The Central Bank of Nigeria (CBN) and FBN Holdings Plc have asked a Federal High Court in Lagos to dismiss a lawsuit brought by investment firm Barbican Capital Ltd.
The suit concerns an alleged alteration of 5.39 billion units of shares in FBN Holdings, a significant stake in one of Nigeria’s leading financial institutions.
Barbican Capital, an affiliate of Honeywell Group Limited, claims that over the years, it has cumulatively acquired 15.1% of FBN Holdings’ shares.
These acquisitions, the firm asserts, were properly recorded by FBN Holdings’ appointed registrars, Meristem Registrar and Probate Service Ltd, and acknowledged by the Central Securities Clearing System (CSCS). However, the legitimacy of this shareholding is now under scrutiny.
FBN’s Case
In court filings, FBN Holdings, represented by Senior Advocate of Nigeria (SAN) Babajide Koku, argues that Barbican Capital deliberately concealed an ongoing verification exercise by the CBN.
According to the bank, the lawsuit is an attempt to bypass regulatory scrutiny. “The primary purpose of instituting this suit was to circumvent the verification exercise and the decision taken by the CBN against Barbican Capital Limited,” FBN Holdings stated.
“Rather than regularise its status with the CBN by providing relevant documents to the CBN necessary for the verification of its unverified shareholding, the plaintiff has instituted this suit in a bid to activate machinery of justice to compel the defendant to defy its regulator, due process, regulatory laws and policies by mandating it to recognise all of the plaintiff’s purported shareholding obtained without CBN’s approval which as at the time of filing the suit stood to the tune of about 5,397,409,262 billion units.
CBN’s Verification Process
Nigerian banking regulations require any acquisition of a 5% or greater stake in a financial holding company to receive prior approval from the CBN.
FBN Holdings informed the CBN in July 2023 that Barbican Capital had acquired a 13.3% shareholding in the bank, triggering a verification process by the regulator.
The CBN requested Barbican Capital to provide documentation to validate its shareholding. However, the firm ‘could only’ produce evidence for 3.11 billion shares, representing 8.67% of FBN Holdings’ total shares, leaving 2.34 billion shares unverified.
In January 2024, the CBN notified FBN Holdings that it could not verify the full extent of Barbican Capital’s claimed shares due to insufficient documentation.
As a result, the bank revised Barbican Capital’s shareholding in its financial statements to reflect only the verified portion, in compliance with regulatory requirements.
Details of the second quarter 2023 financial statement of FBN Holdings reveal Barbican holds 8.67% of the company while Femi Otedola holds 11.87% directly and indirectly, thus the majority shareholder. The shareholding is verified by the CBN.
The CBN, in a deposition by Orjiakor Nwabueze, Deputy Director of the Banking Supervision Department, emphasized the importance of this verification exercise.
“The CBN demanded evidence of the purchase of shares being claimed by the plaintiff with a view to verifying the shares and satisfying itself that the shares were actually purchased,”
“Whilst the verification of shares was ongoing, the CBN having realised that necessary documents were not supplied or provided, wrote the letter of 5th January 2024, to the Defendant notifying it of some documents/information not provided to aid the verification exercise.
“The 3rd party (CBN) instructed the plaintiff and its group to provide materials/evidence to prove its purchase/ownership of the outstanding 2,340,599,305 shares to enable it to verify their authenticity. The 3rd party is still expecting the Plaintiff and its group to come back with relevant materials to enable the 3rd party to decide to grant consent/approval or not to the outstanding shares, “Nwabueze stated.
He further noted that the verification process is essential to ensure compliance with statutory provisions and maintain transparency in the acquisition of shares.
The court has adjourned to October 2, 2024, for a hearing of the substantive suit.
Legal Dispute Escalates
Barbican Capital’s lawsuit seeks to compel FBN Holdings to recognize its full shareholding, despite the incomplete verification. The firm argues that its acquisitions were adequately documented and should be acknowledged in full.
On the other hand, FBN Holdings and the CBN maintain that without full compliance with regulatory procedures, Barbican Capital cannot claim rights or benefits from unverified shares.
The CBN has now been joined as a third party in the case, following a request by FBN Holdings.
The inclusion of the CBN as a third party highlights the regulator’s critical role in this dispute and its impact on the outcome of the case.
“The plaintiff cannot claim any right or benefit on those shares as long as they remain unverified,” Nwabueze noted, stressing the significance of the verification process.
FBN Holdings also pointed out that Barbican Capital’s motion for interim and interlocutory injunctions, which aimed to secure temporary recognition of its full shareholding, was not granted by the court.
Backstory
The Ecobank and Honeywell Group Dispute
The backstory of this case is rooted in a long-standing legal battle between Honeywell Group and Ecobank Nigeria over a significant debt owed by Honeywell.
The Supreme Court of Nigeria ruled in January 2023 that Honeywell must repay the debt, which then stood at over N13 billion.
Following this ruling, concerns have been raised that the recent share acquisition by Barbican Capital, a company reportedly controlled by Oba Otudeko, former chairman of FBN Holdings, might be an attempt to divert assets that should be used to settle the debt.
In July 2023, Barbican Capital acquired 4.7 billion shares in FBN Holdings through 26 proxy shareholders, allegedly connected to Oba Otudeko. This move effectively gave Barbican Capital a 13.3% stake in FBN Holdings, making it one of the largest shareholders in the bank. This acquisition has been contentious, particularly given the unresolved debt issues and the opaque manner in which the shares were acquired.
The CBN’s involvement in the verification of these shares further complicates the situation. The bank has been unable to verify the entirety of Barbican Capital’s claimed shares due to insufficient documentation, which has led to the current legal impasse.
The case has significant implications for the governance of FBN Holdings and could set a precedent for how similar disputes are handled in Nigeria’s financial sector.
The Federal High Court in Lagos has adjourned the case to October 2, 2024, for a hearing on the substantive suit. The court’s decision will be closely watched, given the high stakes involved for all parties.