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LCCI condemns bill compelling private companies to list

By BusinessNews Staff on December 11, 2014

The Lagos Chamber of Commerce and Industry has called for the withdrawal of the Private Companies Conversion and Listing Bill, which is before the House of Representatives, saying it will do the business climate in Nigeria no good.

The bill seeks to compel private companies whose shareholders’ funds exceed N40bn or its annual turnover exceeds N80bn or its total assets exceed N80bn to convert to public liability company and get their shares listed on the Nigerian Stock Exchange.

This is meant to promote growth for both the companies and the Nigerian capital market.

The LCCI, however, explained in a statement by its Director-General, Mr. Muda Yusuf, on Tuesday that although the 1999 Constitution vests the National Assembly with the power to make laws regulating the ownership and control of business enterprises operating in Nigeria, the proposed bill breaches representations made to attract foreign investors and negatively affects Nigeria’s reputation.

“It is counter-productive to the drive for foreign investments because foreign investors prefer to operate under stable economic policies,” it said.

The chamber warned that the proposed bill would also have a negative impact on local investment and the broader economy.

It said, “It (the bill) would lead to considerable loss of revenue to the government and break up of companies to circumvent the requirement of the bill. Also, the Nigerian Stock Exchange may not have the depth and liquidity needed for the investment arising out of the mandatory listing of these companies.”

According to the LCCI, the bill will negatively affect the business environment by creating undesirable and unnecessarily cumbersome regulation and scrutiny on the companies under the Companies and Allied Matters Act, Securities and Exchange Commission and NSE rules and regulations.

It added, “It would also have a negative impact on corporate governance which is the engine room critical for the survival of any company.

“Listing on the floor of the stock exchange is not a ticket to a successful company as some companies that have been listed were delisted, and those that converted to public were re-registered to private companies. Going public and being listed on the floor of the stock market are critical business decisions that only the companies’ management can make.”

The LCCI also warned that rather than achieve its goal of wealth redistribution, the Bill if passed into law would distort the market as it was capable of leading to a situation whereby shareholders would dump shares in other listed companies in favour of the target companies.

It added, “One of the arguments proposed by the proponents of the Bill is that it will provide employment.

However, this bill does not necessarily create employment opportunities as many foreign investors have expatriates in their employment. Some even run highly mechanised or automated businesses so this cancels out this so called benefit of this bill.”

The bill, sponsored by the Deputy Chairman, Capital Market Committee of the House of Representatives, Mr. Chris Azubogu, has generated a debate among stakeholders. While several market operators have expressed support for it, several others have taken a similar stand with the LCCI.

In September, Azubogu said in Lagos that his decision to sponsor the bill was influenced by the provisions of the constitution and that it was part of his duty as a lawmaker.

Azubogu insisted that not only was it in the best interest of Nigerians, the capital market and the country at large, but it was also in tune with the provisions of the Constitution.

He had said if passed into law, “The bill will give us room to have what is called complete financial inclusion, to move away from the informal sector to formalise our economy and to account for the strength of economic activities going on in the country.

“For instance, with the rebased GDP of Nigeria at $500bn, the market capitalisation of the Nigerian Stock Exchange is less than $100bn. So, if our GDP ratio to the market capitalisation is less than 20 per cent, it means that over 80 per cent of our economy is in the informal sector; it will be difficult to account for productivity and for the government to put basic things in place.”

However, the LCCI said the bill was inconsistent with the constitution and other laws regulating investments in the country.

It said, “It contravenes the provisions of section 44 of the 1999 Constitution which forbids compulsory acquisition of private property, and section 25 of the Nigerian Investment Promotion Commission Act which prohibits expropriation and states that “no person who owns, whether wholly or in part, the capital of any enterprise shall be compelled by law to surrender his interest in the capital to any other person.”

According to it, the Bill is also against the spirit of the bilateral investment treaties between Nigeria and certain countries, and therefore pose a huge reputational risk for Nigeria.

Rather than pass the Bill, the LCCI said there would be a greater degree of success in the country if the appropriate investment climate was created; “where companies will seek to invest and will seek to be listed on the NSE by their own volition based on objective, empirical, investment/market considerations.” It also called for the strengthening of the Corporate Affairs Commission and the amendment of the Companies and Allied Matters Act, 1990, noting that it had not be amended in 24 years.

[Punch]

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