The on-going tussle between the Securities and Exchange Commission and the management of Oando Plc is significantly having negative effects on shareholder value, writes Oluchi Chibuzor
Minority shareholders in Oando Plc are presently in an unenviable position. This is as a result of the abrupt suspension of the company’s Annual General Meeting (AGM) last week by the Securities and Exchange Commission (SEC).
Some analysts believe the suspension of the AGM has created more uncertainties around the company and would further dampen investor confidence.
Section 81 of the Companies & Allied Matters Act ascribes to every member of an incorporated company, who has fully paid for his or her shares, a right to attend all the shareholders’ meetings of such a company; and to speak and vote at such shareholders’ meetings. The mode of proving membership of a company is by the possession of a share certificate and the tendering of a certified true copy of the register of members, should such a matter go to litigation. This right is clearly what the apex capital market regulator has denied the minority shareholders of the company.
SEC’s Reasons
SEC had announced the suspension of the AGM in furtherance of an ex parte order of the Federal High Court, Ikoyi, Lagos in Suit No: FHC/L/Cs/910/19 in Mr. Jubril Adewale Tinubu & Anor V Securities & Exchange Commission & Anor.
According to the commission, the AGM was suspended till further notice, based on a court order.
SEC said the action was taken to allow the parties to maintain status quo, adding that it would update the public on the outcome of the ongoing litigation.
SEC had on May 31, 2019, announced the conclusion of investigation of Oando Plc and directed among others the immediate resignation of its Group Managing Director, Mr. Wale Tinubu, his deputy, Mr. Mofe Boyo and other directors.
The apex regulator also barred Tinubu and Boyo from being directors of public companies for a period of five years. The commission followed later with the constitution of an interim management team led by Mr. Mutiu Sunmonu.
But Oando challenged the decisions in court and got the Federal High Court, sitting in Lagos, to issue orders restraining the commission from implementing any of its May 31 decisions.
But in a ruling on Monday by Justice Mojisola Olatoregun, the Federal High Court barred SEC from giving effect to the decision pending the determination of a suit filed by Tinubu and Boyo. Justice Olatoregun had ordered the parties to maintain status quo. The judge made the interim order following an ex parte application taken before her and argued by Mr. Tayo Oyetibo (SAN), accompanied by Mr. Yele Delano (SAN) and Motunrayo Akinyemi.
She ordered that the interim order along with the motion on notice filed by Tinubu and Boyo should be served on SEC and Mr. Mutiu Sunmonu, who was joined as second respondent in the ex parte application.
Who Has Power to Suspend AGM, SEC or CAC?
However, a source at the Corporate Affairs Commission (CAC), faulted the action of SEC regarding the AGM.
She cited a case in 2017, whereby SEC had requested that Oando postpone its 40th AGM whilst the commission addressed allegations raised by petitioners.
Oando had then promptly responded that it had responded to all of SEC’s enquiries and it would also not be in the interests of its shareholders to postpone the AGM and had proceeded with the meeting.
Oando had then written to SEC saying: “You have repeatedly referred to the provision of s.213 of CAMA, which grants the Registrar General of the Corporate Affairs Commission (and not the DG of SEC) the power to extend the time, by a period not exceeding three months, within which a company may hold its annual general meeting, as part of the SEC’s justification for requesting the Company to postpone its AGM. Not only is this extension not automatic, it is within the discretion of the directors of the company whether or not to apply for this extension and will only be granted at the sole discretion of the Registrar General of the Companies.”
The oil and gas company had said there was no power in the Investment and Securities Act that gives SEC such powers.
Order to Seek Review
Also, a Federal High Court, sitting in Lagos last week, has granted Tinubu and Boyo leave to file a motion for a judicial review of the sanctions of SEC.
Tinubu and Boyo, through their counsel, had approached the court for an order to review their ban from being directors of public companies for five years and the additional imposition of N91,125,000 on Tinubu.
Justice Ayokunle Faji granted the order of certiorari following an application filed by Tinubu and Boyo seeking a review of the decision of SEC.
An order of certiorari is a writ or order by which a higher court reviews a case tried in a lower court or administrative agency.
In a separate ex parte application filed through their counsel, Olasupo Shasore (SAN), Tinubu and Boyo prayed for an order of certiorari to quash SEC’s purported imposition of N91,125,000 fine on Tinubu.
