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Court restrains FRC as Standard Bank Group backs Nigerian unit

By on November 6, 2015

The Federal High Court in Lagos on Wednesday restrained the Financial Reporting Council of Nigeria (FRCN) from interfering with the operations of Stanbic IBTC Holdings (SIBTCH), Plc.

Also, the Standard Bank Group reiterated its support for SIBTCH, its Nigeria unit, despite the ongoing controversy between the holding company and FRC.

The court order came two days after the Central Bank of Nigeria (CBN) rejected the request by FRCN that it should take disciplinary action against the company, citing the council’s failure to follow due process in the matter.

Ruling on the application for an order of interlocutory injunction filed by the bank, Justice Ibrahim Buba also restrained the council and its officers from preventing the plaintiff or its subsidiaries “from carrying on their lawful businesses”.

He also restrained the council from inviting the entire Stanbic IBTC Holdings’ board of directors to any meeting in connection with the defendant’s statutory investigation of the plaintiff’s statements.

The orders, the judge said, would subsist “until the hearing and determination of these proceedings”.

FRCN had last week sanctioned Stanbic IBTC over its audited accounts for 2013 and 2014 and suspended the Financial Reporting Numbers of the bank’s chairman, Mr. Atedo Peterside, and its chief executive, Mrs. Sola David-Botha.

The council also barred them from vouching for the integrity of any financial statements in Nigeria.
FRCN also suspended two other directors – Mr. Arthur Oginga and Dr. Daru Owei – for attesting to what it termed the “misleading” 2013 and 2014 financial accounts of the bank, as well as Ayodele Othihiwa of KPMG Professional Services for his firm’s alleged complicity in the infractions highlighted in the financial reports for the two-year period.

It based its sanctions on issues raised by the bank’s minority shareholders led by the Mahtani brothers who own the Churchgate conglomerate, to some other regulatory agencies such as National Office for Technology Acquisition and Promotion (NOTAP), Securities and Exchange Commission (SEC) and the Central Bank of Nigeria (CBN), among others.

The council stated that it met with NOTAP on September 1, 2015 and also exchanged several correspondences on the matter thereafter.

This made Stanbic IBTC to file a suit in court, asking the court to determine among others, whether FRCN has the power to impose a fine of N1 billion on it.

The bank also asked the court to determine whether or not the FRC has the power to license directors and other office holders of public interest entities and if it also has the power to suspend the said licence by suspending a director or other office holder of a public interest entity.

It also wants the court to determine if the council has the power to bar any director or other office holder from signing the entity’s financial statements without informing the affected director or other office holder what he/she has done wrong and giving him/her the opportunity to show cause why disciplinary action should not be taken against him?

Besides, the bank asked the court to answer the question whether “the true construction of the National Office for Technology Acquisition and Promotion (NOTAP) Act 1979 is non-registration of an agreement registrable under the NOTAP Act a criminal offence?”

When the case came up yesterday, the bank’s lawyer, Prof. Fidelis Oditah (SAN), urged  the court to stop FRCN from harassing the plaintiff in the course of its operations.

Oditah said the FRCN was acting beyond its powers by directing SEC to suspend the bank from issuing a public notice on the plaintiff’s N18 billion right issue that the commission had previously approved, citing a letter received from FRCN.

“On September 15, SEC put on hold the plaintiff’s application to pay scrip dividends out of its 2014 profits, citing a letter received from FRCN,” Oditah said.

According to him, the council “is not a prosecutor or a court,” adding that it engaged in a campaign of calumny against the plaintiff.

The consequence, Oditah said, is that Stanbic IBTC’s share price fell from N23 to less than N19 within a week.

But FRCN’s lawyer, Chief Olusina Sofola (SAN), urged the court not to grant the application because the invitation had been overtaken by events.

“The day of the meeting has come and gone and they (plaintiff) did not attend. The heavens did not fall. They have not said they are being invited to another meeting. The meeting did not hold, so what is this court being asked to stop?

“As we speak now, they are carrying out their business. The letter does not run foul of the law. If they feel we acted outside our powers, they should bring an application to challenge our powers. I urge my lord to dismiss their application,” he said.

