-Union Bank on the front burner 

By Peter OBIORA investadvocate

Oct 27 2010 11.12 GMT

Lagos (INVESTADVOCATE)-Boniface Okezie, National Chairman of the Progressive Shareholders Association of Nigeria (PSAN) has faulted the verdict Monday October 24 2010 by a Federal High Court in Lagos Nigeria ruling that the Sanusi Lamido Sanusi, Governor Central Bank of Nigeria (CBN)  has the statutory power to appoint and remove Bank Chief Executive’s (CE’s) and its Directors. 

This is coming on the heels of Justice Mohammed Idris ruling on a case filed by some shareholders of Union Bank Plc (UBN) challenging the appointment of Executive Directors (ED’s) into the Board of the Bank by the Governor of Nigeria’s Apex Bank.

Okezie in his reaction affirmed that the Judge erred in his ruling. My reaction is that the Judge erred in law, CBN has no right to hire and fire” he said.

According to him, the CBN can remove; but cannot replace, CBN can only remove a Board of Director of a Bank where there is crisis” the Shareholder Leader affirmed.

He noted that the Apex Bank can only move in and dissolve the Management and entire Board in such situations and appoint an Interim Leadership in the Bank.

“Whereby the Board is intact and there is only a problem with the Management, the Audited Account which has not been presented to the Board for ratification, ordinarily, Audited investigation should have gone to the Board; so that Management would clarify same as carried out by the CBN.

Okezie affirmed that based on the above, the Governor of the CBN can now issue directives to the Board to fire the Managing Director (MD) or Executive Director (ED) indicted in the audit investigation.

“He can make recommendations to the Board since the Board on its own has not been dissolved, the CBN can only come in if there is crisis on the Board. They can advice the Board to remove the Management of the Bank” he said.

According to him, it is the shareholders through an Extraordinary General Meeting (EGM) that can approve the hiring of new Managments.

“The CBN cannot hire; because the Bank does not belong to the Government” Okezie said.

He affirmed that the Companies and Allied Matters Act (CAMA) supersedes the Banks and Other Financial Institution Act (BOFIA). Without CAMA, BOFIA cannot come; because they are operating in the Banking industry. Banks are only been regulated under BOFIA; because they are in the Banking Industry.

Kenneth Eze of M2 Online affirmed in his report on “Is the Exit Door Open to a Bank CEO Being Investigated” that the law governing corporate practices in Nigeria, the Company and Allied Matters Act (CAMA) in section 262 provides for removal of directors.

Particularly, S262 (1) provides: “A company may by ordinary resolution remove a Director before the expiration of his period of office notwithstanding anything in its articles or in any agreement between it and him.”

Subsection 2 dwells on the processes or requirements for the removal should the need arise. It states: “A special notice shall be required of any resolution to remove a director under this section or to appoint some other person instead of a director so removed, at the meeting at which he is removed, and on receipt of the notice of an intended resolution to remove a director under this section, the company shall forthwith send a copy of it to the director concerned and the director (whether or not he is a member of the company) shall be entitled to be heard on the resolution at the meeting.”

This goes to buttress what Okezie has said that it’s only through an EGM that appointments can be made to the Board or Management of a Bank.

However, as earlier reported in the Media, Justice Mohammed Idris, affirmed that section 35 sub-section (2) (d) of Banks and Other Financial Institution Act (BOFIA) gives the CBN Governor the power to remove or appoint not withstanding anything in any written law or contained in the memorandum and article of association of the banks.

“In my view by virture of the combined effect of the provision of section 33 and 35 of BOFIA, the CBN Governor is empowered to order a special examination into the books and affairs of a bank. He can also intervene in the operation of a bank by removing and replacing the directors of a bank found to be in a grave situation; to hold otherwise is to impair the legislative intent underpinning the provisions, which is the ability of the CBN Governor to provide a failing bank with necessary managerial and operational support to facilitate the bank’s turn around.” he said.