The conflict between FBNH and Barbican Capital centres around the latter’s claim to a significant stake in FBNH. Barbican Capital, an affiliate of Honeywell Group Limited, asserted that it has a cumulative shareholding of 5,386,397,202 shares as of July 1, 2024, representing 15.1% of FBNH’s total outstanding shares of 35,895,292,791 units listed on the Nigerian Stock Exchange (NSE).
Barbican Capital noted that its 15.01% shares of FBNH are currently reflected in the dematerialised records of the Central Securities Clearing System Plc (CSCS) and appropriately captured by the registrars – Meristem Registrars and Probate Services Ltd. Thus, it further seeks to be accorded all the benefits of membership with respect to all shares recorded as owned by it in FBNH as reflected in the dematerialised records of the CSCS.
Proshare’s Economy & Market Intelligence Unit (EMI) appropriates that Barbican Capital’s positions are premised on the fact that the shares it owns are its personal property with all rights and privileges pertaining thereof and constitute proof of its shares with FBNH, based on Section 109, 110(1)(b) and 116 of the Companies and Allied Matter Act 2020. As such, neither FBNH nor the CBN can alter, reduce, or diminish its shares.
While the arguments are logically and fundamentally plausible as our Constitution preserves the rights and properties of all Nigerians, the issue is now be evaluated/examined from an industry-specific context. Banks, and now Financial Holding Companies (FHC) in Nigeria are governed primarily by the Banks and Other Financial Institutions Act (BOFIA) 2020 and guidelines by the CBN as provided for in the CBN Act 2007, both subject only to the 1999 Constitution.
The provision of Paragraph 3.2.1 of BOFIA 2020, as quoted by CBN’s 3rd Party Affidavit in reaction to the 3rd party notice, was clear on share ownership and its verification. According to the section, “An equity holding of 5% and above by any investor shall be subject to CBN’s prior approval. Where such shares are acquired through the capital market, the bank shall apply for a no objection letter from the CBN immediately after the acquisition.”
This is further corroborated by CBN guidelines, also quoted as; “Corporate Governance Guideline for Commercial, Merchant, Non-Interest and Payment Service Banks in Nigeria” effective from August 1, 2023, which requires that any entity acquiring more than a 5% shareholding in a financial holding company must either seek prior approval from the CBN or notify the CBN within seven days of the purchase to obtain a ‘No Objection’ or approval. According to sections 20.2(b) of the guideline, “CBN’s prior approval and No Objection shall be sought and obtained before any acquisition of shares of a bank (including through the capital market), that would result in equity holding of five per cent (5%) and above, by any investor.”
In this case, it behoves on Barbican capital to meet these provisions being the only condition to verify shares in the banking industry. Proshare’s Economy & Market Intelligence Unit (EMI) observed that FBNH notified the CBN of Barbican Capital’s shareholding exceeding the 5% threshold and initiated the verification process.
However, Barbican Capital, from records seen, has yet to provide sufficient documentation to verify the full extent of its shareholding to the satisfaction of the regulators. The CBN’s verification process only confirmed 3,110,400,619 shares (representing 8.67% of FBNH’s total outstanding shares), out of the 4,770,269,843 shares initially claimed by Barbican Capital. The remaining 2,340,599,305 shares, representing 6.52% of FBNH’s shares, could not be verified, according to their January 2024 letter, due to insufficient evidence provided by Barbican Capital.
Proshare’s Economy & Market Intelligence Unit (EMI) confirmed that other significant shareholders subjected to capital verification within the same period also had some portions of their shares unverified due to the lack of relevant contract notes and bank statements. Others, who provided all relevant documents, had all their shares sanctioned by the CBN.
Barbican Capital has justifiably relied on the fact that the Holding Company’s Registrars – Meristem Registrars and Probate Service Ltd – reflected its full shares. However, within the banking context, its inability to provide the requisite documents in its case: Financial Statements for 3 years, Tax Clearance Certificates for 3 years, and Statements of Accounts for the past 12 months appears to weaken the basis of its appeal from a procedural viewpoint despite its argument that it was incorporated in March 2023, a few months before the trial began.
Regardless of this, the statutory requirements cited by FBNH and, by extension, the regulator make it appear that Barbican Capital is attempting to bypass due process for FBNH to recognise its entire shareholding; and by extension, the ongoing verification by the CBN. Earlier communications of FBNH’s company secretary, in a series of letters, to Barbican Capital on the processes and requirements for the CBN verification, which cannot be bypassed under any circumstance, would appear to strengthen the Holding company’s argument (in the public court).
In what appears like a regulatory mediation, the CBN appears to have offered Oba Otudeko/Honeywell Group one representation on the Board, dependent upon the withdrawal of all court cases. Proshare analysts argue that Barbican (Oba Otudeko/Honeywell Group) is entitled to board representation proportionate to ownership regardless of his withdrawal from the existing cases, as he remains a significant shareholder, status quo ante bellum.
In the final analysis, and based on the current situation, until Barbican Capital obtains/secures a “No Objection” approval of the disputed shares; the records will show and rightfully reflect that the disputed 2.34bn shares are excluded from the records of the bank.
The next question must therefore be – what happens to this quantum post a decision by the courts?
Adapted From Proshare Nigeria.
