Several prominent businessmen and policy experts are among the 432 individuals and institutions that will hold shares in the immediate period after the conversion of the Nigerian Stock Exchange (NSE) from a member-owned mutual company limited by guarantee to a public limited liability company. A report by the NATION Newspapers has stated
The conversion, known as demutualization, has reached the final stage with members of the Exchange scheduled to meet early next month to consider and approve the scheme of arrangement, the final document for the conversion, and to empower the transition of the council to a board of director.
With the demutualization, the NSE will transit into a holding company, Nigerian Exchange Group (NEG) Plc. which will be the parent company for the Nigerian Exchange Limited, the successor that will carry on the securities trading business of the Exchange, and other subsidiaries. Shareholders will own shares in NEG Plc. while NEG will own the main company and other subsidiaries.
Documents obtained by The Nation indicated that the shareholders’ base of NEG will in the meantime consist of some 432 institutions and individuals, but this may increase to some 440 institutions and individuals in the event of additional claims to ownership after the conversion.
A breakdown of the shareholders’ base included 255 institutional shareholders and 177 individual shareholders. The post-demutualization shareholding arrangement was arrived at by converting the existing dealing members of the Exchange to institutional shareholders and ordinary members to individual shareholders.
Shareholdings will be on equal basis in the immediate conversion period with each institutional shareholder holding 6.01 million ordinary shares of 50 kobo each while each individual shareholder will hold 2.44 million ordinary shares of 50 kobo each.
Thus, each institutional shareholder will hold 0.3 per cent equity stake while each individual shareholder will hold 0.1 per cent equity stake, in line with the current membership-share conversion ratio of 78 per cent for dealing members and 22 per cent for ordinary members.
A list of post-demutualization shareholders indicated that Mr Akintola Williams, the only surviving signatory to the founding charter of the Exchange will lead the individual shareholders. However, the Exchange will allocate shares to all members with shares due to deceased ordinary members and expelled or liquidated dealing members being allocated to their legal representatives.
Prominent individual names on the shareholders’ list include late Senator Theophilus Adebayo Doherty, the late Sir Odumegwu Ojukwu, the late Alhaji Shehu Bukar, Chief Ernest Shonekan, the late former President Umaru Yar’Adua, the late Dr Abdul Lateef Adegbite and the late Mr Gamaliel Onosode among others.
Other individual shareholders will include Alhaji Aliko Dangote, Alhaji Abdul Rasaq, Alhaji Aminu Dantata, Mr Tony Elumelu, Mr. Oba Otudeko, Mr. Pascal Dozie, Chief Bayo Kuku, Chief Christopher Ogunbanjo, Dr Christopher Abebe, Mr Goodie Ibru, Alhaji Isyaku Umar, Otunba Adekunle Ojora, Mr Phillip Asiodu, Rear Admiral Allison Madueke, Rabiu Gwadabe, Senator Udo Udoma and Senator David Dafinone among others.
Institutional shareholders will include GTI Securities Limited, CSL Stockbrokers Limited, Capital Assets Limited, Cowry Asset Management Limited, Meristem Securities Limited, APT Securities and Funds Limited, Capital Bancorp Limited, Centre-Point Investments Limited, Chapel Hill Denham Securities Limited, Emerging Capital Limited, Stanbic IBTC Stockbrokers Limited, Trust Yields Securities Limited and Vetiva Capital Management Limited among others.
Under the scheme of arrangement scheduled for approval on March 3, 2020, the NSE will transit into a non-operating holding company with an authorised share capital of 2.5 billion ordinary shares. About 2.0 billion ordinary shares of 50 kobo each are expected to be issued in the immediate period of the conversion.
The NSE will transit into a holding company, Nigerian Exchange Group (NEG) Plc, which will be the parent company for the Nigerian Exchange Limited, the successor that will carry on the securities trading business of the Exchange, and other subsidiaries.
The NSE will transfer its securities exchange license and other assets necessarily required to carry out the securities exchange function; which will include human resources, securities exchange function related contracts, the trading facilities comprising of the trading floors, work stations, telephones and other office equipment such as cabinets and others, quotation board, stock price electronic display device, stock printers, inquiry display equipment and other assets to Nigerian Exchange Limited pursuant to the scheme.