They sought an order of certiorari to quash SEC’s purported decision to bar them from being appointed as directors of public companies for five years.
They further prayed for an order of certiorari to quash SEC’s purported appointment of an interim management team to be headed by Sunmonu (the second respondent) to oversee Oando’s affairs. Justice Faji, last Tuesday, granted the application as prayed.
He granted an “order of certiorari bringing up to the Federal High Court for the purpose of being quashed, the decision of the first respondent contained in its letter of 31st May 2019 at Page 6 Paragraph 5 thereof, which purported to bar the applicants from being directors of public companies for a period of five years.”
He also granted an order prohibiting SEC, whether by itself or agents, from enforcing or seeking to enforce its purported decisions contained in the May 31 letter.
He also ordered the restraining of SEC from implementing its purported decisions contained in a statement it issued on June 2 and from interfering with, taking over or usurping the management of Oando’s affairs either by itself, agents or through the purported interim management team.
The court restrained Sunmonu from purporting or continuing to act as head of the interim management team in place of the applicants.
Justice Faji made “a declaration that the first respondent (SEC) acted ultra vires and without jurisdiction in making its decision as contained in its letter of 31st May, 2019 which conveyed the imposition of a fine of N91,125,000 on the first applicant and purported to bar the first and second applicants from being directors of public companies for a period of five years… and appointing an interim management team to be headed by the second respondent.”
“The motion or summons for judicial review shall be filed and served within seven days,” the judge ruled Justice Faji adjourned until June 21 for hearing.
Shareholders React
Also, some shareholders of Oando Plc protested the action by SEC. In addition, some minority shareholders of Oando called on the federal government to save the company from its current crisis. But while some of the shareholders said the suspension of the AGM was neither in favour of the investors nor the capital market, others lauded the regulator for its action.
In fact, the minority shareholders urged the federal government to intervene and stop further value erosion in the company’s shares.
Chairman, Progressive Shareholders Association of Nigeria (PSAN), Mr. Boniface Okezie, said the regulator should have allowed the AGM to hold.
“I think SEC has not done the right thing because the AGM has been approved before now. Suspending it will lead to loss for the company, which has also booked for the venue and paid for other things necessary for the meeting to take place. What I think SEC should have done is to come and observe,” he said.
Okezie added that since the release of the forensic audit result, the shareholders have not had the opportunity to hear from the directors, noting that the AGM would have afforded them the opportunity to get more information from the board of the company.
Also, the Chairman, Ibadan Zone Shareholders Association of Nigeria, Mr. Eric Akinduro, said suspending the AGM was unfortunate.
He said: “There should be a human face to some of these things. There is a court order saying the status quo should be maintained and I believe the AGM is one of the things referred to by the court order.
“Suspending an AGM 24 hours to the meeting is not good for the shareholders and even the market. Some of the shareholders have travelled from other states to Lagos for this AGM.”
However, the President, Constant Shareholders Association of Nigeria, Mallam Shehu Mikail, said SEC did the right thing.
“To me, SEC has done the right thing because there are so many issues in the company right now and we do not know how the meeting will look like. So, the proper thing is to suspend the meeting. If Oando goes ahead to hold the AGM, it means it is disrespecting the market regulator,” he said.
An outraged shareholder, Pastor Olagoke Samson Olusegun, who is President of De-Impressive Shareholders’ Association of Nigeria, disagreed with SEC’s decision.
He said: “This is simply a game because before we announced the AGM, SEC approved our accounts. So why now? Why is it when Oando is climbing out of the hole of debt and returning to profitability? Like Skye Bank, they want to take Oando over and give to their friends. We will fight to the end as shareholders. If we have to go and meet SEC in Abuja, we will. The SEC is functioning like a car with no engine – and in this game, the only people who suffer are we the shareholders. We will not tolerate it!”
Some of the shareholders also accused SEC of high-handedness.
“What SEC is doing can only be described as regulatory rascality, and it is unfortunate that this is coming from a regulator. Are they regulators or revenue generators? We should go ahead with our AGM as though nothing happened. We should continue as planned with our AGM. SEC tried to do this in the case of Ikeja Hotels, but we did not let them stop us, we had our AGM under a tree,” an Oando shareholder, Tunde Badmus, said.
