The Royal Securities Exchange of Bhutan (RSEBL) has found a total of around Nu 17M unclaimed dividends with the respective listed companies accumulated till date.
During an interactive session between interested individuals and the exchange officials yesterday, it was pointed out that many shareholders invest in company shares without comprehension of the nature of the business.
An official said that when an initial public offering (IPO) takes place and people stand in queue to subscribe to shares, others just join the queue without reading the prospectus.
“Then when the company suffers loss and do not declare dividend, people just come to complain,” said an official from the exchange, Dawa Dakpa. “Some don’t even bother to claim their dividends.”
This is one reason behind amending the listing rules. Earlier incorporated companies fulfilling the minimum paid up capital requirement of 20M are eligible to offer IPO. Now, for a company to offer IPO, the company has to be in operation for three years with two years of profit.
There are also cases where shareholders have not updated their mailing address and citizenship identity card numbers. “There are many shareholders whose identity cards still bear the old five digit numbers while some had not updated their addresses,” he said.
However, as and when people come to enquire about their shareholding and dividends, the exchange facilitates it and updates the information on the central depository.
Central depository is similar to that of a bank, except that instead of cash, it deals with stock. In 2016, the volume of securities deposited in the central depository was 771 million shares.
Officials also said that people construe investment in shares as secured and expects similar returns every year. “If the dividend increases, people are happy and if it declines, they blame the stakeholders, including the exchange.”
Years after some companies were delisted from the stock exchange, people still come to inquire about dividends and demand returns.
What must be understood is that owning shares of a particular company makes the shareholder(s) one of the owners of the company. This implies that shareholders do have a stake in company’s operation and performance.
While all the listed companies are mandated to hold annual general meetings (AGM), shareholders do not turn up for the AGM.
“In other countries, this is the time to hold company management and board director accountable,” said one of the officials, adding that when minority shareholders raise a common voice even the CEOs are made to resign.
Because most shareholders do not turn up for the AGM, whatever the board decides becomes binding, including the declaration of dividend.
“Later, people complain about low or no dividends,” he said.
Once a company is listed, it has to fulfill the entire requirement and comply by the laws. As a result, all audited accounts, taxes and operational reports are made public. It then becomes the responsibility of shareholder to access them and raise concerns, which hardly happens in most cases.
“All minority shareholders can come together and appoint a representative to voice their concerns, even vote the person to board director,” another official said.
Shares are equity that comes with risk. When an individual buy shares of the company, by default that person become the owner of the company and returns will be based on the performance of the company. If the company makes profit, shareholders get the dividend or else shareholders should also bear the loss.
In case of bankruptcy, the banks will cease the assets and recover its debts by selling the properties. Only if there is any surplus from the auction proceed, shareholders will be paid back.
This is different from the bond, a debt instrument also offered by the exchange. Buying a bond means the investor is giving loan to a company. In any case, the return is assured with interest.
However, evaluation conducted by the RSEBL found that it is better to invest in shares than save in bank. This is because the minimum dividends companies offer is 10 percent per annum and it goes as high as 500 percent of the face value. Depositing in a saving of fixed deposit fetches only about 7 percent.
Albeit small, officials said that a market capitalisation of Nu 26B is not bad for a population of about 700,000. Market capitalisation is the total share value at market price.
Elsewhere in the world, capital market forms a major share of GDP because there is vigorous trading every hour and investors, sellers and brokers make lot of money from the proceeds. Any undesired consequences in the company’s management and downturn in sales could share the stock price and in turn the net worth of a company. In case of Bhutan, officials said that few trading occurs with regard to shares of the financial institutions. “In Bhutan, people construe investment in shares as life long investment because even educated people did it so,” said a local economist.
To educate the people on the fundamentals of the stock exchange, RSEBL began conducting ‘walking sessions’ every Friday since last six months.
“It has been a success and more people are turning up every week,” said Dawa Dakpa.