Ogun State Land Scare! Government Blackmails Estate Developers, Land Owners

Volume II, Issue 20

Volume II, Issue 20

Last Monday, 8 June, 2009, the Ogun State Bureau of Lands and Survey, under the insignia of the State Government, had caused the publication of what it described as a “Final Warning” ostensibly directing the attention of individuals and corporate bodies to activities of estate developers and promoters in about 14 locations in the state where real estate development seems to be intense. The Bureau of Lands and Survey described the activities of the estate developers as illegal.

The second of such publication in two weeks, the last of the same half page public notice, did get the attention of the target population it was intended for; a hail of panic seized the community of estate developers and subscribers to the former virgin lands belonging to Ogun State but which have found new attraction in value because of their proximity to Lagos State. As affected estate developers became restless, so were subscribers, they became distressed. (Read More)

BGL still upset with underwriting AIT, Honeywell public offers

It is just as well that the Securities and Exchange Commission has decided to adopt the recommendation of the Oladotun Sulaiman’s Nigeria Capital Market Reform Committee on the reversal of compulsory underwriting of public offerings.

BGL Securities Limited, one of Nigeria’s lead issuing houses and brokerage firms, is said to still be smarting from the downside effect of underwriting two public offerings last year. BGL Securities was part of the underwriters of the public offering of Daar Communications and Honeywell.

Others –

Losses, Debts Force Sale of Zain

Transcorp To Lose Hilton Hotel, Abuja

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Doing Business with Zain is suicidal – Dealers

It would seem as if major dealers of GSM network giant, continues here.

ZAIN dragged before NCC for Exploitation and Cheating

Click here to read.

N10 billion rocks Celtel/Zain Board: Otudeko leads directors against Bayo Ligali, others

As published in the September 01, Issue 32. ULD by ol’Victor Ojelabi

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L-R, Oba Otudeko, Celtel logo, Bayo Ligali, Zain logo

L-R, Oba Otudeko, Celtel logo, Bayo Ligali, Zain logo

The decision by the managing director of Zain, Mr. Bayo Ligali, to disregard the objection raised by some members of the board of directors of the company over a five year rent of a property at the Banana Island, Ikoyi, Lagos for a pricely sum of $27million (N3.1billion) has caused a bitter row among directors representing the interest of Celtel BV, the controversial majority shareholders of Zain and the minority shareholders.

The dissenting shareholders are aggrieved that rather than build its own head office with the sum, the Managing Director, was allegedly pressured by Zain’s parent company in far away Kwait to rent the Plot 2, Zone L, Banana Island property for the said sum even when Etisalat, a newly set up competitor of Zain, actually bought outrightly, a property of nearly the same size at $20.8 million.

The dissenting shareholders led by Mr. Oba Otudeko have filed papers at the Federal High Court, Lagos asking a reversal of the $27million rent for the building and a declaration to stop the re-branding of the company’s product from Celtel to Zain.

Otudeko had in different letters (which were also attached to the originating summon) to the Chairman of the Board of the company, Mr. Gamaliel Onosode, accused the majority shareholders of the company of wasting a total $58million (N6.7million) on rebranding the company within two years, adding up to a record five times the company has changed its name in its seven years existence. A sum of $30million (N3.4billion) was said to have been expended on rebranding the company from Vmobile to Celtel and just under two years thereafter, the same company is now expending a sum of $28million (N3.2billion) on its current rebranding effort which dissenting directors describe as wasteful for a company that is yet to declare dividend in the seven years of its existence.

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Seven years since Econet joined other global system of telecommunication operators to usher in a new generation of mobile telephony in Nigeria, the Econet progenitor brand had since changed ownership four times within those seven years and with each change of ownership comes peculiar disagreements that have become celebrated issues of settlement at different courts of law in Nigeria and abroad.

For most telecommunication industry watchers, reviewing the seeming protracted bickering that continues to snap at the heels of the brand since its inception could be confounding. However, an industry analyst says it is best to qualify the genesis of the unremitting crises in the company as that of the right of ownership between Econet, the first operator of the GSM license and the two others, Vodacom and Celtel BV (now Zain) that had acquired majority stake in the company in quick succession.

While the outcome of who holds the right ownership of the company is yet in view, a new and perhaps, more troubling dimension have emerged, and again, aggrieved directors are heading for the court. At issue in the present conflict on the board of the company are allegations implying breaches of the underlying principles of corporate governance.

