State agency Unclaimed Financial Assets Authority (UFAA) announced that moving the roughly 2.03 billion idle shares under its custody would cost KSh400 billion, based on a charge of KSh200 per share from the Central Depository and Settlement Corporation (CDSC).
The fee has forced UFAA to abandon its plan to place the abandoned shares in a single non-trading Custodial Depository Agent (CDA) account.
UFAA, appointed as a CDA over a decade ago, currently depends on stockbrokers, share registrars and investment banks to reunite idle shares with owners, as it does not hold the shares itself.
The agency is seeking to lower the transfer cost from current custodians, including stockbrokers, investment banks, custodians and commercial banks, to its central account, arguing that a CDA would enable the State to collect dividends directly.
Shares are classified as abandoned when owners have not taken part in corporate actions such as annual meetings, dividend collection or share splits for at least three years, or when issuers cannot locate owners after that period.
“These shares are being held by various institutions including registrars. We do not have control of those shares,” UFAA chief executive officer Laban Molonko told the National Assembly committee on Finance and National Planning, adding that the UFAA Act permits the agency to retrieve and reunify the units with rightful owners.
UFAA has highlighted the risk of unauthorised transfer of the stocks while they remain outside its custody.
The authority is in talks with market intermediaries such as the Nairobi Securities Exchange (NSE) and the Kenya Association of Stockbrokers and Investment Banks (Kasib) to reduce the transfer cost; NSE and Kasib own 22.5 per cent and 18 per cent respectively of CDSC.
CDSC currently charges about KSh200 to move a single share unit to UFAA, which translates to a KSh400 billion bill for all 2.03 billion idle shares.
Molonko said the agency intended to start with a phased transfer of 400,000 units, which would cost roughly KSh80 million at the KSh200 per share rate.
Under Section 23 of the UFAA Act, the authority must assume custody of idle assets and their dividends, which are also deemed abandoned and must be surrendered for reunification.
The law requires the holding company to search for owners before declaring assets unclaimed and forwarding them to UFAA.
Unclaimed assets often arise from deceased owners leaving no will or failing to inform beneficiaries, and many wealthy Kenyans, including businessmen, former officials and politicians, remain reluctant to claim them.
UFAA also faces challenges reuniting dormant bank accounts, uncashed cheques and safe-deposit-box contents, which are part of the broader unclaimed-asset pool.
Once transferred to the non-trading CDA, UFAA would receive dividends, attend shareholder meetings and could seek board representation where idle shares in a single firm are substantial.
CDSC manages electronic share holdings and the transfer process for shares traded on the NSE.
UFAA believes that centralising the idle shares in its custody will streamline reunification and avoid duplication of roles currently performed by other custodial agents such as stockbrokers and investment banks.
