ISLAMABAD: A new provision, "Unpaid Dividend Account" has been introduced in the Companies Act, which now requires companies to deposit unpaid or unclaimed amount to a separate profit bearing account and profit over, which shall be used for Corporate Social Responsibility Initiatives, and specified purposes by the SECP.
The new Section 244, "Unpaid Dividend Account" substituted the earlier Section 244, "Unclaimed shares, modaraba certificates and dividend to vest with the Federal Government", and the earlier Section 245 of "Establishment of Investor Education and Awareness Fund".
The Section 244 of "Unpaid Dividend Account" has to be introduced along with other amendments through Companies (amendment) Ordinance, 2020, recent because the sections 244 and 245 that had been inserted in the Companies Act 2017, have became inoperative due to disagreement between the SECP and the State Bank of Pakistan on opening of profit-bearing accounts with the State Bank of Pakistan or the National Bank of Pakistan in terms of sub-section (3) of Section 244, as envisaged in the said section.
According to the sources, the Ministry of Law and Justice had categorically issued legal opinion on the subject matter rejecting the SECP claim to open profit-bearing accounts in terms of sub-section (3), and hence, the section became inoperative.
Due to the legal stance of the Ministry of Law and Justice, it has become impossible for the SECP to implement the earlier provisions of sections 244 and 245.
Furthermore, even in the said regime, the amounts of unclaimed dividends were to be transferred to the federal government but the right of shareholders on the amounts of unclaimed dividends was not waived for which the interest on the said amounts could only be utilised for investor education.
Afterwards, based on the feedback received from the stakeholders, the SECP proposed to substitute the earlier sections 244 and 245 with a new section of "Unpaid Dividend Account".
After amendment in this section, the unpaid dividend shall be deposited/maintained by the company in a separate profit bearing account to be called the "Unpaid Dividend Account" to be opened by the company for this purpose in any scheduled bank, which shall be used for the settlement of claims and any interest to be accrued/paid on the said principal be invested for CSR/investor education purposes. Reporting mechanism has also been provided in the amended provision.
Copyright Business Recorder, 2020
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