BY EMEKA EJERE
According to The Nation, the Investment and Securities Tribunal (IST) has ordered the Nigeria Deposit Insurance Corporation (NDIC) to pay a subscriber to an aborted initial public offering (IPO), in a landmark judgment that places the burden of uncompleted transactions on the NDIC.
The IST ordered NDIC to pay Winners Medical Diagnostic and Research Institute Limited N5 million for the aborted share purchase transaction. In addition, the NDIC is to pay N5 million at two per cent interest above the Central Bank of Nigeria (CBN) MRR from March 2006 when NDIC took over All States Trust Bank until the full payment of the principal sum.
The IST also awarded to Winners Medical Diagnostic and Research Institute, cost of N500,000 to be paid by NDIC.
But NDIC said it would instruct its solicitors to appeal the judgment.
The case involved Winners Medical Diagnostic and Research Institute and eight others, including NDIC, in which Winners Medical Diagnostic and Research Institute bought 2.5 million shares in the 2005 IPO of the former All States Trust Bank Plc, now Ecobank Plc, at N2 per shares of 50 kobo each and paid N5 million.
The Tribunal found that it was wrong for the NDIC to classify the Winners Medical Diagnostic and Research Institute as a creditor, as it had no contractual relationship with the All States Trust Bank Plc for which it was expecting payments, but was rather a subscriber to its aborted IPO, whose money is by the capital market law, rules and regulations termed “return money”, to be refunded by the entity in custody of the money.
The Tribunal added that “NDIC having not denied that it took over the subscription money for the aborted All States Trust Bank Initial Public Offer, should be in a position to refund to Winners Medical Diagnostic and Research Institute Ltd the sum of N5, 000, 000, it paid for the un-allotted shares of All States Trust Bank”.
According to the IST, Winners Medical Diagnostics & Research Institute subscribed to 2, 500, 000 units of shares in the 2005 IPO of the former All States Trust Bank Plc, now Ecobank at N2 per shares of 50 kobo each and paid N5 million, which was acknowledged by the First Bank Plc and NDIC.
Though acknowledging the existence of the share-IPO suspense account, Ecobank Nigeria said it was not part of the private sector deposit liabilities of All States Trust Bank it inherited.
Reacting to the judgment, the NDIC said the decision of the tribunal was in error as it misconstrued and consequently misapplied the provisions of the legislations governing bank liquidation.
“The share/IPO subscription fee which was paid by Winners Medical Diagnostic and Research Institute to the defunct bank for the allotment of shares only qualifies the claimant as a creditor to the defunct bank as the subscription fee would be treated as money had and received by the defunct bank,” NDIC stated.
NDIC noted that it was an undisputed fact that Winners Medical Diagnostic and Research Institute was not a customer to the defunct bank but a subscriber to its shares, which unfortunately, were not allotted to it before the bank went under.
The NDIC said it was not contending the indebtedness of the defunct bank to Winners Medical Diagnostic and Research Institute for the IPO subscription fee.
“Rather, the position and contention of the NDIC is that the law on priority of claims must be strictly followed in the distribution of the assets of the defunct bank.
“To pay Winners Medical Diagnostic and Research Institute Ltd as ordered by the Tribunal without following due process as prescribed by law would amount to illegality on the part of the liquidator (NDIC) as it would be a clear violation of the express provision of the laws quoted above” NDIC stated.
According to NDIC, the tribunal also erred when it ordered the NDIC in its corporate capacity to pay the claimant the judgment sum as any award of damages should be against the defunct bank as it is still a legal entity until dissolved and its name struck out of the register of companies at the CAC.