Dead Kenyans leave behind Sh29b shares in listed firms

An employee makes notes in front of an electronic stock information screen inside the Nairobi Securities Exchange Ltd. [Courtesy, Bloomberg]

Deceased Kenyans have left behind shares worth Sh29 billion in companies listed at the Nairobi Securities Exchange (NSE).

This is as the government struggles to find and reunify beneficiaries of billions in unclaimed financial assets.

The latest financial report from the Unclaimed Assets Trust Fund (UATF) reported a 15 per cent increase in the total trust fund from Sh23.9 billion reported in 2021 to Sh27.7 billion reported last year.

In the last one year, the Unclaimed Financial Assets Authority (UFAA) received Sh291 million in cash including foreign currency from deceased Kenyans that was held in commercial banks, listed firms and telcos. This marked a 34 per cent increase from Sh217 million surrendered in the previous year.

The total value of financial assets held by the UFAA to date now stands at Sh57.5 billion with the authority paying out Sh1.9 billion to 28,320 claimants last year.

Data from the UFAA further indicates that the value of shares held by asset holders stood at Sh29.8 billion last year, a 48 per cent increase compared to Sh20 billion the previous year.

These range from shares held in listed companies and government securities, dividends, bond coupons, savings and credit co-operative organisations (Saccos) shares and collective investment vehicles among others.

The authority is also currently holding on to 3,661 unopened safety deposit boxes whose value is yet to be determined, an increase from 2,844 that were reported in 2021.

The latest report from the UFAA comes on mounting concern that compliance by asset holders, including commercial banks, SACCOs, pension schemes, utility firms and telecommunication firms, remains low.

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In the 2023 Finance Bill, the National Treasury has proposed an amendment to the Unclaimed Financial Assets Act to allow payment of claims to the claimant or such other person the claimant may designate.

"This is a welcome move because it will allow the claimant an opportunity to appoint more beneficiaries such as siblings, and legal administrators as opposed to the current provision where only the claimant is the only person entitled to be a recipient," explained tax advisory firm EY in a report.

The Unclaimed Financial Asset Act, 2011 lists a broad range of assets that should be forfeited in the event of an owner's death. These include deposits for utility services, court awards, unpaid cheques, insurance policies or annuity contracts, and unpaid wages among others.

As at June 2021, commercial banks lead in the overall value of assets with Sh13.6 billion worth of assets surrendered to the Authority, an increase from Sh10.9 billion in 2020.

Listed companies, insurance firms, Saccos and pension funds surrendered Sh3.2 billion, Sh1.2 billion, Sh44 million and Sh29.3 million in unclaimed assets to the UFAA as at June 2021.

According to the report, receipts from telcos in 2021 hit Sh2 billion, 36 per cent higher than the previous year.

Safaricom, KCB Group, East African Breweries Limited and Co-op Bank account for 75 per cent of the value of unclaimed shares reported from 45 listed companies.

The UFAA is mandated to invest 100 per cent of the money in the Fund in Treasury Bills and last year the regulator earned Sh1.5 billion in investment income.d

A recent case filed by AIG Insurance challenging some clauses in the Unclaimed Financial Assets Act 2021 could, however, bar the UFAA from laying a claim on some asset classes.

The firm moved to court in 2020 challenging a move by the UFAA to demand Sh138 million in unclaimed assets and Sh3.9 million in audit fees.

The firm also wants the court to quash an audit report commissioned by UFAA that found the insurer held Sh138 million in unclaimed assets and so far owed the authority Sh312 million in penalties and interest.

The insurer also wants the court to declare that credit balances on accounts receivable and credit balances in paid claims register are not applicable under the UFAA Act. The case will have far-reaching consequences on UFAA's mandate to collect unclaimed assets from insurance firms and could lead to similar legal challenges from other asset holders.