In court papers, shareholders of the company, including Mr. Oba Otudeko, Broad Communication Limited, and Foluke Otudeko are alleging that Celtel BV, the majority shareholders in Celtel Nigeria, through its appointed directors, had consistently foisted its desires on the company without regard to the appropriateness of the action or the investment held by other shareholders.

For a company that is yet to pay a dividend to its shareholders seven years since its inception, the complaining shareholders have alleged that a sum totaling $85million, about N10billion have been expended on projects that are questionable and unjustified.

The immediate precipitation of the current crises of confidence on the board of Celtel Nigeria was the decision of Celtel Nigeria’s Managing Director, Mr. Bayo Ligali to disregard the objection of some shareholders/directors of the company to pay a sum said to be about $27million (N3.1billion) to acquire a five- year leasehold of a property at Plot 2, Zone L, Banana Island, Ikoyi, Lagos, Nigeria.

Court documents averred that when Ligali proposed a resolution, at a board meeting, for the company to relocate from its present head office location at Plot1678, Olakunle Bakare Close, Victoria Island, Lagos, Nigeria, to banana Island property, the proposal was vigorously put to debate with several directors querying the rationale for incurring such an expense. Besides, there were suggestions that it would make more sense and be more prudent for the company to expend such resources in erecting its own head office building rather than expending $27million on renting new premises.

Most of the board members also noted that the lease hold rentals proposed were prohibitively expensive and that the was not conducive. The director insisted that the shareholders who had not received any dividend from the company since inception would not approve of such wasteful expenditure.

Ligali and other representatives of Celtel BV on the board were said to have responded to these arguments against the proposed transaction was that the “Group,” had approved the transaction. By “Group” Ligali and those on his side were referring to the parent company of Celtel BV in Kuwait. The other directors were said to have made it clear that their fiduciary (the responsibility to look after someone else’s money in a correct way) duties were owed to Nigerian law and not to the so called “Group” and that the decisions with regard to the company should be taken in good faith by its board and not by any “Group” outside the company.

As a means of resolving the impasse, Mr. Gamaliel Onosode, Chairman of the board set up a committee of the board to look into the proposed lease transaction. The committee, known as the ad-hoc committee on the new head office building, was made up of four members of the board namely: Mr. Alex Otti (Chairman), Mr. Ligali Ayorinde, Ms Tsega Gebreyes and Mr. Paul Usoro.

The committee was said to have met on several occasions with the management of the company. The committee, in its report to the board, noted the discrepancy in the rents quoted in different documents presented to the board. It (the committee) indicated that while some quoted $1,050 per square meter, others quoted $1, 175 per square metre and yet some other documents had figures like $1,200 and $1,300. A management letter to the ad-hoc committee, in its report, said it considered that taxes were alien to rentals in Nigeria, thus, acting on the objection of the committee, the management came back to it (ad-hoc committee) with rent proposition devoid of the objectionable taxes of $1,050 per square metre. The ad-hoc committee also observed in its report that the proposed rent was out of tune with existing rent in Nigeria market.

What might have persuaded the committee in this regard was the revelation during the course of its investigation that Etisalat, a competitor company who had just set up in Nigeria, bought outrightly a property of over 5, 000 square metres in the same Banana Island at a price of $20.8million just about the same time Celtel’s management were negotiating to rent for five years at about $27million.

Besides, the ad-hoc committee also raised, among other issues, the potential health hazard for the occupants of the building. It is noted that the building is close to high tension wires while also observing that the building has only one lift with a maximum capacity of eight people. This, the committee, considered grossly inadequate.

In its conclusion, the committee submitted that it was unable to give final approval for the lease of the Banana Island property.

Even before the committee submitted its report to the full seating of the board, Ligali was said to have reported that he had the approval of the “Group” to go ahead and pay for the property irrespective of the outcome of the report of the committee. The dissenting directors protested. In a letter dated 7th July, 2008 addressed to Mr. Onosode, chairman of the board, the directors, the dissenting directors alleged that the chairman “clandestinely and in collaboration with other directors proceeded to authorize the acquisition and have since made the payment of a sum of about $27million to cover the purported lease.”

In further protestation of what they describe as failure of corporate governance, the dissenting directors in the letter to the chairman, submitted that they considered the action “to have been both imprudent in gross violation of your fiduciary duties to the company and a diminution and erosion of our personal rights and interest as shareholders of the company.” They then asserted that “the board of directors is the organ entrusted with management of the affairs of the company and no director or group of directors is entitled to deprive that organ of its authority in the manner which you have done.

