Bank of Ghana revokes purchase of shares in ADB

The Bank of Ghana (BoG) has, with immediate effect, revoked the share purchase of four institutions in the Agricultural Development Bank (ADB) after declaring them not fit and proper to own shares in the bank.

This means that Belstar Capital Limited (Belstar), Starmount Development Company Limited (Starmount), SIC-Financial Services Limited (SIC-FSL) and EDC Investments Limited (EDC) are no longer shareholders of ADB.

By this ownership of the bank automatically reverts to the government of Ghana and Bank of Ghana through the Financial Investment Trust.

A statement issued by the Bank of Ghana on Monday evening said: "Belstar and Starmount are not fit and proper persons and cannot permit them to continue to hold shares acquired directly or indirectly in ADB." 

The four investors owned 51 per cent of ADB, which was listed on the Ghana Stock Exchange (GSE) in December 2016.

Consequences

The central bank in the Monday evening statement explained that following the revocation of the share purchase, “all shares acquired by Belstar, Starmount, SIC-FSL and EDC in ADB, which were previously held by the Financial Investment Trust (FIT), are to be immediately restored to the FIT until further notice”.

“All directors appointed by Belstar, Starmount, SIC-FSL and EDC to the ADB Board are to cease holding themselves out as directors of ADB with immediate effect,” it added.

Basis of action

The statement said the order to annul the share purchase of the four institutions was pursuant to Section 55 of the Banks and Specialised Deposit-Taking Institutions (BSDI) Act, 2016 (Act 930).

The section empowers the central bank to annul a transaction that is not approved by the BoG or fails to meet specific laid down requirements.

The order also prohibits the four institutions from any of the voting rights or any other rights in respect of the relevant shares.

Reasons for action

Explaining the reasons behind the order, the BoG said following the ADB’s initial public offering (IPO) in 2016, Belstar and Starmount directly acquired 24 and 11 per cent, respectively, of issued shares in ADB.

It explained that it, however, came to the notice of the BoG that Belstar and Starmount were affiliates.

“And unknown to the BoG, they entered into agreements with SIC-FSL and EDC to acquire additional shares in ADB in its IPO.

“These agreements, in addition to the direct acquisitions by Belstar and Starmount, resulted in a direct and indirect holding by these companies of over 50 per cent of the shares of ADB without the knowledge and approval of the BoG and in breach of Section 49 of the BSDI Act, 2016 (Act 930),” the statement said.

It added that the BoG further learnt that the shares acquired by Belstar and Starmount were acquired with funds obtained from uniBank Ghana Limited (currently in official administration), using emergency liquidity support obtained by uniBank Ghana Limited from the central bank “in questionable circumstances”.

“However, the liquidity funds obtained by uniBank were improperly and unlawfully on-lent to Belstar and Starmount to acquire shares (including shares held by the FIT on behalf of the BoG) in ADB’s IPO,” it added.

Questionable transactions

Since then, the statement said, Belstar and Starmount had participated in a series of “other questionable, unsafe and unsound related party transactions involving uniBank Ghana Limited, to the detriment of Ghana’s financial system and for their financial gain and benefit”.

As a result, it said, the BoG “considers that Belstar and Starmount are not fit and proper persons and cannot permit them to continue to hold shares acquired directly or indirectly in ADB”.

The linkage

The statement added that the request for emergency liquidity support from the BoG by uniBank, loans from uniBank to Belstar and Starmount, the loan from Belstar to SIC-FSL, provision of funds to and the engagement of EDC by Starmount as purchaser and trustee of shares “are inextricably linked and manifest a calculated intention by these entities to act in concert to acquire a majority shareholding in ADB, using EDC and SIC-FSL without the knowledge and approval of the BoG”.

Meanwhile, a banking consultant, Dr Richmond Atuahene, has said in an interview that the order to annul the transaction is “one of the best actions ever taken by a regulator in the country”, writes Maxwell Akalaare Adombila.

Although the action was belated, Dr Atuahene said he was optimistic that it would set a good precedent for transparency in future transactions, adding that that should help end possible insider trading in the capital market.

