National Assembly
WorldStage Newsonline-- The Lagos Chamber of Commerce and Industry has rejected the Private Companies Conversion and Listing Bill which seeks to provide for the private companies whose shareholders funds exceed N40 billion or its annual turnover exceeds N40 billion or its total assets exceed N80 billion, to convert to public liability company and get its shares listed in the Nigerian Stock Exchange, thereby promoting growth for both the company and the capital market.
In its position paper on the proposed bill, LCCI said: That admittedly, the 1999 Constitution vests the National Assembly with power to make laws regulating the ownership and control of business enterprises operating in Nigeria. However, the proposed Bill breaches representations made to attract foreign investors and negatively affects Nigeria’s reputation. It is counter-productive to the drive for foreign investments because foreign investors prefer to operate under stable economic policies.
•The proposed Bill would negatively impact on local investment and the broader economy. It would lead to considerable loss of revenue to the government and break up of companies to circumvent the requirement of the Bill. Also, the Nigerian Stock Exchange may not have the depth and liquidity needed for the investment arising out of the mandatory listing of these companies.
•It would negatively affect the business environment by creating undesirable and unnecessarily cumbersome regulation and scrutiny on the companies under CAMA, SEC and NSE rules and regulations. Moreover, the procedure for going public is expensive and onerous and not every investor or would-be investor whether local or foreign has the temperament for such.
•It would also have a negative impact on corporate governance which is the engine room critical for the survival of any company. Listing on the floor of the stock exchange is not a ticket to a successful company as some companies that have been listed were delisted, and those that converted to public were re-registered to private companies. Going public and being listed on the floor of the stock market are critical business decisions that only the companies’ management can make.
•The mere listing of a company’s shares does not guarantee success of the relevant business. The main benefits of buying publicly quoted shares are capital appreciation and the ease of disposal. These two concepts depend largely on the operational success of the relevant business. Bringing so many companies into the picture without any sound and strong basis for so doing other than complying with some laws could create a situation whereby the All Share Index continues to nose dive to the absolute embarrassment of the Nigerian state.
•Contrary to the supposed intention of the Bill to redistribute wealth, just a insignificant percentage of the populace, particularly the money bags would benefit as it would give them opportunity to channel their wealth to purchasing shares in some target companies. It would also lead to a situation where investors in the stock market would sell their investments in some companies to acquire the shares of these target companies, thus grossly distorting the stock market.
•The Bill is anti-entrepreneurship and discourages innovation. A lot of people have worked assiduously hard to bring their companies to where it is today. The decision of whether to raise funds from the public through the stock market or to allow the public own shares in their companies should be absolutely theirs to make.
•The Bill has no stipulation for the minimum percentage of the share capital to be offered to the public. It could lead to loss of absolute shareholder and Board control of the company.
•One of the arguments proposed by the proponents of the Bill is that it will provide employment. However, this Bill does not necessarily create employment opportunities as many foreign investors have expatriates in their employment. Some even run highly mechanized or automated businesses so this cancels out this so called benefit of this Bill.
•The Bill is inconsistent with the Constitution and other laws regulating investments in Nigeria. It contravenes the provisions of section 44 of the 1999 Constitution which forbids compulsory acquisition of private property, and section 25of the Nigerian Investment Promotion Commission Act which prohibits expropriation and states that “no person who owns, whether wholly or in part, the capital of any enterprise shall be compelled by law to surrender his interest in the capital to any other person”. It is also against the spirit of the Bilateral Investment Treaties (BIT) between Nigeria and certain countries, and therefore pose a huge reputational risk for Nigeria. The Bill is expropriative to the extent that it compels privately owned companies to offer their private equities for sale on the floor of the stock exchange.
•The penalty regime created by the Bill is unduly harsh and will create a material risk and huge deterrence to businesses investing in Nigeria.
CONCLUSION AND RECOMMENDATION
•The Bill would do the business climate in Nigeria no good and should be immediately withdrawn.
•There would be a greater degree of success in the country if the appropriate investment climate is created, where companies will seek to invest and will seek to be listed on the NSE by their own volition based on objective, empirical, investment/market considerations.
•The Companies and Allied Matters Act, 1990 (“CAMA”) should be amended as no amendment has been made to the Act in 24 years. Also, the Corporate Affairs Commission should be strengthened with appropriate legislation to discharge the responsibilities placed on it by CAMA.
•The regime of the Bill should be made voluntary and providing sufficient tax incentives to encourage and not mandate companies to be become public or be listed at the stock exchange
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