Already, Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC) has granted the scheme its “no objection” approval, paving the way for the continuation of other processes.
According to the scheme, the demutualized NEG will take off with authorized share capital of N1.25 billion comprising of 2.50 billion ordinary shares of 50 kobo each, which will be registered with the Corporate Affairs Commission. The NEG will subsequently set aside 2.0 billion ordinary shares of 50 kobo each as issued share capital, which will be registered with the SEC.
A total of 40.08 million ordinary shares, representing 2.0 per cent of the proposed issued shares of NEG will be set aside for allotment to parties who are adjudged as being entitled to shares in the demutualized Exchange, otherwise known as claims review shares, pursuant to the provisions of the Demutualization Act 2018. The apportionment of two per cent as the claims review shares is based on an analysis of the probable quantum of shares that would be required to settle each claim. This was determined given the rigorous and robust process undertaken to verify and confirm the names on the Register
However, in the event the claims review shares are insufficient to satisfy successful claims, additional shares will be allotted from the demutualized Exchange’s authorized share capital.
A total of 1.96 billion ordinary shares, representing 98 per cent of the issued shares, the balance of the issued shares following the reservation of the claims review shares, will be apportioned between dealing and ordinary members on the basis of a ratio of 78:22.
The shares shall be allotted on an equal basis within each block of the dealing and ordinary member groups, based on a share allotment established on the basis of the valuation of the Exchange and the distribution rationale1 approved by the council of the NSE
Accordingly, each dealing member shall receive 6.01 million ordinary shares of 50 kobo each in NEG credited as fully paid while each ordinary member shall receive 2.44 million ordinary shares of 50 kobo each in NEG credited as fully paid.
The scheme indicated that the NSE reported a net asset value of N25.6 billion as at December 30, 2018, which had been factored into the valuation that was undertaken.
With the approval of the scheme, all assets, liabilities and undertakings include real property and intellectual property rights of the NSE- with the exception of the securities exchange license and all assets and appurtenances in relation to the securities trading business of the NSE – shall be retained by NEG.
The NSE will set up a separate company, NGX Regulation Limited (NGX Regulation) that will be charged with the regulatory functions of the Exchange after demutualization pursuant to an arm’s length agreement. This is in order to safeguard the neutrality of the regulatory system.
With demutualization, the Memorandum and Articles of Association of the re-registered Exchange will be amended to indicate the new name, NEG, the authorized share capital and all requisite provisions for a public company limited by shares.
The NSE was established as the Lagos Stock Exchange on September 15, 1960 under the provisions of the Companies Ordinance 1922, with a share capital of £5,000 divided into 500 ordinary shares of £10 each. At incorporation, each of the original subscribers subscribed to five shares in the Exchange.
Subscribers at incorporation included C. T. Bowring & Co. (Nigeria) Limited, Senator Chief Theophilus Adebayo Doherty, John Holt Nigeria Limited, The Investment Company of Nigeria Limited, Sir Odumegwu Ojukwu, Akintola Williams and Alhaji Shehu Bukar.
The share capital of the Exchange was subsequently increased to N20, 000 consisting of 1,000 ordinary shares of N20 each, pursuant to an ordinary resolution dated December 2, 1977. The name of the Exchange was then changed from the Lagos Stock Exchange to the NSE on December 15, 1977.
However, following the enactment of the Companies and Allied Matters Act 1990, now referenced as C20 Laws of the Federation of Nigeria 2004, companies limited by guarantee were prohibited from being registered with a share capital; and all such existing companies were mandated to re-register without a share capital. The NSE was re-registered on December 18, 1990 as a company limited by guarantee and the then existing share capital of N20,000 was cancelled; and the equity rights of the initial subscribers extinguished.
Thus, as at now, the NSE operates as a mutual company limited by guarantee; and therefore has no issued or paid-up share capital; as such no individual or corporate entity has equity-based ownership rights.