Nigeria’s National Pension Commission (PenCom) has released new guidelines banning significant cross-shareholding in multiple Licensed Pension Fund Operators (LPFOs) in the country.
In its latest guidelines issued on Friday and which became operational with immediate effect, the pension regulatory commission stated that the latest initiative would promote transparency and good governance as well as protect the pension assets.
It described significant cross-shareholding as a situation in which a significant shareholder in an LPFO thereafter a) acquires, or seeks to acquire, a significant shareholding in another LPFO; or b) otherwise becomes legally entitled, whether directly or indirectly, to hold such significant shareholding in another pension entity, by means including but not limited to the conversion of debt to equity, operation of law such as transmission on death, or any other form of vesting.
In addition, the commission maintained that significant cross-shareholding could arise from mergers and acquisitions outside the pension sector, which leads to individuals or entities holding equities of five per cent or more in multiple LPFOs.
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In the new guidelines aimed at forestalling such a situation in the pension system, the commission stipulated: “No person shall hold, or continue to hold, or otherwise enter into any arrangement or agreement that would result in holding or continuing to hold a significant cross-shareholding.
“For the purpose of determining whether a person holds a significant cross-shareholding, the Commission may aggregate the shareholdings of such person with those of its related persons.
“The restriction on significant cross-shareholding applies regardless of how the stake is acquired, whether through mergers, acquisitions within or outside the pension sector, direct investment, new licensing, or other means whatsoever. The goal is to ensure that no shareholder or applicant company holds a direct or indirect ownership/shareholding of five per cent or more in more than one LPFO. This includes affiliates, holding companies, subsidiaries, and related parties of the shareholder, as well as its directors, employees, spouses, and family members of the shareholder or the new applicant company.
“Any person who, on the effective date, holds a significant cross-shareholding shall, within [six months] from the effective date, divest such portion of its shareholding as is necessary to comply with the restriction on significant cross-shareholding as provided in these guidelines. Any person who, by operation of law, after the effective date, comes to hold a significant cross-shareholding shall, within [six months] from such vesting, divest such portion of its shareholding as is necessary to comply with the restriction on significant cross-shareholding as provided in these guidelines”, it added.
As a deterrent to abuses, the PenCom also imposed sanctions on defaulting PFOs, pointing out that any agreement or arrangement resulting in a significant cross-shareholding shall be void and ineffectual.
Furthermore, it stated that any shares purportedly acquired or held in contravention of the guidelines would not confer rights or privileges, including voting rights, dividends, or participation in the governance of the pension firm.
The PenCom further clarified: “The LPFO in which such shares are purported to be held shall not recognise or record such shares in favour of the significant shareholder.
“Appropriate administrative penalties shall be imposed for violation of the provisions of these Guidelines in line with the Commission’s Framework for Regime of Sanctions and Penalties”, the commission stipulated.
It would be recalled that the commission had earlier issued a circular on Centralised or Shared Services Arrangements with Parent, Holding, Group Entities and/or other related subsidiary companies.
Industry experts believe that the latest guidelines for PFOs are also issued to promote good governance in the pension system and ensuring that CSSAs are independently operating with competitive pricing that reflects the services rendered and clearly defined roles and responsibilities of all players in the system.
