Business News of Tue, 17 Jul 20180
BoG annuls 51% ADB shares
The Bank of Ghana (BoG) has declared as invalid, all 51% shares, valued at over GH¢300 million, being held by four institutional investors in the Agricultural Development Bank (ADB) on grounds that the money used to purchase the shares was emergency liquidity support the Bank of Ghana extended to uniBank.
According to the regulator, how the shares were acquired constitute a calculated intention by these entities to act in concert to acquire a majority shareholding in ADB using EDC and SIC-FSL without the knowledge and approval of the Bank of Ghana.
The affected institutions are Belstar Capital Limited (Belstar), Starmount Development Company Limited (Starmount), SIC-Financial Services Limited (SIC-FSL), and EDC Investments Limited (EDC).
The order affected all shares held by them in ADB Bank Limited, as well as all transactions undertaken in respect of the relevant shares.
The shareholding structure of ADB, prior to this announcement, is Government of Ghana – 32.30%, Belstar Capital Limited – 24%, Starmount Development Company Limited – 11%, SIC Financial Services – 10%, EDC Investment Limited – 6%, Bank of Ghana – 9.50%, and retail investors and ADB staff – 7.20%.
According to the Bank of Ghana, the entities acquired the shares in 2016 using questionable means, which, it said, is in contravention of the country’s banking laws.
A statement from the BoG said the order, which took immediate effect, was made pursuant to section 55 of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).
“The Bank of Ghana, therefore, in the exercise of its powers pursuant under sections 49 and 55 of Act 930, has with immediate effect annulled the acquisition by Belstar, Starmount, SIC-FSL and EDC of all shares held by them in the ADB and all transactions undertaken in respect of these shares,” it said.
The statement said the exercise of any of the voting rights or any rights issue in respect of the shares by Belstar, Starmount, SIC-FSL and EDC, and the payment of any dividends in respect of these shares were also prohibited.
It said all shares acquired by Belstar, Starmount, SIC-FSL and EDC in ADB which were previously held by the Financial Investment Trust are to be immediately restored to Financial Investment Trust until further notice.
The statement further directed all directors appointed by Belstar, Starmount, SIC-FSL and EDC to the ADB Board to cease holding themselves out as directors of ADB with immediate effect.
Following the Initial Public Offering (IPO) undertaken in respect of ADB in 2016, Belstar and Starmount directly acquired 24 per cent and 11 per cent respectively of issued shares in ADB.
However, the statement said it had come to the notice of the Bank of Ghana that Belstar and Starmount were affiliates, and unknown to the Bank of Ghana, they entered into agreements with SIC-FSL and EDC to acquire additional shares in ADB in its IPO.
“These agreements, in addition to the direct acquisitions by Belstar and Starmount, resulted in a direct and indirect holding by these companies of over 50 per cent of the shares of ADB without the knowledge and approval of the Bank of Ghana and in breach of section 49 of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930),” it said.
The statement said it had also come to the notice of the Bank of Ghana that the shares acquired by Belstar and Starmount were acquired with funds obtained from uniBank Ghana Limited (currently in official administration) using emergency liquidity support obtained by uniBank Ghana Limited from the Bank of Ghana in questionable circumstances.
However, the liquidity funds obtained by uniBank were improperly and unlawfully on-lent to Belstar and Starmount to acquire shares (including shares held by the Financial Investment Trust on behalf of the Bank of Ghana) in ADB’s IPO.
It said Belstar and Starmount had participated in a series of other questionable, unsafe and unsound related party transactions involving uniBank Ghana Limited to the detriment of Ghana’s financial system and for their financial gain and benefit.
“The Bank of Ghana considers that Belstar and Starmount are not fit and proper persons and cannot permit them to continue to hold shares acquired directly or indirectly in ADB,” it said.
The request for emergency liquidity support from the Bank of Ghana by uniBank, loans from uniBank to Belstar and Starmount, the loan from Belstar to SIC-FSL, provision of funds to and the engagement of EDC by Starmount as purchaser and trustee of shares, are inextricably linked and manifest a calculated intention by these entities to act in concert to acquire a majority shareholding in ADB using EDC and SIC-FSL without the knowledge and approval of the Bank of Ghana, the statement added.
At the time, the Bank of Ghana appointed an administrator for uniBank. It relied extensively on liquidity support to the tune of over GH¢2.2 billion from the BoG over the past two years to meet its recurring liabilities.
BoG was exposed to the tune of nearly GH¢400 million, as this amount was not reflected in its books.
In spite of the Ministry of Finance recently agreeing to absorb a significant amount of the debts government contractors owed to the bank, to the tune of GH¢428,817,961, (backed by Interim Payment Certificates issued to contractors), the bank was unable to address its capital deficiency, which continued to deteriorate.
Agricultural Development Bank (ADB) Limited is a universal bank offering a full range of banking products and services in consumer, corporate, parastal, SME, agriculture, trade and e-banking services. Its business focus is universal banking, with a developmental focus on agriculture and more.
The bank successfully listed on the Ghana Stock Exchange (GSE) on December 20, 2016.