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Stanbic IBTC BANK, Stakeholders Clash Over Share Holding Restructuring Plans

By Mathias Okwe, (Assistant Business Editor, Abuja) 
04 October 2015   |   2:52 am
THE controversy between minority shareholders and the management of Stanbic IBTC Bank over alleged schemes by the latter to float a rights issue for at least N18 billion fresh capital may have raised questions about the operating terms of the Nigerian partners of South Africa’s Standard Bank in the continent’s largest economy, The Guardian has learnt.
Mukhtar

Mukhtar

• It’s Not True, Says Peterside
THE controversy between minority shareholders and the management of Stanbic IBTC Bank over alleged schemes by the latter to float a rights issue for at least N18 billion fresh capital may have raised questions about the operating terms of the Nigerian partners of South Africa’s Standard Bank in the continent’s largest economy, The Guardian has learnt.

Aggrieved shareholders, who have been in running battle with the bank’s management, insist that there are plans — which they allege was part of a grand design — to defraud Stanbic IBTC’s Nigerian stakeholders as well as the Nigerian government of over N10b for repatriation to South Africa through ‘illegal’ deductions from the bank’s gross income.

This, they claim, was to be done under the guise of payment for banking franchise, which is not approved by Nigerian regulatory agency, the National Office for Technology Acquisition and Promotion (NOTAP).

The Chairman of Stanbic IBTC’s Board of Directors, Mr. Atedo Peterside, had, in several fora since the controversy began, denied plans to short-change Nigerian shareholders through the management/franchise deal.

But, recently, Chairman of the Minority Shareholders Association of Nigeria, Alhaji Dr. Mukhtar Mukhtar, insisted that the plot was part of a larger plan by the South African-based Standard Bank, majority shareholders in Stanbic IBTC, to severely dilute Nigerian shareholding in the bank and that Peterside was being economical with the truth.

He said Standard Bank, at the moment, holds a controlling equity of 53 per cent and if the planned rights and script issues, which the majority shareholders have allegedly converted to shareholding, is allowed to hold, the South African bank would be owning almost 85 per cent equity of Stanbic IBTC Bank, leaving indigenous shareholders with only a paltry 15 per cent.

Mukhtar noted that the development would amount to violation of Nigerian tax laws by the management of Stanbic IBTC Bank, stressing, “The bank has, since 2011, been debiting and accruing tens of billions of Naira from gross revenue earned in a suspense account, as payment of management/franchise and IT fees to its controlling and majority shareholder without the approval of NOTAP. This has been in the practice till date, which is unlawful.

“It is this infraction, wrongdoing and misleading of indigenous minority shareholders that necessitated our petitions to regulatory authorities. The NOTAP Act clearly provides that such agreement for transfer of technology must be registered and approved before any payment can be made to any person outside Nigeria.

“The bank’s Chairman, Mr. Atedo Peterside, is being economical with the truth. The illegal yearly deduction from the gross revenue for payment as management/franchise fees has adversely affected the bank’s balance sheet from 2011 to date. The balance sheet, as it is, cannot be said to be a true and fair position of the state of the company.

He alleged that N3,129b and N3,338b were debited in 2013 and 2014 respectively, making a total of N6,467b. He said it was unjustifiable that such an amount was required for part-time recruitment of experts and advertising for just two years, wondering how such a massive amount, which is enough to pay the entire civil service of a state in the country, is debited solely for payment of part-time recruitment.

According to him, “How is it justified that the management of Stanbic IBTC prefers to pay billions of Naira yearly for foreign experts instead of training and investing in Nigerian professionals, so that the technology is transferred; which is the spirit and primary aim of the registration of these types of agreements by NOTAP. How is it justified that the management of Stanbic IBTC prefers to perpetually pay billions of Naira for the part-time recruitment of foreign experts for banking business, a venture which has been successfully undertaken in Nigeria since 1894?”

“How is it justified, also, that the strongest banks in Nigeria are all indigenously run and managed, but instead of taking a cue from these banks, Stanbic IBTC has preferred to perpetually debit and accrue billions of Naira each year for the part-time use of experts and technology from the controlling/majority shareholder – Standard Bank of South Africa,” Mukhtar further queried.

