Shareholders of banks and insurance companies have not received their dividends timely manner, despite the companies have already conducted their annual shareholders meetings, and submitted their results to the central bank.
Yet, shareholders have yet to get paid dividends. The law requires the financial industry to hold shareholders general meetings within four months of the conclusion of the financial year.
Prior to 2015, companies in the financial sector paid dividends within seven days of the conclusion of the annual shareholders meeting. After 2015, the National Bank of Ethiopia’s endorsement was needed before dividends could be paid out.
Delays may be explained by the National Bank’s lengthy procedure prior to giving their endorsement of the minutes of shareholder meetings, according to managers and board members in the industry.
There are 16 private banks and 17 insurance companies in the country. Of these, 15 banks and 11 insurance companies have already held their meetings.
The delay is hurting vulnerable shareholders, many in the industry claim.
“There are people whose livelihoods depend on income earned from dividends,” Taye Belachew, one of the 3,500 shareholders at Nib International Bank, told Fortune. “We used to receive dividends by mid-November Nib Bank held its annual shareholders meeting three weeks ago.”
However, some executives disagree with the complaints about the delay.
“Since some banks are conducting their shareholders’ meetings, it is too early to complain,” a bank president told Fortune.
Debub Global is the only bank that has not yet conducted its annual shareholders’ meeting, but called for Saturday, December 18.
“Even though we submitted the minutes of our meeting 20 days after, we are still waiting for NBE endorsement,” Alemnew Tegen, CEO of Abay Insurance told Fortune.
Before minutes are sent to the supervisory body, all documents are required to be endorsed by the respective Board of Directors. In addition each of the banks and insurance companies are expected to submit reports to the central bank within twenty days of the conclusion of a shareholder’s yearly meeting, according to the law.
The directive of the National Bank states that the minutes of the meetings and the decisions passed there should be inspected and approved by the National Bank.
The Central Bank examines the eligibility of members of nomination committees, elected board members, the process of elections and fees, and the auditor reports.
The regulatory body studies all decisions passed in meetings and ensures that all the laws have been strictly followed.
“Even though service standards direct the National Bank to respond to the minutes within fifteen days, we have not had a response yet,” one bank manager who wished to be unnamed commented.
After the approval of the National Bank, it takes weeks to verify and register the documents at the Documents Authentication & Registration Office (DARO).
“I see the merits of the law,” Alemnew told Fortune. “If the Central Bank discovers vital errors regarding the meetings, it is difficult to recollect the distributed dividends from shareholders and conduct another meeting.”
In rare cases, the Central Bank may order banks and insurance companies to have another shareholder meeting where it finds major breaches of law.
“Before 2015, we used to allot dividends to shareholders while the minutes were being examined at the National Bank,” Alemnew added.
“The observation by representatives of NBE and DARO attending at the meeting should have contributed in minimising the time taken to inspect the documents,” Taye commented.
Another actor in the banking industry associates the problem with the law itself.
“If shareholders have grievances, they should complain to lawmakers, not the banks,” Tabor Wami, Board Chairman of Awash International Bank told Fortune.
Despite repeated attempts, representatives of the National Bank were not available for comment.
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