Court orders Ecobank to forfeit N22.5bn over Airtel Shares

A Federal High Court in Lagos has ordered O & O Networks Limited, a special purpose vehicle owned by Ecobank Transnational Incorporated, to pay the sum of N22.5 billion, being proceeds of the wrongful sale of shares in Airtel Networks Limited by Ecobank to Bharti Airtel, into the court’s account.

The decision is a fallout from the long-standing legal dispute between Mr. Oba Otudeko, a founding shareholder and former Chairman of Airtel Nigeria; his company, Broad Communications Limited; another founding shareholder of the company and O & O Networks now owned by Ecobank Transnational Incorporated.

Otudeko and Broad Communications Limited had instituted a legal action in 2006 challenging Delta State Government’s acquisition of O & O network’s shares in Airtel Networks (formerly Econet Wireless Nigeria).

From the facts of the case, Broad Communication’s main contention is that the transaction was unlawful and a breach of the Shareholders’ Agreement executed by the shareholders of Airtel Networks.

According to the said Shareholder’s Agreement, the shares should have been offered to the existing shareholders first as their right of “First Refusal” (pre-emptive right), as mandated by Clause 17.2.1 of the Shareholders’ Agreement, before being offered to Delta State Government

Following the institution of the suit, O & O Networks purportedly bought back the disputed shares from Delta State Government.

Beneficial ownership of the Airtel shares was subsequently transferred to Oceanic Bank, which is now owned by Ecobank Transnational Incorporated.

In 2015, following information received that the disputed shares were being offered for sale, Broad Communications published a “Buyer Beware” notice advising interested parties of the existing dispute on the shares.

On February 5, 2015, Justice John Tsoho of the Federal High Court also gave an order restraining all parties from dealing or tampering with the shares in the custody of Ecobank, and that all parties must maintain status quo until the final determination of the suit.

However, sometime in July 2018, and in disregard of the existing orders of the court, O & O Networks/Ecobank, entered into an arrangement with Bharti Airtel, the parent company of Airtel Networks, for the sale of the disputed shares to Bharti Airtel for the sum of N22.5billion.

Further findings revealed that as a condition of the sale transaction, Bharti Airtel, being previously aware of the dispute and court orders on these shares, extracted an indemnity from O & O Networks/Ecobank, the sellers of the shares, against any exposure to any liability.

In a ruling delivered on March 7, 2019, in respect of Broad Communication’s application challenging the recent sale of shares to Bharti Airtel, Justice Mojisola Olatoregun held that the order to maintain status quo earlier made by Justice Tsoho on February 5, 2015 still subsists and that O & O Networks should not have entered into the agreement with Bharti Airtel.

The judge stated that this was tantamount to disobedience of a subsisting court order and an affront to the court’s authority.

She submitted that any sale of the disputed shares was done at the seller’s risk.

Consequent upon this, the judge ordered O & O Networks, owned by Ecobank Transnational Incorporated, to pay the sum of N22.5billion being the proceeds of the unlawful sale into the custody of the Federal High Court within seven days from the date of the court ruling.

The suit was adjourned to May 28, 2019 for continuation of hearing.

Credit: Thisday