28 June 2009
(Page 2 of 2)
Bank PHB's Position
However, in a two-page paid advertisement last week, counsel to Bank PHB, Fidelis Oditah, SAN, regretted that a supposedly government document that has not been acted upon has to be had to be treated on the pages of newspapers. Oditah also stated that the opinion of the Minister of State was "one-sided, jaundiced, biased and misunderstands both the relevant facts and legal issues involved".
For the minister to have said that the PMA exercise "is very fundamental to the determination of the ownership structure of Spring Bank", the lawyer believes was an error of judgement. The rights of Spring Bank shareholder, he stated, are in no way contingent upon the conclusion of any post merger share adjustment exercise to be carried out pursuant to any historical scheme of merger.
Post merger, he noted, "is not going to result in any cancellation of any existing shares. If and when it takes place it might result in the issuance of new shares, but that cannot prevent existing shareholders from selling their shares to Bank PHB or anyone else.
"Indeed Spring Bank shares continue to be bought and sold daily on the Nigerian Stock Exchange, NSE, notwithstanding the extancy of the purported post merger share adjustments.
"Similarly, if meetings of Spring Bank shareholders were to be called, it is persons whose names are on its share register that would be entitled to attend and vote at such meetings. If a dividend were to be paid by Spring Bank, it is its registered shareholders that would be entitled to receive such dividends.
"The rights of shareholders are not frozen awaiting some historical and now time-barred post merger share adjustment," Oditah stated.
He referred to the PMA exercise as time-barred because, according to him, the exercise has a life of one year and that period expired on February 1, 2007. To extend it, Oditah says would have required the support of 75 per cent of the shareholder of the six federating banks to pass special resolutions amending the scheme of merger so as to provide for a longer period.
Instead of doing this, he noted, some of the aggrieved shareholders went to court to seek among other things the extension of PMA time frame. Mr. Justice Tijani Abubakar, however dismissed the proceedings on the grounds that the correct procedure was for the aggrieved shareholders to have gone back to all the shareholders to get approval for the proposed material variations of the scheme.
Apparently not satisfied with that ruling, the shareholders lodged an appeal on January 29, 2009 and that was the only case Oditah admitted is pending as issues relating to the acquisition of Spring Bank by Bank PHB is concerned. But as at the time of the acquisition, he says, there were no outstanding injunctions. "Historically, two injunctions were granted - one by Justice A. R. Mohammed and another by Justice Lambo Akanbi.
"On 18 November 2008 Justice A. R. Mohammed dismissed the proceedings and discharged his injunction. That was almost 10 days before SEC gave approval to Bank PHB on 27 November 2008 to proceed with the mandatory bid.
"As for the Justice Lambo Akanbi injunction, it was an interim ex-parte injunction which lapsed after 14 days and was not extended. Indeed another application for injunction was filed before Justice Lambo Akanbi after the expiry of his earlier injunction.
"In a ruling given on 17 December 2008, the learned judge refused to grant another injunction. If, as the minister wrongly stated, there was an outstanding injunction granted by Justice Lambo Akanbi why was it necessary for another injunction to be sought?
"It is thus clear that when SEC gave final approval for the mandatory bid, there was no outstanding injunction," Oditah stated.
He even said that the post merger share adjustments would have been concluded if the aggrieved shareholders did not reject the report which had been signed by four out of the six shareholder representatives.
From the foregoing, he said, Bank PHB "complied with all extant laws of Nigeria and court orders relevant to acquisition of shares in Spring Bank".
Genesis of the Problem
The emergence of Spring Bank, post consolidation, may have been founded on quicksand. Except for a few of the management team that were optimistic that whatever differences that existed could be papered through, the merger that brought the bank about was bound to have serious hiccups.
Spring Bank is made up of two broad groups - Bank One and the Citizens-Guardian Group. Bank One comprised of Omega Bank, Fountain Trust Bank and Trans International Bank. Guardian Express Bank, Citizens Bank and ACB International Bank constituted the Citizens-Guardian Group on the other hand.
Some analysts have said that the bank's problem stems from its inability to integrate culturally. The three banks in the Bank One Group have their ownership rooted in the Yoruba race while the three in the Citizens-Guardian Group have their roots in the Ibo race.
There is a thick divide between the Yorubas in the Bank One Group and the Ibos in the Citizens-Guardian Group, which led to mutual suspicion by the two groups of one trying to dominate the other.
Somehow in the sharing of offices, the Yorubas took the chairmanship while the Ibo had the chief executive position. This tended to suggest two parallels within the bank and the line of loyalty as well. The fear is that whenever the management took a decision that affected the Yorubas, it is seen as victimisation of that particular race no matter how rational that policy might seem. The reverse may just be true for the Ibos.
Troubles started for the bank when the six legacy banks started expressing doubts of the actual contribution of each of them to the group. The CBN had expected them to resolve this among themselves without stress. However, the inability of the bank's board to resolve the issue of the contributions of each legacy institution to its capital led to special CBN/NDIC examiners to re-certify the bank's capital.
The regulatory authorities conducted a bank-by-bank contribution to the shareholders' fund. At the end, it was revealed that only the former Guardian Express Bank and ACB International brought positive capital to the merger.
"However despite its weak capital base, the other indicators show that the bank has a strong promise; its deposit base and liquidity situation are strong. It was in the light of this that the new capital structure of the bank (and relative contributions of the legacy institutions) as well as the deeply divided and acrimonious board, that the CBN decided earlier to dissolve the board and call for a reconstitution by the legacy institutions," Soludo had explained.
He further assured that "the CBN and NDIC stand to provide necessary support to the new board to recapitalise the bank and ensure that it meets the aspirations of the shareholders, depositors and the Nigerian public," which he said would be completed within the shortest possible time.
But the intervention of Soludo was seen by the Yoruba group as support for the Ibos' attempt to sell the bank to one of their own just because he is an Ibo man. Likewise, the current intervention of the Minister of State for Finance may have been seen as some tacit support for the Yoruba cause by the Ibo group.
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