12 February 2018

Nigeria: More Companies Flout NSE's Post Listing Requirements

The number of companies flouting the post listing requirement of the Nigerian Stock Exchange, NSE, regarding timely disclosure of financial performance rose by 37.5 percent in 2017, prompting shareholders to call for sanctions on directors of the companies.

Financial Vanguard investigations revealed that the number of companies that failed to disclose their interim and audited financial performance under the minimum listing requirement of the NSE rose to 22 in 2017 ('17) from 16 in 2016.('16). However, the penalties paid by the defaulting companies fell by 5.5 percent to N132 million in 2017 as against N140 million in 2016.

Sanction for Default

NSE listing requirement mandates listed companies to submit their quarterly financial statement, not later than one month after the last day of the quarter. It also mandates companies to submit their audited annual financial statements not later than three months after the last working day of the financial year. .

According to NSE rules, "Any late submission of accounts shall attract a fine of One Hundred Thousand Naira (N100, 000) per week from the due date until the date of submission. A listed company which contravenes any of the provisions of the Listing Rules and General Undertaking and fails to pay the penalty imposed on it for such contravention on or before the due date shall be liable to a further fine of Three Hundred Thousand Naira (N300,000) in addition to Twenty Five Thousand Naira (N25,000) per day for the period the violation continues."

Defaulting Companies

The companies that defaulted and penalty fees in 2017 are as follows: Vitafoam Nigeria Plc (Audited Account 2017, N800,000), Academy Press Plc (Audited Account 2017,N35 million) Niger Insurance Plc, (Audited Account 2016 and First Quarter 2017, N16.1 million), Union Diagnostic & Clinic Services Plc (Audited 2016 and First Quarter 2017, N3.9 million) Afromedia Plc (Third Quarter Account 2017, N200,000) John Holt Plc, Skye Bank Plc.

Others are Golden Guinea Breweries Plc (Audited Account 2017), Nigerian German Chemical Plc (Audited Account 2017), Roads Nigeria Plc (Audited Account 2017), Austin Laz & Company Plc (First Quarter Account 2016), Smart Product Nigeria Plc (Second Quarter 2017 Account), Conoil Plc (Audited 2016 and First Quarter, 2017 Account, N13.5 million), Daar Communications Plc (Audited 2016 and First Quarter 2017 N14.1 million), Fortis Microfinance Bank Plc (Third Quarter Account 2017, N1 million), Newrest ASL Plc (First Quarter 2017, N2.5 million), Nigerian Enamelware Plc (Audited Account 2017, N900,000), Pharmadeko Plc (First Quarter Account 2017, N1.6million), Presco Plc (Second Quarter Account 2017 N200, 000), Sovereign Trust Insurance Plc (Audited Account 2016 and First Quarter 2017, N10.2 million) and Staco Plc (Audited Account 2016 and First Quarter 2017, N7.5million).

The companies that defaulted in 2016 and the fines paid include: AG Leventis Plc (Audited Account 2016, N2.9milion), African Alliance (Audited Account 2015, 2016 Account, N46.1million), Austin Laz (Audited Account 2016, N5.4 million), Capital Oil Plc (Audited Account 2016, N1.1 million), CWG Plc (Audited 2016, N2.1 million), Dangote Flour Mills Plc (Audited Account 2016, N500,000), Diamond Bank Plc (Audited Account 2016, N2.4 million), Equity Assurance Plc (Audited Account 2016 N11.2 million), Fidelity Bank Plc (Audited Account 2016 N700,000), Fortis Microfinance Bank Plc (Third Quarter Account 2016, N19.8 million), Guinea Insurance Plc (Audited Account First, Second and Third Quarter 2016, N18.5 million).

Others are Premier Paints Plc (Audited Account 2016, N11.2 million), Presco Plc (Audited Account 2016, N1.3million), Royal Exchange Plc (Audited Account 2016, N7.3 million), Standard Alliance Insurance Plc (Audited Account 2016, N8.2 million) and Unity Bank Plc (Audited Account 2016, N500,000).

Further analysis by Financial Vanguard showed that four companies did not file their financial performance for first quarter of 2017 (Q1' 17), nine months after the April 30 deadline. These are Austin Laz & Company Plc, Resort Savings & Loans Plc, Skye Bank Plc, and Smart Product Nigeria Plc.

Also, Skye Bank Plc and Smart Products Nigeria Plc did not submit the financial statement for second quarter of 2017 (Q2'2017), six months after the July 31 deadline for submission. Furthermore, seven companies did not submit their audited annual accounts. These are Vitafoam Nigeria Plc, Academy Press Plc, John Holt Plc, Afromedia Plc, Golden Guinea Breweries Plc, Nigerian German Chemical Plc and Roads Nigeria Plc.

