Unclaimed assets are those assets which have been presumed abandoned or in respect of which there are conditions raising a presumption of abandonment. For example, unpaid wages, which include unpresented payroll cheques, allowances, bonuses and terminal benefits, will be presumed to be abandoned if they remain unclaimed for more than one year after becoming payable. Unclaimed property laws have origins in the common law in England. At common law, the concept of escheatment was applied whereby land held in tenure (i.e. occupied by someone other than the owner) was reversed back to the Lord when the immediate tenant died without heirs. The modern rationale for unclaimed property laws is that the state is best placed to preserve and protect the interest of the rightful owner.
In Kenya, for many years, firms held unclaimed assets as they struggled to locate their rightful owners or beneficiaries and were liable in any claims arising in respect of the assets. Following a recommendation by the taskforce on Unclaimed Financial Assets for a framework to govern unclaimed financial assets in Kenya, Parliament passed the Unclaimed Financial Assets Act (the “Act”) in 2011. The Act established the Unclaimed Financial Assets Authority (the Authority”) which began operations in 2012. By November 2018, the Authority reported that it held cash amounting to Kshs. 13 Billion and 555.5 million shares. Notably, only 2.5% of the said assets collected had been claimed.
In this article, we set out in brief the obligations imposed on a holder of unclaimed assets in Kenya under the Act.
Of critical importance, holders of unclaimed assets have a duty to make reasonable efforts to locate and notify owners of their assets before reporting the unclaimed assets to the Authority. They, in addition, have a duty to report and deliver assets presumed abandoned under the Act to the Authority and provide information as the Authority may require within such times and such intervals as may be specified.
Upon delivering unclaimed assets to the Authority, the Authority assumes custody and responsibility for safekeeping of the assets and the holder is relieved from all liability, in respect of the assets, to the extent of the value of the assets paid or delivered for any existing claim(s) which may arise. Also as a consequence, the Authority will defend and indemnify the holder from any claim of the assets by another person or country under its escheat laws.
Another ancillary role expected of the holder is with respect to record keeping. Generally, a holder of unclaimed assets should maintain the name and the last known address of the owner (where it is known) of the unclaimed assets for ten years after they become reportable.
Whether obligations are Mandatory
One would ask whether these obligations are merely prescriptive or mandatory. Under the Act, failure to deliver unclaimed assets with the Authority or to perform an obligation imposed by the Act attracts various sanctions depending on the nature of the offence committed. For example, a holder who willfully fails to render a report or perform their duties under this Act is be liable to pay a penalty of Kshs. 7,000 but not more than Kshs. 50,000 for each day the failure continues.
Retrospective effect of the Act
The Act applies to all assets that would be deemed to be unclaimed assets under its provisions including those that would have been presumed abandoned before the coming into force of the Act. This means that this Act will apply to all holders of unclaimed assets even those that held such assets prior to this Act and these holders are required to meet their obligations as prescribed by the Act.
In summary, compliance with the Act , by holders of unclaimed assets, not only avails the advantages discussed above with respect to shifting of liability but also helps to reunite and reactivate missing owners with their assets and clients with their deposits, reduces operating expenses/overheads for the holders and eliminates regulatory/non-compliance risks. Worth noting is also the fact that delivery of unclaimed assets to the Authority and performance of obligations imposed under the Act are mandatory obligations and holders of such assets should comply with the provisions of the Act in a timely manner. Failure to do this attracts undesirable sanctions which can be avoided. A future article will discuss effectiveness of the legal framework in easing access to the unclaimed assets by the rightful owners.
Article Ivyn Makena
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