In the meantime, regulatory agencies, the Financial Reporting Council (FRC) and the Securities and Exchange Commission (SEC) as well as NOTAP have stepped into the matter and are investigating the allegations.

The FRC, which is responsible for, among other things, developing and publishing accounting and financial reporting standards to be observed in the preparation of financial statements of public entities in Nigeria; and for related matters, has recalled Stanbic IBTC Bank’s Accounts within the period under reference for vetting.

The FRC’s Executive Secretary, Mr. Jim Obazee, confirmed to The Guardian that the Council was already looking into the books of Stanbic IBTC and has equally raised observations to which the bank is expected to expeditiously respond before a meeting involving the Bank, shareholders and the NOTAP, as well as the Council.

He explained that the FRC was interested in the matter because it falls within the purview of its mandate to protect investors, and prevent attempts by unscrupulous public entities to deny government its fare share of revenue in form of taxes for business activities they undertake in the country.

Mr. Obazee said: “The petition from the stakeholders of Stanbic IBTC Bank is on issues relating to Stanbic IBTC and the way they have been accruing some monies in their account. There is nothing wrong with accrued monies, but it must be disclosed properly. Shareholders said the accruals required NOTAP approvals before payments can be made and that there was no need to make those accruals because the bank has not secured NOTAP approval.

He continued: “The petitions kept coming and we invited Stanbic IBTC to hear their side in the matter. Listening to their side of the story, we believe that the petitioners have a good case. The next step was to look at the agencies that were duly involved: NOTAP, which is to give approvals; the Central Bank of Nigeria (CBN) as regulator, and the Security and Exchange Commission (SEC), because they were asking for general mandate for the treatment of third party transactions. We were against that because it was not in line with related party transactions accounting standards.

“We are here to also find out if NOTAP approved any of these payments, such as Historical fees. We are looking at transactions from 2011 to date. If they didn’t get approval for 2011, 2012, 2013, 2014 fees, why are they keeping these monies?”

He said the Council wanted to know whether the bank was aware that it wanted to shore up their capital with rights issues and diluting shareholding, which could be addressed instead with the money it was setting aside.

He said, “If they are pursuing rights issue of say N18b to shore up capital and they have monies they have kept aside, instead of diluting shareholdings, in such a way that will now affect minority shareholders, why not use that money to shore up your capital.

“The other party in this is the SEC. We have put a call to them and they have swiftly stopped whatever rights issue request that Stanbic IBTC Bank is making in a hurry, until this matter is properly resolved. Because our jobs as government agencies is to protect investors and other stakeholder’s interest, government is also involved in this matter. If you are backing out some money out of profit before tax, and you are warehousing it for a number of years, you are actually defrauding the Federal Government, because government is supposed to have taxes from the profit.

Noting that keeping money from Profits Before Tax (PBT) accounting denies government of its share of tax earnings, Obazee said that the issue has to be straightened out and if the accounts weren’t reported correctly in the financial statement, the bank would be subjected to the FRC disciplinary procedure.
“We can even ask them to withdraw the financial statements and reissue it because the correct account has to be stated. We also want to know the credibility of the external auditors. The amount we are talking about is very substantive. It runs into tens of billions. It’s not the kind of money that we can afford to look away. But it is not an amount that we can pin down now because we are looking at 2011, 2012, 2013, 2014,” Mr. Obazee further explained.

He described as worrisome the activities of some public agencies, particularly the banks, concerning their observance of accounting standards in Nigeria, stressing that the 2011 World Bank Report of Observance of Standards and Codes; Accounting &Auditing (ROSC A&A) was submitted to the Federal Government of Nigeria in June 2011.

The Acting Director General (DG) of NOTAP, Dr. Dan-Azumi Mohammed Ibrahim said the Office had turned down the application for the approval of the foreign franchise sought by Stanbic IBTC Bank because the technology for which the Bank was seeking approval to import could be sourced locally.

He said: “We regulate the inflow of foreign technology into the country and at the same time develop local technology. NOTAP is expected to register Stanbic IBTC with its foreign partner and we have a guideline on how we do our registration. The forex manual of the CBN guides us.

“We don’t approve what is not covered by the manual. So Stanbic IBTC applied for a franchising and management fee agreement and we still did not render them that approval because management service agreement is not required in Nigeria. We have local firms that have this. So we felt we do not need foreigners to come and teach us how to manage banks. And also a franchise arrangement is not covered under banking facility.

