Breaking New: New regulation requires CBN approval to acquire 5% stake of any Nigerian bank
Any investor looking to acquire up to 5 per cent stake of any bank in Nigeria will need to obtain prior approval and no objection from the Central Bank of Nigeria (CBN).
This is according to section 20.2 of the new Corporate Governance Guidelines for Commercial, Merchant, Non-Interest, and Payment Service Banks in Nigeria.
Classified under the protection of shareholder’s rights provisions, the new regulations attempts to also address recent events in the capital market affecting some commercial banks.
“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.”
The regulation also stated that no one can own controlling stake in more than one bank, except there was a prior approval of the apex bank.
“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.”
The new regulation also states that where the central bank has an objection to any of the acquisition, the notice of the objection must be communicated to the bank. The bank then has 48 hours to notify.
“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 forty-eight (48) hours.”
The protection of shareholders rights regulation also extends to government ownership of banks, which it states should not exceed more than 10% (direct and indirect) for a maximum of 5 years.
“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 central bank also gave government two years from the effective date of the Guidelines to comply with the provision.
“For existing investments above five years, the bank shall within two years from the effective date of this Guidelines, comply with the provision.”
The central bank regulation also addresses Financial Holding Companies (FHC), and activities around mergers and acquisitions.
According to the regulation, no director or shareholder can change control of a bank without the prior approval of the bank. It also does not allow the transfer of 5% and above of a bank to any shareholder without the prior approval of the CBN.
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:
“i. a change in the control of the FHC, the transfer of shareholding of five per cent (5%) and above in the FHC; and/or an increase in shareholding to five per cent (5%) or more in the FHC. Provided that CBN’s prior approval and No Objection shall be sought and obtained, before any acquisition of shares of an FHC by an investor (including through the capital market), that would result in equity holding of five per cent (5%) and above.
- the sale, disposal or transfer of the whole or any part of the business of the FHC;
iii. the acquisition or merger of the FHC;
- the reconstruction of the FHC; or
- the employment of a management agent, management by or transfer of its business to any such agent.”
