- Ozekhome: Decisions without board approval null and void
Chika Amanze-Nwachuku and Obinna Chima
The Asset Management Corporation of Nigeria (AMCON) friday put the total amount of cash and assets it had recovered from its debtors at N644 billion.
The Managing Director/Chief Executive Officer, AMCON, Mr. Ahmed Kuru, who disclosed this during an interactive session with journalists in Lagos, also said 56 per cent of its debtors had approached the corporation for “settlement.”
Kuru explained that by the term “settlement,” he meant individuals that had entered into agreement with AMCON on their repayment plan.
He faulted the framework on which AMCON was set-up.
Also yesterday Mike Ozekhome (SAN), social crusader and constitutional lawyer bluntly warned AMCON that “any decision, or resolution, or contracts executed or action taken requiring supervisory board approval without a board in place as currently the case is null and void in eyes of the law going by the Act establishing AMCON.” This could open some decisions of the current management to legal challenge.
AMCON on Tuesday posted a 2015 loss of N304.35 billion, wider than 2014 loss of N275.49 billion, after it wrote-down the value of collateral recovered from its purchase of bad loans.
But its Executive Director, Aminu Ismail explained that there was improvement in the corporation’s results in terms AMCON’s stand-alone because in 2014, the loss was N344 billion, but in 2015, it came down to N310 billion.
He further explained that the large chunk of the loss driver was the six per cent interest it is currently paying, just as he expressed optimism that as AMCON recovers and restructures more loans, the interest elements charged in subsequent years would also go down.
Also, Kuru explained that the loss situation of AMCON would continue to reduce over a period of time.
AMCON has a 10-year period.
“Now, loss is unavoidable. When we bought these facilities between 2010 and 2011, if you recall, there were interest elements on them. The obligors were made to pay interest which in itself from beginning was faulty. That is because, the banks that sold these facilities to us had already provided for them. They were not charging interest at all because the businesses were dead. At the initial stage, there was a gap between the purchase price and the face value of the liabilities.
“So, for some of these obligors, by coming to AMCON, already they had a discount. Almost 51 per cent of those accounts were restructured. Now, in CBN’s valuation and based on prudential guidelines provisions, any account that you have restructured with a payment plan, is a performing account. Let us not forget that these accounts were brought from somewhere they had been buried.
“For you to now say AMCON is going to make profit in the next couple of years is not possible because these facilities are hard-core facilities and they are not performing. The only thing we can do is to continue to recover them. Let us not forget the fact that AMCON was not set up to make profit. It is not a profit-making organisation. AMCON is a resolution company that has a timeline,” Kuru added.
The AMCON boss explained that the corporation gets on the average, about N100 billion every year from the sinking fund.
He estimated that the contribution of the sinking fund, as the banking industry grows, would continue to improve.
“The initial concept was that they would contribute 31 per cent, but not based on what is happening, they are going to contribute about 60 per cent of the total liabilities of AMCON, which is around N5.1 trillion. The most important thing for AMCON is the ability to, at the end of its sunset period, be able to discharge its obligation and I think AMCON would be able to do that diligently.
“We have about four countries that adopted this type of model and the institutions in those countries are still not profit making ventures. They are still having challenges with profitability because what they are trying to do is to be able to meet their obligations.
“Even if I am making profit today, it still goes back to the settlement of the bonds. So, what is important is that at my sunset period, I am able to meet my debt obligation so that AMCON can wind down,” Kuru added.
Onyekpere faults AMCON’s operation without board…
Also yesterday, another legal practitioner and the Lead Director, Centre for Social Justice (CSJ), Mr. Eze Onyekpere, has faulted the operation of AMCON’s management in the absence of a functional board.
He argued that the government was expected to reconstitute the board of AMCON and other corporations as soon as they are dissolved.
Onyekpere said AMCON needed a board to superintend the affairs of its management.
“Decisions and activities which need the attention and endorsement of the board should have been left alone by the management until a new board is constituted. It is also imperative to state the government should not have dissolved existing boards if it was not ready to constitute a new ones immediately.
“The decision to dissolve a board should not be taken as a matter of routine once a new regime comes to power. It should have been taken on a corporation by corporation basis after analysing the performance of the boards to determine if they should be allowed to continue or get changed. It is also fundamentally flawed to dissolve boards whose tenures are defined by law, without allowing the board to be dissolved by the effluxion of time,” he said.
The lawyer argued that AMCON’s management is not in a legal position to repudiate terms of settlement reached by debtors with the previous management and approved by the previous board. According to him, it is up to the affected debtor companies and individuals to challenge such unilateral decision in court and the courts may likely set aside such unilateral action of the new management.
“Unless there is evidence to show that the terms of settlement were reached based on deliberate misrepresentation by the debtor company, the decision of the new management cannot stand. The enabling laws of corporations set out the specific tasks and functions of these boards. They play major policy roles and provide direction for the day to day running of the corporations by their management.
“The fiduciary duty of boards ensures that they properly liaise between the state which is the owner and the management and staff of the corporation to guarantee good performance and focus on the achievement of stated policy goals.
“Many of them are professional boards that add value to the chain of operations in their respective industries including directions to management that have impact on the bottom line of corporate operations. The absence of the boards has left a vacuum that is difficult to fill,” he said.
The lawyers’ reactions followed complaints of high-handedness and breach of extant rules and settlement agreements reached with AMCON by some debtor companies.