He said that the office did not give the bank the approval because it was guided and strictly adheres to its mandate, adding, “Unless we register an agreement, the Nigerian company may not be able to pay through the Central Bank to the technical partner outside. And when we register, we issue certificate. It is this certificate that they take to central bank to enable them remit money to their technical partners.”

“So long as we don’t register or give the certificate, the agreement is not valid and no one can make any payments. Stanbic IBTC have not paid Standard Bank of South Africa, because we have not approved the partnership. The bone of contention is between shareholders and Stanbic IBTC itself. The shareholders are complaining that the money they seek approval for, to take outside the country should be ploughed back into the system so that they can reap benefits.

“We are trying to bring a check on these issues. We have made a suggestion to the CBN that the forex manual should have a clause that any company within the country that wishes to enter into any agreement with a foreign partner must have a written permission from their shareholders. This is because if shareholders are not part of the decision, grumbling like this will not come in,” the NOTAP boss said.

The Board chairman of Stanbic IBTC Bank, Mr. Atedo Peterside has consistently denied the allegations of selfish interest in favour of Standard Bank of South Africa, pointing out that he as a shareholder of Stanbic IBTC Bank cannot take action that can jeopardize his investment in Stanbic IBTC.

He said in a recent media interview: “ The hat I wear in this dispute is that of the chairman of Stanbic IBTC Holdings PLC, and I am committed to acting in the best interest of the Company. I am for honesty and fair play, having regard to international best practices. In addition, you must be mindful of the published fact that I am a significant shareholder in Stanbic IBTC Holdings PLC, and so why will I ever support an unjust action that will harm my own financial interests? Having said that, I am not one to disrespect any foreign shareholder and treat them unfairly, just because that will increase what accrues to me as a shareholder of their Nigerian subsidiary. Stanbic IBTC is a fully compliant and responsible corporate organisation, which operates in accordance with international best practices. Stanbic IBTC has not and will never make any international remittance without due approvals from the National Office for Technology Acquisition and Promotion (NOTAP).”

He also shed more light on the NOTAP request and why his Bank is not responding to the media’s inquiries concerning the allegation: “The Management of Stanbic IBTC have been engaging with NOTAP on this matter. We believed this to be a routine business application, which needed to be made to NOTAP.  If anybody in NOTAP ever saw me in their offices, they should describe the colour of the attire that I wore on that day. The matters relating to the specific allegations are under legal consideration. Therefore, addressing them on the pages of the newspaper will be in contempt of the court. We did, however, put out an advertorial in national dailies on Wednesday September 2, in which we assured our stakeholders that we are a responsible company that respects and adheres to accounting standards. If you notice, even in this interview, I have not mentioned a specific item or a specific amount because all those specifics are for the court to decide. I only discussed a general principle as it applies to virtually all subsidiaries of multinationals applying in various sectors across the world.”

Mr. Peterside, however confirmed that the Bank’s books of accounts are being vetted by the FRCN, acting on a petition by the protagonist in the law suit. He declared that the Bank’s management is cooperating with the FRCN and will address any concerns that they may raise. He allayed fears of any possible underhand dealing.

His words: “ Our Accounts were audited in line with International Financial Reporting Standards and accounting policies. I have said repeatedly that we conform with all known accounting standards. We have always also used some of the most reputable accounting firms. At the EGM of Stanbic IBTC Holdings PLC, held on 06 August 2015, shareholders overwhelmingly passed a resolution authorising directors to offer to all shareholders entitled to receive interim dividend the right to elect to receive new ordinary shares, instead of the whole of any interim dividend declared by Directors, in respect of the financial year ending 31 December 2015. In line with the said approval/resolution, a number of shareholders elected to receive new ordinary shares instead of their cash interim dividend. On the other hand, those shareholders who elected to receive cash dividend have been paid their cash interim dividend since 28 August 2015. It is therefore surprising that certain shareholders, having elected and received their cash dividend are now seeking to prevent those shareholders who elected to receive new ordinary shares instead of their cash dividend from doing so. This is totally unjustifiable and should not be allowed by the regulators; as it would be unfair to those shareholders.”

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