Compulsory Shares Acquisition: Court Refuses to Dismiss Bank PHB shareholders’ N58b suit Against CBN, AMCON, Others

Compulsory Shares Acquisition: Court Refuses to Dismiss Bank PHB shareholders’ N58b suit Against CBN, AMCON, Others 

A Federal High Court in Lagos has refused to dismiss a suit filed by some shareholders of the defunct Bank PHB Plc (now Keystone Bank) against the Central Bank of Nigeria (CBN), the Asset Management Corporation of Nigeria (AMCON) and three others over the forced acquisition of their shares.

While ruling on a preliminary objections filed by the defendants to challenge the jurisdiction of the court, Justice Mohammed Yunusa held that as shareholders, the plaintiffs have a say in the bank and that no arm of government can take away a citizen’s right to acquire or hold property; therefore, there can be no compulsory acquisition of the shares.

The plaintiffs are challenging the alleged illegal transfer of their shares to Keystone Bank without compensation.

They are also demanding the sum of N38.6billion from the defendants being "fair compensation" to them for the value of their investment in Bank PHB Plc. 

The shareholders are further asking the court for an order setting aside the alleged unlawful nationalisation, compulsory acquisition and expropriation of their investments in Bank PHB, and are seeking N20billion as damages for the loss of value of their investments in Bank PHB. 

The defendants in the suit are CBN, Keystone Bank, Attorney-General of the Federation, Nigeria Deposit Insurance Corporation (NDIC). 

The plaintiffs claimed that NDIC on August 5, 2011, wrote Bank PHB’s Managing Director informing him that the bank's assets and liabilities has been transferred to Keystone Bank without any form of adequate compensation to the shareholders. 

The plaintiffs are praying the court to declare that the action amounted to unlawful compulsory acquisition of their investment and is therefore unconstitutional, arbitrary, null and void. 

But the defendants in their preliminary objections to the suit, urging the court to strike it out for lack of jurisdiction. 

According to their lawyer, Kola Awodein the shareholders did not bring the action properly before the court thereby robbing the court of the jurisdiction to hear it. 

Ruling, Justice Yunusa held that the plaintiffs were right to exercise their right to sue. “Section 114 of the Companies and allied Matters Act provides for the rights and liabilities attached to shares of a company…In essence, the shareholder has a legal right to approach the Court. Section 610 of the Companies and Allied Matters Act gives the Federal High Court jurisdiction to hear such matters,” the judge said.

The judge also held that the plaintiffs have the locus standi to institute the action and seek redress pursuant to Section 46(1) of the 1999 Constitution, adding that the court has exclusive jurisdiction relating to the agencies who are the defendants.

“The mode of commencement is not material and by virtue of Order 3 Rule 1 of the Fundamental Human Rights Enforcement Procedure Rules, 2009 there is no limitation on the time to bring a fundamental human right matter. Also, there is no requirement of compliance with the statutory pre-action notices when it involves fundamental human rights issues,” the court held.

The verdict may affect AMCON’s planned sale of Keystone Bank in the second quarter of the year.

AMCON’s Chief Executive Officer, Mustafa Chike-Obi, was recently quoted as saying: “Keystone Bank will be sold in due course. An election time is clearly not the best time to commence the sale of a bank. We will wait for the elections and allow the dust to settle. Sometime in the second quarter of the year, we will commence the sale of Keystone Bank.”

Justice Yinusa adjourned till March 31 for hearing.