The Central Bank of Nigeria (CBN) has issued a new Corporate Governance Guidelines for Commercial, Merchant, Non-Interest, and Payment Service Banks which require that any investor intending to acquire up to 5% equity in any bank must obtain prior approval and no objection from it before proceeding with the investment.
Based on the provisions of section 20.2 of the new guidelines and classified under the protection of shareholder’s rights provisions, the new regulations may not be unconnected with the apex bank’s move to frontally address the recent controversies trailing the acquisition of some commercial bank shares in the capital market.
Specifically, the guidelines stated, inter alia: “CBN’s prior approval and No Objection shall be sought and obtained before any acquisition of shares of a bank (including through the capital market), that would result in equity holding of five per cent (5%) and above, by any investor.”
“Except where prior approval of the CBN is granted, no individual, group of individuals, their proxies or corporate entities shall own controlling interest in more than one bank.”
“Where the CBN has an objection on any acquisition as stated in Section 20.2.b above, notice of the objection shall be communicated to the bank, and the bank shall notify such investor(s) within fortyeight (48) hours”, the apex bank added.
Similarly, the new guidelines provides for the protection of shareholders rights in government ownership of banks, which should not exceed more than 10% (direct and indirect) for a maximum of 5 years but that for existing investments above five years, the government is given two years of grace to comply with the provision.
The apex bank further clarified: “Government’s direct and indirect equity holding in a bank shall not be more than ten per cent (10%), which shall be divested to private investors within a maximum period of five years from the date of investment.
“For existing investments above five years, the bank shall within two years from the effective date of this guidelines, comply with the provision”, it added.
The CBN regulation also addresses Financial Holding Companies (FHC), and activities around mergers and acquisitions even as it clearly stated that no director or shareholder can change control of a bank without the prior approval of the bank.
In addition, it does not allow the transfer of 5% and above of a bank to any shareholder without the prior approval of the CBN and further stated that no FHC or any of its director, shareholder or agent shall enter into an agreement which results in a change of control of the holding.
