, and (2) where the dividend is kept by the Company for another twelve months is taken away, and such shareholders would only have the limitation period of seven years under section 74(3). Under section 74(3) the effect is that, from August 2019 when the Act 992 came into force, the initial period of three months and the additional twelve months is lost to that shareholder. Even though this provision shows a good intention of the law maker, it is the author’s view that same may not pass the constitutionality test as long as it seeks to apply retrospectively to unclaimed dividends and the rights of such shareholders had accrued under the previous law. To the extent that section 74(3) provides that upon the coming into force of Act 992, unclaimed dividends shall be transferred to the registrar who shall lodge same for seven years after which it will be disbursed in accordance with sections 74(1) and (2). This implies that such shareholders will lose the Initial three months and the subsequent twelve months’ periods under sections 73(1) and (3) and that in the author’s view, is a vested and accrued right which section 74(3) applies retrospectively to deny the shareholders of such.
The author is fortified by the constitutional law presumption against retroactive legislation. Article 107 (b) of the 1992 Constitution provides that, “Parliament shall have no power to pass any law, which operates retrospectively to impose any limitations on, or to adversely affect the personal rights and liberties of any person or to impose a burden, obligation or liability on any person except in the case of a law enacted under articles 178 to 182 of the Constitution”. This means that aside financial matters in Articles 178 to 182, Parliament has no power whatsoever to make any legislation that will have a retrospective effect and if Parliament does so, it has gravely erred, exceeded its powers and that legislation must be struck down by the Supreme Court as unconstitutional.
Retrospective Legislation
Retrospective legislation is a law passed which adversely affects the rights already accrued by persons under the old legislation. In essence, if a person’s right has accrued under an old legislation, a new law cannot be passed to take away that vested or accrued right. The general rule is that statutes are generally prospective except the ones which are declaratory or related to matters of procedure.[4] This is because no one has a vested right in procedure. Lord Simmons P. states the position in the case of Williams v Williams[5] thus “The rules about retrospection of statutes are set out in Maxwell on Interpretation of Statutes and Craies on Statutes Law in passage which have frequently been cited with approval, “A statute is deemed retrospective, which… creates a new obligation, or imposes a new duty or attaches a new disability in respect to transactions or considerations already passed“. In the case of Yew Bon Tew v Kanderaan Bas Mara[6] the Court per Lord Brightman held that “A statute is retrospective if it takes away or impairs a vested right acquired under existing laws, or creates a new obligation, or imposes a new duty, or attaches a new disability in regard to events already passed. In Ghana, the Court has in the case of Fenuku and Another v John Teye and Another[7] said that “The general rule was that statutes, other than those which were declaratory, or which related only to matters of procedure or of evidence, were prima facie prospective; and retrospective effect was not to be given to them unless by express words or necessary Implication, it appeared that, that was the intention of the legislature. In general, the Courts would regard as retrospective any statute which operated on the cases or facts coming into existence before Its commencement in the sense that if affected, even if for future only, the character into or of other past conduct. Thus a statute was not retrospective merely because it affected existing rights nor was it retrospective merely because part of the requisites for its action was drawn from a time antecedent to its passing.”
Therefore, upon the commencement of the current Act, any attempt to apply this law per section 74(3) to unclaimed dividends that had accrued under the old law, cannot be immediately treated as required by section 74(3). It is the humble submission of the author that, at least such shareholders should also have their unclaimed dividends go through the same processes from section 73 (1) and (2) before the application of section 74(3). It is only when these steps are followed that in the view of the author, the litmus test of constitutionality will be passed.
Conclusion
In conclusion, it is suggested that even though unusual, when dividends are unclaimed, the new legal regime provides for how same will be treated, but in so doing, there are constitutional issues which should have weighed on the minds of the law makers regarding the retrospective application of the law under section 74(3) of the Act. Shareholders who have not been claiming or not claimed dividends declared by their companies will therefore do well to follow up and lay claim to them before they are estopped by law from doing so. Shareholders must therefore take note of this new provision and be guided.
[1] Article 1(2) of the 1992 Constitution
[2] [2011] 2 SCGLR 1104
[3] Dennis Adjei, Modern Approach to the Law of Interpretation in Ghana 315
[4] Dennis Adjei Modern Approach to the law of Interpretation in Ghana p.169
[5] [1971] 2 All ER 764 at 770
[6] [1982] 3 All ER 833 at 836
[7] [2001-2002] SCGLR 985 holding 2
