Public quoted insurance companies are having a tough time convincing their minority shareholders to align with their recapitalisation plans.
A few meetings of the insurance companies with their shareholders saw board chairmen and directors sweating hard to convince the minority shareholders to approve their different capital raising proposals.
At some of the AGMs held recently, which were rowdy, shareholders were hard on the boards, refusing to approve special businesses detailing on raising capital with plans to bring in new investors.
The shareholders said carrying out such plans, like private placement and special arrangements, would neutralise their stakes and maybe cede the company to new owners.
“We are not going to allow you sell off our stakes to people we don’t know,” Nona Awo, a prominent shareholder in many Nigerian public quoted companies, said at one of the AGMs.
According to him, a plan that is going to give a new investor over 80 percent is already at the disadvantage of existing minority shareholders.
But a board chairman of one of the insurance companies assured the shareholders that their interest would be adequately protected.
“I am assuring you our shareholders that neither you nor myself or other board members will like to lose his or her stake, but we have to go this way to protect your company from regulatory hammer,” the board chairman. “It is better to be a member of a big group that is bringing value than to be a member of a small company that is struggling or dying.”
He said neither the board nor anybody else has any idea who the investors would be.
A lot of the insurance companies are currently pursuing their recapitalisation plans, having secured no objection order from NAICOM after the review of plans.
Rasaq Salami, head, Commissioner for Insurance Directorate, had in a statement notified all insurance stakeholders that NAICOM received plans of 47 insurers and two reinsurers. The statement was further to the circular issued by NAICOM on May 20, 2019 increasing the paid-up share capital of insurers and reinsurers in Nigeria and the subsequent directives to companies to submit their recapitalisation plans by August 20, 2019.
In the statement titled ‘Update on Recapitalisation of Insurers and Reinsurers’, Salami said in keeping with the recapitalisation roadmap, the Commission had concluded review of the submissions and had communicated individual companies on their positions.
According to the statement, 26 companies were granted “No Objection” to proceed with their plans, while the plans of 17 companies were corrected; the companies were advised to resubmit their new plans using paid-up capital and not shareholders fund.
Four companies did not have the requisite 2018 financial statements and were, thus, advised to review their plans of using IPO, the statement said.
It also noted that one company had litigation issues and was advised to resolve them as soon as possible to enable it to make progress, while one company’s submission was noted to have met the necessary requirements.
“The review of submissions from two companies is ongoing, while three companies are yet to submit their recapitalisation plans,” the statement said.
NAICOM had in a circular dated July 23, 2019 said the recapitalisation plan should include, among others, capital status of the companies as at the last audited financial statements; board resolution on how to comply with the directives, and detailed action plan on how the funds for the recapitalisation are to be sourced with timelines and deliverables.
The circular had also required companies intending to seek funds from the capital market to submit their plan of action on a file-and-use basis, just as “companies that intend to merge or acquire another should submit their proposal after which they must comply with Section 30 and 31 of the Insurance Act 2003”.
In the new capital regime, NAICOM increased the paid-up share capital of life companies from N2 billion to N8 billion, general business from N3 billion to N10 billion, composite business from N5 billion to N18 billion, and reinsurance companies from N10 billion to N20 billion.
The minimum paid-up share capital requirement was expected to take effect from the commencement date of the circular (May 20, 2019) for new applications, while existing insurance and reinsurance companies were required to fully comply not later than June 20, 2020, the Commission said.