“The irresistible conclusion to be drawn from your action when viewed against the background of the extensive and negative findings of the committee set up to look into this matter”, the dissenting directors observed in the letter, “is that the decision to proceed with this transaction without waiting for the committee to submit its report and for the board to deliberate upon it was borne out of interest in other than those of the company.”

In the letter to Onosode which is supporting document to the sworn affidavit in the support of the originating summons, the dissenting directors also raised issues on the multiple brand names under which the company operated.

“As you must be aware”, the dissenting director observed in the letter, “the company has operated under four different brand names in its seven years of existence. First it was Econet Wireless Nigeria Limited, and then it was Vodacom Nigeria Limited, Vee Networks Limited and now Celtel Nigeria Limited. When the last re-branding to Celtel Nigeria Limited was mooted, we voted against the proposal on the basis that the acquisition of a majority shareholding in the company by Celtel Nigeria BV was still the subject of legal challenges and that it would be prudent to await the outcome of these challenges before expending resources on another rebranding exercise. Our protestation was ignored.

“Another re-branding has now been proposed at the last board meeting, this time to Zain, the new name of the parent company of Celtel Nigeria BV. Again, we had voted against this proposal and as on the previous occasion we have been outvoted.”

While noting that the benefits, if any, of the re-branding exercise would only ensure to the de facto majority shareholders whereas the burden of the rebranding in terms of costwould have to be shared by all the shareholder, the dissenting directors posited that the company had already changed its identity four times since it commenced business in 2001 and these changes of identity have been detrimental to the company business and confusing to its customers.

For dissenting directors, the cost of the re-branding exercise conducted since the purported acquisition of a majority in the company by Celtel Nigeria BV was disproportionate.

“The cost of re-branding carried out in 2006 was about $30million (N3.4billion) whilst the cost of the proposed re-brand to Zain is estimated at about $28million. All these costs are being incurred by a company that has failed to declare dividend in its seven years of existence,” the dissenting directors noted in the letter to the chairman.

The directors insisted that the current rebranding of Celtel to Zain is for the sole benefit of a shareholder group that is also in control of the technical and administrative management of the company.

They then averred that they considered the instance of the majority shareholders on proceeding with the re-branding to be unfairly prejudicial conduct which has a substantial and negative effect on the majority interest.

“If the majority shareholders feel a strong need to have the company rebranded to communicate its majority control to the public,” the dissenting directors reasoned, “there is no justification for the minority being compelled to share the burden and cost of this personal desire.”

In a veiled response to the allegation of the dissenting director, Ligali, during a chat with journalists made strenuous effort to justify the change of brand name to Zain; “Zain has expanded its network known as One Network 12 countries to 22 countries in both Africa and the Middle East. The 22 countries, according to Ligali, were across Africa and the Middle East thereby enabling the company’s customers in Nigeria to benefit from the globalization of the network.”

While highlighting the benefits of the globalization exercise, Ligali said the cost of operations would begin to go down due to the economies of scale of being a member of a large group.

What the Nigerian law says on protection of minority shareholders against illegal and oppressive conduct

Some of the section of the Company and Allied Matters Act on which the dissenting directors are pleading a redress so as to be protected against illegal and oppressive conducts are sections 300 and 303(1) which state:

Section 300: Without prejudice to the rights of members under sections 303 to 30S and sections 310 to 312 of this Act or other provisions of this Act, the court on the application of any member, may by injunction or declaration restrain the company from the following;

(a) entering into any transaction which is illegal or ultravires;

(b) purporting to do by ordinary resolution any act which by its constitution or the Act requires to be done by special resolution;

(c) any act or omission affecting the applicant’s individual rights as a member;

(d) committing fraud on either the company or the minority shareholders where the directors fail to take appropriate action to redress the wrong done;

(e) where a company meeting cannot be called in time to be of practical use in redressing a wrong done to the company or to minority shareholders; and

(f) where the directors are likely to benefit, or have profited or negligent or from their breach of duty.

Section 303(1): Subject to the provisions of subsection (2) of this section, an applicant may apply to the court for leave to bring an action in the name or on behalf of a company, or to intervene in an action in which the company is a party, for the purpose of prosecuting, defending or discontinuing the action on behalf of the company.

ZAIN SUPPLIERS GRUMBLE

Suppliers of Zain who had waited out the mandatory 30days for payment have been compelled to extend their wait.

Heard the new Financial Head at Zain got finicky with the books, while the financial head is still perusing, no payment can be made. The suppliers who had anxiously waited smiled when they got the information.

In reality however, they (suppliers) are grumbling to high heavens over the delayed payment while marking the new likely date for payment on their calendar.