Reasons behind unclaimed dividends, how it negatively impacts companies and measures to tackle it

The Royal Securities Exchange of Bhutan (RSEB) has highlighted a growing issue in the country’s stock market, unclaimed dividends.

Two of the largest companies listed on the exchange, the Royal Insurance Corporation of Bhutan Limited (RICBL) and Druk Punjab National Bank (DPNB) has large amount of unclaimed dividends.

The main reasons behind this problem are a large number of shareholders, lack of awareness, and incomplete or outdated information, which are making it difficult for companies to pay out dividends.

RICBL, which has been listed for 31 years, has declared dividends for 23 of those years. DPNB, listed for 14 years, has paid dividends for 8 years.

Both companies are now facing a large amount of unclaimed dividends, as many shareholders either don’t know about the dividends they are entitled to, or have incomplete or incorrect bank details that prevent the payments from being processed.

The main reason for unclaimed dividends is the low level of financial literacy among shareholders. Many investors don’t fully understand the dividends they are supposed to receive, while others may not have bank accounts or may not have updated their account details with the companies or with RSEB.

“In some cases, shareholders have changed their address or phone number, and have not updated their bank account information,” explained an RSEB official, and added, “As a result, their dividends remain unclaimed, causing the amounts to pile up over time.”

Unclaimed dividends can have a big impact on the companies listed on RSEB. These funds are recorded as liabilities on the companies’ balance sheets, which affects their financial reports. If these unclaimed dividends continue to grow, they can also affect a company’s liquidity and ability to manage its cash flow.

“Managing unclaimed dividends takes a lot of time and effort for companies. The company needs to set aside money for these unclaimed amounts, which could otherwise be used for business growth or other important projects,” said the RSEB official.

To tackle the issue of unclaimed dividends, RSEB has been working closely with the listed companies to reach out to shareholders. They are calling shareholders directly and using social media platforms like Facebook, Instagram, and TikTok to encourage people to update their contact details and bank account information.

“We’re posting lists of shareholders with incomplete or outdated information on our social media pages, hoping it will encourage people to come forward and update their details. We’re also working with the companies to publish lists of unclaimed dividends on their websites and in newspapers, inviting shareholders to claim their funds,” said the official.

RSEB is also focusing on improving financial literacy to help people better understand their rights as shareholders. The exchange has launched a number of initiatives, including monthly online sessions, educational videos, and podcasts shared on social media. RSEB is also visiting colleges and organizations to run awareness programs, helping people learn more about managing their investments and staying informed.

In addition to these efforts, RSEB is working with the Office of the Registrar of Companies (ORoC) to create a new regulation called the ‘Investor Protection Fund’. This regulation, expected to be introduced next year, will help solve the problems related to unclaimed dividends and provide clearer guidelines for companies and shareholders alike.

Unclaimed dividends are more than just a financial problem. They also highlight the need for better financial education in the country.

For now, RSEB continues to prioritize education and outreach to ensure that all shareholders receive the dividends they are entitled to and, to create a more informed and engaged investor community.