CAMA Anomaly: Unclaimed Dividends To Be Classified As Company Debt

Unclaimed dividends will soon be classified as the debt owed by companies, as the government moves to neutralise what it calls an "anomaly" in the Companies and Allied Matters Act (CAMA), which allows companies to lay claim to unclaimed dividends after 12 years.

There's a provision that makes shareholders lose their unclaimed dividends after 12-years, which companies share among active stakeholders. Dividends are financial benefits offered to shareholders of a company.

In some cases, some shareholders don't claim or obtain the dividends, leaving it in the possession of the stockbroker and companies. In order to prevent the culture of companies redistributing the gains at the loss of the inactive shareholder, the government decided to turn unclaimed dividends into debt.

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This means the dividends will remain as debt until the shareholders whom the dividends are intended for come to claim it. This was revealed by the sub-committee of the fiscal policy reforms committee, which is led by Ajibola Olomola.

“This change corrects an anomaly under the companies and allied matters act (CAMA) which extinguishes shareholder’s right to dividend after 12 years and returns the money to the company for redistribution to other shareholders.”

Small Businesses Exempted From TET

Small businesses will be excluded from paying tertiary education tax (TET) - which is two percent of assessable profits for each year of assessment - as the government's support for SMEs operating within the country. This will be reflected in the 2020 Finance Bill review.

According to Olomola, the TET will be amended to favour small businesses. This is one of the many exemptions that the finance bill provides small businesses. The 2019 version had also exempted businesses with less than NGN25 million as annual turnover from paying company income tax.

While the government demanded 20 percent as company income tax from companies with a turnover of between NGN25 million and NGN100 million yearly.

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Government To Use I.T To Cut Tax Collection Cost

Olomola also stated that the 2020 finance bill will be used to collect information about taxpayer on tax and reduce the cost of collection, "in line with the federal government objective of incentivising small businesses, there is a need to introduce an exemption for TET,” Olomola said.

The committee's chairman also stated that “The finance bill 2020 will include certain provisions that allow the tax authorities to deploy information technology for the collection of taxpayer information of tax and reduce the cost of collection.

“In light of this proposal, stringent rules are also proposed to secure taxpayer confidentiality from unauthorised access by third parties. The finance bill 2020 will look to introduce significant penalties for breach of data confidentiality by tax officials.”