International Energy Insurance's finances & role in Heritage Bank called to question by shareholder




Friday, May 08, 2015 4.52 PM / News

The management and board of International Energy Insurance Plc, a one-time high flying insurance company in Nigeria, yesterday faced serious questions from shareholders on the management of the affairs of the company, the company’s ownership and role in Heritage Bank Plc.

These issues, we learnt have also been brought to the attention of the company’s primary regulator, NAICOM.

PearlChrix Property’s Limited, the second largest shareholder of the company raised these serious concerns regarding the financial health and status of the company.

The entity called to question how the company’s shareholder funds decreased from over N12 billion in 2008 to less than N500 Million in 2012, when its liability to to a single entity, Daewoo Securities ballooned to approximately N4 billion.

PearlChrix has also questioned the role played by the Insurance Company in the recapitalization of Heritage Bank Plc and its ownership in the bank.

This latest development is coming on the back of a challenge thrown by the shareholder what it terms as a destruction of shareholder value vide a strongly worded letter to the company in October 2014 where a number of governance questions were raised.

In addition to the management issues, PearlChrix believes that there has been a breakdown in corporate governance at the company’s board. 

It was learnt that PearlChrix yesterday called for an Extra-Ordinary General Meeting (EGM) of the shareholders in which it has proposed that the shareholders remove members of the current board for failure to act as proper fiduciaries for shareholders.

From the information gathered, PearlChrix now believes that the board members no longer act for the company’s stakeholders but rather for their best and only interest. 

Investigations reveal that there exist a fierce legal battle between PearlChrix and the company over the continued rights of certain board members to continue on the board, given their roles in a particular/undisclosed/specific transaction that may have caused the company significant financial harm.

Enquiries to date have not yielded details of this transaction, one for which inquiries with the regulators and the bourse did not yield any verifiable information.

Yet, representations made with the shareholder affirms that it has received approval from the Corporate Affairs Commission (CAC) under section 213 (2) of CAMA, to call an Extra-Ordinary General Meeting (EGM) of the shareholders to address a number of critical and urgent issues.

In taking these extra-ordinary measures, it would thus appear that the shareholder is convinced and strongly believes it has the support of many shareholders.

In a telephone conversation, a representative said “we have watched as the company’s shareholder funds went from N12 billion to less than a billion without any explanation…., we heard that the company is now under NAICOM’s watchful eyes and would not wait to see NAICOM take over the company before we do something.  We will try to save the company before we have nothing to save”.

That NAICOM is now involved in some form of investigation is pleasing to note; yet a number of market watchers express surprise that such an information was kept from the market thus far.

It is now common knowledge that NAICOM has been and continues to offer guidance and assistance in midwifing the company through its problems, while the CAC was decisive on the side of the law and in the protection of shareholders rights by bringing the matter to the attention of shareholders/public.

It would appear therefore that both the CAC and NAICOM are offering the shareholders an opportunity to save their company before it is compelled to act.

The actions of PearlChrix is following an emerging pattern to be watched in the corporate governance landscape in Nigeria.  Recently, shareholders of Ikeja Hotels Plc, expressing their dissatisfaction with how the company was run, made certain changes to the board of directors and management of the company.  It will be fair to assume that more of these types of actions will become more commonplace as investors seek to exercise their rights; and opt for self protection given the precedents that exist in the market.


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