He explained that the action meant that the government would now have to pay off the four shareholders before deciding on how to apply the affected shares.

On the way forward, Dr Atuahene, who specialises in corporate governance, said the BoG and the Securities and Exchanges Commission should collaborate to undertake the mapping of ownership to help avoid collusion and insider trading.

Below is a copy of the BoG statement

BANK OF GHANA ANNULS THE ACQUISITION OF SHARES OF ADB BANK LIMITED HELD BY BELSTAR CAPITAL LIMITED, STARMOUNT DEVELOPMENT COMPANY LIMITED, SIC-FINANCIAL SERVICES LIMITED, AND EDC INVESTMENTS LIMITED

The Bank of Ghana has today made an Order pursuant to section 55 of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) to:

(i) annul the acquisition by Belstar Capital Limited (Belstar), Starmount Development Company Limited (Starmount), SIC-Financial Services Limited
(SIC-FSL), and EDC Investments Limited (EDC), of all shares held by them in the ADB Bank Limited (ADB), and all transactions undertaken in respect of
the relevant shares; 

(ii) prohibit the exercise by Belstar, Starmount, SIC-FSL and EDC of any of the voting rights or any other rights in respect of the relevant shares; and

(iii) prohibit the directors appointed by the parties specified above to the Board of the ADB from acting as directors of ADB.

The Order takes immediate effect.

Following the Initial Public Offering (IPO) undertaken in respect of ADB in 2016, Belstar and Starmount directly acquired 24% and 11% respectively of issued shares in ADB.

It has come to the notice of the Bank of Ghana that Belstar and Starmount are affiliates, and unknown to the Bank of Ghana, they entered into agreements with SIC-FSL and EDC to acquire additional shares in ADB in its IPO.

These agreements, in addition to the direct acquisitions by Belstar and Starmount resulted in a direct and indirect holding by these companies of over 50% of the shares of ADB without the knowledge and approval of the Bank of Ghana and in breach of section 49 of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).

It has also come to the notice of the Bank of Ghana that the shares acquired by Belstar and Starmount were acquired with funds obtained from uniBank Ghana Limited
(currently in official administration) using emergency liquidity support obtained by uniBank Ghana Limited from the Bank of Ghana in questionable circumstances.

However, the liquidity funds obtained by uniBank were improperly and unlawfully on-lent to Belstar and Starmount to acquire shares (including shares held by the Financial Investment Trust on behalf of the Bank of Ghana) in ADB’s IPO.

Belstar and Starmount have participated in a series of other questionable, unsafe, and unsound related party transactions involving uniBank Ghana Limited to the detriment of Ghana’s financial system and for their financial gain and benefit.

The Bank of Ghana considers that Belstar and Starmount are not fit and proper persons and cannot permit them to continue to hold shares acquired directly or indirectly in ADB.

The request for emergency liquidity support from the Bank of Ghana by uniBank, loans from uniBank to Belstar and Starmount, the loan from Belstar to SIC-FSL, provision of funds to, and the engagement of EDC by Starmount as purchaser and trustee of shares, are inextricably linked and manifest a calculated intention by these entities to act in concert to acquire a majority shareholding in ADB using EDC and SIC-FSL without the knowledge and approval of the Bank of Ghana.

The Bank of Ghana, therefore in the exercise of its powers pursuant under sections 49 and 55 of Act 930, has with immediate effect annuled the acquisition by Belstar,
Starmount, SIC-FSL, and EDC of all shares held by them in the ADB and all transactions undertaken in respect of these shares.

The exercise of any of the voting rights or any rights issue in respect of the shares by Belstar, Starmount, SIC-FSL, and EDC and the payment of any dividends in respect of these shares are also prohibited.

All shares acquired by Belstar, Starmount, SIC-FSL and EDC in ADB which were previously held by the Financial Investment Trust are to be immediately restored to the
Financial Investment Trust until further notice. All directors appointed by Belstar, Starmount, SIC-FSL and EDC to the ADB Board are to cease holding themselves out
as directors of ADB with immediate effect.