Prior to the enactment of the Unclaimed Financial Assets Act No.40 of 2011, (“the Act”) unclaimed financial assets were left under the control of the various holders or such entities where such assets were held. With the operation of the Act, all entities are required to report, trace and deposit any unclaimed financial assets with the Unclaimed Financial Assets Authority (the “Authority”).
In most instances, these unclaimed financial assets take the form of cash accounts, unpaid dividends, life assurance benefits, fixed deposits, pension and investment benefits and interest thereon. These assets ordinarily end up unclaimed due to passage of time, death of owners, loss of contact, migration, mergers and acquisitions, name changes and incomplete records.
Unclaimed financial assets are defined under the Act as those assets that have been:
- presumed as abandoned and have become unclaimed assets under the provisions of the Act;
- transferred to the Authority as unclaimed financial assets; and
- deemed under any other law to be unclaimed assets and payable to the Authority.
For an asset to qualify as unclaimed:
- the records of the holder should be insufficient to identify of the owner of the asset;
- the holder of the asset must not have previously paid or delivered the assets to the owner or any other person that is entitled to the asset; and /or
- the last known address of the owner must be in a country that does not provide by law for escheat, or its unclaimed asset law is not applicable to the assets and the holder is domiciled in Kenya.
When a rightful owner fails to claim an asset over a specified number of years known as the abandonment period, those left holding such assets are required to transfer custody to an unclaimed property trust account in a process known as escheat. The Act provides for different abandonment periods for different assets, for example, assets relating to ownership interest such as shares and dividends have an abandonment period of 3 years while savings, demands or fixed deposits have an abandonment period of 5 years. The years of abandonment under the Act range from 1-5 years to allow the holding institutions trace the owners.
Holders of unclaimed financial assets have to make all reasonable effort to locate the owners and once unable to do so, they are required to vest and deliver these assets to the Authority. Moreover, holders are required to file annually their reports duly signed by their Managing Directors by or before the first day of November of each year for the twelve-month period ending on the immediately preceding thirtieth day of June.
Failure to report or perform any duties required under the Act attracts a penalty of Kenya shillings seven thousand but not more than Kenya shillings fifty thousand for each day the report is withheld, or the duty is not performed.
Anyone who remits unclaimed financial assets to the Authority in good faith shall be relieved of all liability to the extent of the value of assets paid or delivered to the Authority. Where the holder pays or delivers such assets to the Authority in good faith, then the Authority shall defend the holder against claims and indemnify the holder against any liability on the claim. This serves to cushion such holders against claimants who would litigate against them for these assets. It also buffers them against negative reputation in the eyes of the public because it is the holders’ duty to report and hand over these unclaimed financial assets where the owner has not claimed them even after being reached out to.
The Authority is required to maintain a register of all unclaimed financial assets in the form of a searchable database. A claimant on the other hand is required to complete certain forms under the Act and provide certain documentation to enable the Authority successfully process a claim.
In conclusion, it is prudent for holders to comply with the provisions of the Act and as of consequence prevent possible malpractices that may arise from holding unclaimed financial assets. Compliance with the Act will ensure the reunification of assets with their owners, enhance shareholder/customer relations with holders, and reduce cases of fraud and litigation.
Disclaimer: This article has been prepared for informational purposes only and is not legal advice. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Nothing on this article is intended to guaranty, warranty, or predict the outcome of a particular case and should not be construed as such a guaranty, warranty, or prediction. The authors are not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information. Readers should take specific advice from a qualified professional when dealing with specific situations.