Court restrains bridge banks from mgt of nationalised banks’ assets
Category: Mergers & Aquisitions
November 16, 2011
A Federal High Court sitting in Lagos, yesterday, restrained Mainstreet, Keystone and Enterprise Banks, which inherited the assets of the three nationalized banks from further dealing in the assets, businesses and operations of the defunct banks pending the determination of the suit filed by some aggrieved shareholders of the banks. The three nationalised banks are Afribank Plc, Bank PHB Plc and Spring Bank Plc.
Trial judge, Justice Charles Archibong, granted the order, following an ex-parte application, by some shareholders of the banks, who are challenging the revocation of their banks operational licence by Central Bank of Nigeria, CBN, and take over of their banks by Nigeria Deposit Insurance Corporation, NDIC, and the Assets Management Corporation of Nigeria, AMCON.
The plaintiffs, amongst them, Boniface Okezie, Adeyemi Kehinde, Adebowale Bolanle and Cole Alexander are in court, challenging the nationalisation of Afribank Plc, Bank PHB Plc and Spring Bank Plc on the ground that the action violates their rights to freedom from compulsory acquisition of property guaranteed under the constitution and the prohibition of nationalization of enterprises contained in Section 25 of Nigeria Investment Promotion Commission Act.
Defendants in the suit are Mainstreet, Keystone and Enterprise banks, CBN, NDIC, AMCON, Securities and Exchange Commission, Nigerian Stock Exchange, Afribank Plc, Bank PHB Plc, Spring Bank and Minister of Finance.
The shareholders are contending in the suit that the revocation of the licenses of the nationalised banks by the CBN Governor, Lamido Sanusi was prejudicial to their rights to invest in public quoted companies in accordance with the Nigeria Investment Promotion Commission Act and the Investment and Security Act.
They want the court to declare that the action of CBN, NDIC and the AMCON in purporting to transfer the assets, businesses and operations of the nationaliaed banks to the new banks was a breach of their fundamental human rights to freedom from compulsory acquisition of property as guaranteed by the constitution.
They want the court to order the respondents, jointly and severally to pay punitive damages as assessed by the court to them through their lawyer for the diminution in the value of the shares of the nationalised banks as a result of the unlawful, malicious and unreasonable conduct of the CBN Governor.
They are also praying the court to restrain the three new banks, NDIC and AMCN from offering for sale or advertising or representing to any person, any intention or offer for sale or transferring or purporting to transfer to any person any interest in the assets, businesses and operations of the three nationalized banks.
The shareholders also want the court to grant the nationalised banks, a period of six months or with such an extension of time as the court may allow within, which to recapitalize or attain any requisite level of recapitalization as determined by the court and free of any interference from the CBN or its Governor.
Meanwhile, further hearing in the matter, has been adjourned till November 28.
It will be recalled that on Friday August 14th the federal government through the Nigeria Deposit Insurance Corporation (NDIC) nationalised Afribank Plc, Bank PHB Plc and Spring Bank Pls. The Corporation had created three bridge banks namely Mainstreet Bank , Keystone Bank and Enterprise bank to assume ownership of the three rescued banks following the revocation of their operating licenses by the Central Bank of Nigeria (CBN). The following day, NDIC sold the three bridge banks to Asset Management Corporation of Nigeria (AMCON0), which in turn appointed management for the banks and injected N679 billion to bring the capital base of each bank to N25 billion.
Following the nationalisation of the banks by the government last August 8, the shareholders resorted to panic dumping of their shares at the secondary market, thereby depressing the market even as the Nigerian Labour Congress blamed the Central Bank of Nigeria for the crisis in the banking sector and warned against victimisation of workers.
Last Friday AMCON injected N679 billion of public funds into the three, bringing the total fund injected into the rescued banks to N1.299 trillion. But before the CBN intervention, the Expanded Discount Window the CBN opened for banks to support them was N270 billion facility from which they could borrow. That window was closed by CBN governor, Mallam Sanusi Lamido Sanusi thus leaving the troubled banks naked.