NSE to Support Investors’ Right to Dividends; Activates 5% Sanction on Defaulters

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Wednesday, August 13th, 2014 10.26AM/NSE

In line with one of its core strategic pillars for enhanced market performance and growth via sustaining a "strong investor protection" framework, The Nigerian Stock Exchange (NSE) has stated that it shall not hesitate to administer and enforce a 5% sanction on any Issuer that fails to pay dividends to its shareholders within the timeline specified in the resolution passed by the shareholders at the Annual General Meeting at which such dividends were declared. It was made clear that the sanction is not a new proposal but part of the already existing General Undertaking in The Exchange's Listings Requirements, which was executed by every Issuer before its securities were approved for listing on The NSE. ​​


The Head of Legal and Regulation Division at The NSE, Ms. Tinuade Awe stated that before securities are approved for listing on The Exchange, every Issuer has to execute a document known as the General Undertaking. The General Undertaking sets out the obligations imposed on an Issuer. These commitments include the obligation to notify The Exchange prior to taking certain corporate actions; the obligation to seek The Exchange's approval before publishing certain information; the obligation to comply with The Exchange's Listings Rules; the obligation to comply with the directives of its shareholders in the event of declaration of dividends.


"These obligations kick in once an Issuer executes the General Undertaking. They are obligations of long standing, which remain binding for as long as an Issuer is listed on The Exchange. Section 14 of the General Undertaking, which is one of the Listings Requirements sets forth the sanctions for violations of the Rules.  Section 14(e) provides that failure of a listed company to pay dividend on the due date shall attract a fine of 5% of the total dividend amount declared.  (For the entirety of Section 14, please see our Listings Rules at NSE; 'The Green Book' page 57)" said Awe.


"On 21 July 2014, in connection with the publication of certain amendments to the Listings Rules which were approved by the Securities and Exchange Commission (SEC) on 19 May 2014, The Exchange republished the sanctions provisions of its Listings Rules, i.e., Section 14 on its website. Although Section 14 was published with the amendments, which are new, as explained above the Section is not new.  Ergo, Section 14(e) is not a new provision.  It is unequivocally binding on every Issuer whose securities are listed on The Exchange.  Indeed, The Exchange republished Section 14 of the General Undertaking as Rule 30.5 of the SEC approved "Amendments to the Listings Rules" in order to remind Issuers of their obligations and the corresponding sanctions under the Listings Rules" added Awe.


Commenting on the issue, Mrs Josephine Igbinosun, the Head of Listings Regulation at The Exchange, noted that there were a host of reasons why The Exchange may penalize specific conduct. In the instant case, there are two primary reasons, namely: to encourage a change in unacceptable behaviour; and to act as deterrent against engaging in conduct which violates applicable rules.  By imposing the 5% sanction set forth in Section 14(e) in the event of a breach regarding the payment of dividends as directed by shareholders, The Exchange is enforcing the payment of dividends to shareholders, in line with their resolution to receive same on a specific date. In essence, Section 14(e) sends a reminder to the directors of the Issuer that the directives of the shareholders in general meetings must be obeyed. 


"The Exchange wishes to draw the attention of the investing public to the SEC Rule (2013) Part B, Rule 44(1) on Payment of Dividends which also imposes an obligation on Issuers to ensure payment of dividends declared to shareholders not later than seven (7) working days after the Annual General Meeting (AGM) at which the dividend was declared. Rule 601(7) of the SEC Rules provides for Administrative Sanctions; and empowers the SEC to impose fines for non-compliance with its Rules and Regulations. Finally, in order to avoid engaging in conducts prohibited by the Listings Rules, The Exchange encourages all Issuers to enhance their internal systems and controls; and improve their awareness of the Listings Rules and their obligations thereunder. Moreover, The Exchange strongly advises against shareholder apathy and encourages shareholders to educate themselves on the provisions of the Listings Rules" added Igbinosun.


She further stated that The NSE recently upgraded its website so as to make information about Issuers, The Exchange and the Nigerian Capital Market more accessible to investors and other stakeholders. Interested parties may wish to visit the website.


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