The Secretary-General, Association for Investors Liberation, Mr. Hamza Ridhwa, who spoke on behalf of the shareholders in Lagos, noted that already the equity had depreciated from N4.20 on May 31, to N3.75.
According to him, it was not acceptable for SEC to attempt to take down the company, as Oando Plc adds significant value to the Nigerian economy as an employer of labour and attract foreign direct investment into the country.
He said the way and manner SEC suspended the AGM was disappointing and disheartening.
“We condemn in absolute terms the way and manner chosen by SEC in announcing the cancellation on the eve of the event, despite having ample time to do the same. We have shareholders who have come in from all over the country; it is disappointing and disheartening to think that SEC did not think it worthy to consider us.
“SEC is a regulator that is here to protect the market, and in particular, us the minority shareholders. They have a duty to care for us first. Their actions in the Oando case have neither protected us nor shown a duty of care.”
The shareholder activist said shareholders were disappointed at SEC’s investigation into Oando Plc.
“The actions over the last two years and specifically the last 10 days, have shown that our voices as minority shareholders are not being listened to,” he said.
Clearly, there is an urgent need for the ongoing dispute to be resolved speedily so as to avoid further damage to the company’s reputation as well as further erosion of shareholder value. The apex capital market regulator must abide by all court orders and ensure that it follows due process in the matter so as not to continue to send wrong signals to investors, especially the foreign investors that the country is badly in need of.
Double Standard
Oando has repeatedly stated that it was not given fair hearing by SEC after it conducted a forensic of its account.
Oando also alleged SEC did not avail it opportunity to respond to identified infractions, if any, in the course of the forensic audit. And that the SEC pronounced punishment on its directors without hearing from them.
THISDAY is in possession of a letter the SEC wrote to Mr Isyaku Umar of Ecobank Transnational Incorporation Plc , dated December 4, 2013, by then Executive Commissioner, Operations, SEC after it had carried out a forensic audit of the bank that appears to buttress Oando’s position that SEC failed or neglected to follow standard procedure and did not avail it of findings contained in the forensic audit to enable it respond before pronouncing punishment against its board of directors in a press statement on May 31, 2019. Below is the full press release by SEC following the conclusion of the forensic audit of Oando.
SEC’s Press Release on Conclusion of Investigation of Oando
Following the receipt of two petitions by the Commission in 2017, investigations were conducted into the activities of Oando Plc (a company listed on the Nigerian and Johannesburg Stock Exchanges). Certain infractions of Securities and other relevant laws were observed. The commission further engaged Deloitte & Touche to conduct a Forensic Audit of the activities of Oando Plc.
The general public is hereby notified of the conclusion of the investigations of Oando Plc. The findings from the report revealed serious infractions such as false disclosures, market abuses, misstatements in financial statements, internal control failures, and corporate governance lapses stemming from poor board oversight, irregular approval of directors’ remuneration, unjustified disbursements to directors and management of the company, related party transactions not conducted at arm’s length, amongst others.
As part of measures to address these violations, the commission has directed as follows:
Resignation of the affected Board members of Oando Plc,
The convening of an Extra-Ordinary General Meeting on or before July 1, 2019, to appoint new directors,
Payment of monetary penalties by the company and affected individuals and directors,
Refund of improperly disbursed remuneration by the affected Board members to the company,
Bar of the Group Chief Executive Officer (GCEO) and the Deputy Group Chief Executive Officer (DGCEO) of Oando Plc from being directors of public companies for a period of five years.
As required under Section 304 of the Investments and Securities Act, (ISA) 2007, the commission would refer all issues with possible criminality to the appropriate criminal prosecuting authorities. In addition, other aspects of the findings would be referred to the Nigerian Stock Exchange (NSE), Federal Inland Revenue Service (FIRS), and the Corporate Affairs Commission (CAC).
The commission is confident that with the implementation of the above directives and introduction of some remedial measures, such unwholesome practices by public companies would be significantly reduced.
Therefore, in line with the federal government’s resolve to build strong institutions, Boards of public companies are enjoined to properly perform their fiduciary duties as required under extant securities laws.
The commission, as the apex regulator of the Nigerian capital market, maintains its zero tolerance to market infractions, and reiterates its commitment to ensuring the fairness, integrity, efficiency and transparency of the securities market, thereby strengthening investor protection.
