The planned sale of a number of Nigeria’s rescued banks is being delayed due to a number of court cases lined up by shareholders against the move.

The Central Bank of Nigeria (CBN) is encouraging the sale to core investors of six banks it rescued in August, 2009 in a N620 billion ($3.98bn) bailout. The banks include Bank PHB, Intercontinental Bank, Oceanic Bank, Union Bank, FinBank, Afribank and Spring Bank.

Already, Mergermarket has reported the interest of Habib Bank Pakistan in buying over Bank PHB plc. Locally listed Access Bank also announced Monday (March 28, 2011) it would sign a Memorandum of Understanding (MoU) with Intercontinental Bank, while First Bank of Nigeria plc is also said to be planning to acquire Oceanic Bank. Union Bank has announced it reached a memorandum of agreement with a group of investors led by African Capital Alliance (ACA), a Nigeria-based private equity firm, for a $750 million recapitalisation drive. Mergermarket had earlier reported the planned acquisition of Afribank and Finbank by Vine Capital, a private equity firm formed by Nigerians based outside the country.

Shareholders of all the affected banks, which are all listed on the Nigerian Stock Exchange (NSE), have meanwhile taken the case to court, claiming that they have been sidelined in the planned sale of the banks.

Some Shareholders of Bank PHB plc, on March 16, 2011, filed a legal challenge of the planned sale of Bank PHB plc at the Federal High Court in Lagos. The court ordered that the respondents which include Habib Bank Pakistan Limited be served a notice of the case. It also put on hold the process of selling the bank until the case is heard.

Another legal challenge before the Federal High Court, Lagos is from shareholders of Intercontinental Bank plc who are also challenging the sale of the bank. In the petition before Justice Binta Murtala-Nyako, the shareholders request the Federal High Court to stop the acquisition of Intercontinental Bank by Access Bank, on the ground that it would cause substantial injustice to them and their shares. They are therefore asking the court to nullify the MoU between Intercontinental Bank and Access Bank.

Also, the acquisition of Union Bank by African Capital Alliance is being challenged by Union Bank of Nigeria Pensioners Association. So far, the only banks that have not had their expected sale challenged are Afribank and Finbank. Spring Bank plc is another bank on the sale block, but its shareholders have not indicated their willingness to challenge the sale.

Sunny Nwosu, president, Independent Shareholders Association of Nigeria (ISAN), said the shareholders will pursue their cases in court until a pronouncement is made on the issues raised.

Ben Obidegwu, a legal practitioner, notes that the shareholders may have a case, adding that “increase in the share capital of a company, going by provision 102 of the Companies and Allied Matters Act, the law guiding corporate transactions in the country, is the exclusive preserve of the shareholders through a general meeting duly convened.

Members of the CBN-appointed board do not have the power to do this. To do otherwise would amount to embarking on an effort in futility.” 
There are legal practitioners who however believe existing shareholders have lost their stake in the rescued banks since they all have negative capital.