Early Filers

Financial Vanguard investigations also revealed that six companies filed the financial statements ahead of required time. These earlier filers are Infinity Trust Mortgage Bank Plc, United Capital Plc, Omoluabi Mortgage Bank Plc, Unilever Nigeria Plc, PZ Cussons Nigeria Plc and Forte Oil Plc.

The early filers are companies that file their interim financial statements at least two weeks before the due date and audited financial statement at least four weeks before due date. In a statement commending the early filers, the NSE said: "Quoted companies on the Exchange are required to file their financial statements on timely basis in accordance with Appendix iii of the listing rules.

"The Exchange has identified these companies that have exceeded the minimum listing rules standards in terms of timely disclosure of their annual audited and quarterly financial performance as early filers. We are extremely proud of these companies and will continue to showcase quoted companies that imbibe high corporate practices."

Reaction from defaulting companies: All the defaulting companies failed to respond to Financial Vanguard enquiries except Skye Bank. Speaking on condition of anonymity, a top official of the bank attributed its default to regulatory delay.

Shareholders react: Irked by the upsurge in number of companies flouting a very basic listing requirement of the NSE, shareholders said it is time for the management of the Exchange to review the sanction approach to forestall the rising trend.

In separate interviews with Financial Vanguard, they unanimously advocated that the NSE should sanction the directors or company officials responsible for the default instead of sanctioning the company and hence indirectly sanctioning the shareholders. They also suggested that default occasioned by regulatory delays should not be penalised, adding that the Exchange should also introduce an incentive framework to encourage early submission.

Mrs. Bisi Bakare, Chairman, Pragmatic Shareholders Association of Nigeria, said "my advice is that those officers of the companies assigned to process returns should do so as at when due to avoid unnecessary penalties. Also, our regulatory authorities should know that the burden or consequences of penalty is borne by shareholders. This is because the aftermath effect is that topline and bottomline will definitely be affected and dividend proposed will decline and the working capital of these companies will also affected.

"On this note, I want our regulators to temper justice with mercy, by looking at other ways to punish these companies that flout listing rules than monetary fine so that our investment will not be affected. The regulators in the banking, capital market and insurance sectors (CBN, SEC, NAICOM) should be up and doing in their responsibilities because most times it is when one regulator or the other does not complete their work on time that it affect prompt filling of results by companies to the NSE."

Mr. Boniface Okezie, Chairman, Progressive Shareholders Association of Nigeria, PSAN, said "The NSE need to further carry out investigation why these companies have failed to meet regulatory requirement. Imposing of fine is not the best, as this action affects the owners of the companies (shareholders) and not the management. It is only when such action is taken and the company fails to provide reasonable reason that a fine could be imposed; and the fine should be imposed on all the officers responsible to turn in the results and not to the firm itself. Also, the Exchange and other regulators should compel companies to state reason for late fillings of results in their annual reports. This will enable shareholders to tackle and hold the management responsible during Annual General Meetings, AGMs .

Commenting as well, Mr. Moses Igbrude, Public Relations Officer, Independent Shareholders Association of Nigeria, ISAN, said "There are rules and regulation in our market and operators must abide by them. So, management of companies should be aware of the rules and penalties involved. The management, as our Association always tells them, is to guide against being penalised. Another issue why some companies do not meet regulatory requirement, is because of the numerous regulators in our system. If one regulator delays a company from meeting the requirement of other regulators; should they be held responsible? No, I don't think it is proper. So, the NSE should look at this issue critically before imposing fine to defaulting companies. Sanctions is not always the best as we normally advise. We think regulators should find a way of rewarding those that meet regulatory requirements; in that case others will learn and be attracted to get such reward subsequently.

"Again even when penalties are to be imposed, the officers or directors responsible to turn in results should be punished. We frown at a situation where the entire company or shareholders bear the brunt of the negligence of some few officers. If that is done, you will see that the directors will sit up and do things that will not attract penalty to the company."

Mr. Owolabi Peter, Chairman, Integrated Supreme Shareholders Association of Nigeria, said "In as much that sanction is necessary to make the companies sit up, it is still not the best form of punishment. It is the shareholders' investment that suffers most. Whether there is fine or not directors are paid their money. The money used in paying these fines is shareholders' fund. I think regulators should rather sanction officers directly involved for failing in his or her responsibility. In that way they will sit up to avoid unnecessary penalty."

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