In his ruling, Justice Buba held that the application has merit.

“There is a strong case for the maintanance of status quo. There is a case made for the grant of the interlocutory injunction,” he said.

According to the judge, FRCN is aware of the suit, therefore, the best thing was for all parties not to take steps that could “undermine” the case in court.

“The whole essence of having a court of law in any civilised society is to ensure everything is done according to law and not otherwise,” the judge said.

“No court will stop a statutory authority from performing its statutory duties.

“However, the court must emphatically add that where it is alleged that a statutory authority is acting ultra vires on its statutory powers, the courts have powers and are imbued with jurisdiction to enquire into whether it is true or false,” the judge added.

He held that “the application has merit and is hereby granted”.

Justice Buba consequently adjourned the matter to Friday for hearing of a motion to join a shareholder to the suit.

Meanwhile, Standard Bank, which is the parent company of Stanbic IBTC, has assured the board and management of the Nigeria-based bank that it will continue to stand  “firmly behind Stanbic IBTC’s chairman and executive team,” describing them as “individuals of impeccable credibility and the highest integrity.”

The Chief Executive, Standard Bank Group, Sim Tshabalala, said this in a speech presented at a dinner to mark the Nigeria-South Africa Chamber of Commerce 10th anniversary celebration that was held in Johannesburg, South Africa.

He pointed out that the management of Stanbic IBTC “run a bank that is widely recognised as a paragon of excellent governance”.

Tshabalala said: “Our board, after all, is led by Atedo Peterside, the very embodiment of good corporate governance in Nigeria in his capacity as Chairman of the National Council on Privatisation’s Technical Committee, and as Founder and President of the ANAP Foundation.  The people of Stanbic IBTC are, quite simply, the cleanest and best in the business.

“We remain committed to doing business in Nigeria, and to building constructive relationships with the Nigerian authorities based on clear communication and transparency. In the short term, we will continue to engage with the relevant authorities to resolve these issues as quickly as possible. In the longer run – indeed for as long as there is such a thing as the Standard Bank Group – we will continue to uphold the highest standards of corporate governance, of adherence to the law and of ethical conduct.”

Giving insights into the issues that led to the current face-off, Tshabalala said:  “Here’s our perspective on the current controversy involving Stanbic IBTC. The issue in a nutshell is that – in line with the Standard Bank Group’s operating model, a wide range of services – the largest component of which are IT services – are provided by the Standard Bank Group to Stanbic IBTC and our other franchises in Africa. I’d like to emphasise that charges for these services amount to approximately five per cent of the total cost base of Stanbic IBTC.

“The Nigerian National Office for Technology Acquisition and Procurement has in recent years raised objections to the payment of these fees, resulting in the accumulation over the past two years of an outstanding inter-company balance between Stanbic IBTC and Standard Bank South Africa because these charges cannot be remitted without NOTAP’s regulatory approval.

“We argue that the regulator is not in a position to make this call – and we are not alone in this opinion.  The decision of the FRC is erroneous on its merits and the process that led to it is significantly flawed and not in compliance with the requirement of the FRC Act.”
Tshabalala, however, pointed out that the controversy between Stanbic IBTC and the FRC would neither dent Standard Bank’s confidence in Nigeria nor ‘make us think twice when advising others about investment opportunities in the country’.
“We have every confidence that the current dispute will be resolved fairly, appropriately and reasonably.  Nigeria is an enormously important market for us, and for a great many other South African firms – including MTN of course.  So when disputes such as these arise, it’s in everyone’s interests to play open cards, to commit to transparent and constructive resolution, and to learn from the process.  That’s precisely what we intend to do.”

But Tshabalala noted that there was need for more trade and investment between Africa’s two largest economies — Nigeria and South Africa — as well as for the region as a whole.
“The South Africa-Nigeria relationship is far from superficial. We must, therefore, expect difficulties from time to time, including those currently happening between the Nigerian authorities and two of the largest South African firms operating in Nigeria – one of which you visited this morning, and one of which you’re visiting right now,” he noted.

 

[ThisDay]