UNION BANK PLC. THE DISSOLUTION OF BANKS BOARD BY THE
- Introduction: On the 10th
January 2024 , theCentral Bank of Nigeria (CBN) dissolved the Board and Management ofUnion Bank ,Keystone Bank andPolaris Bank inNigeria .2 The CBN disclosed that "This action became necessary due to the non-compliance of these banks and their respective boards with the provisions of Section 12(c), (f), (g), (h) of Banks and Other Financial Institutions Act, 2020. The Bank's infractions vary from regulatory non-compliance, corporate governance failure, disregarding the conditions under which their licenses were granted, and involvement in activities that pose a threat to financial stability, among others."3This Article seeks to explore whether the dissolution of the Bank Boards and Management by the CBN is illegal or not?
- Who Regulates Nigerian Banks? The CBN's has the primary responsibility for the regulation of Nigerian Banks and part of its statutory objective is to promote a sound financial system in
Nigeria 4 and ensure a high standard of conduct and management throughout the banking systems5. The Banks and Other Financial Institutions Act, 2020 (BOFIA) also empowers the CBN to regulate and supervise Banking and the business of other Financial Institutions inNigeria . While the CBN has regulatory oversight on Nigerian Banks as Financial Institutions, these Banks are primarily Companies and the chief statute for the operation of companies inNigeria is the Companies and Allied Matters Act (CAMA) 2020 (as amended)6.
- How must Directors be legally removed in
Nigeria ? 288 (1) of CAMA outlines the procedure for the removal of Directors of a company. It expressly states that a Director can only be removed through an ordinary resolution of the Company. It however outlines some condition precedents that must be fulfilled before such an ordinary resolution can be legally and validly passed. Section 288 (2) provides that the Company must issue a special notice convening the meeting and detailing that part of the agenda for the meeting is the removal of a Director(s). A copy of such notice must be sent to the concerned Director, whether he is a Member of the Company or not, and such Director is entitled to be heard on the resolution of his/her removal at the Meeting. Section 288 (3) of CAMA further provides that the concerned Director(s) shall have a right of representation to such removal notice, either written, oral or both.
- Removal of Directors outside of CAMA: While Section 288 of CAMA broadly details the process for the legal removal of Directors, Section 288(6) of CAMA acknowledges that Directors of a Company can be removed under other powers which may exist outside the provisions of Section 288 of CAMA. Underscoring this fact, Section 53 (2) of BOFIA provides that where any of the provisions of the Companies and Allied Matters Act are inconsistent with the provisions of BOFIA, the provisions of this BOFIA shall prevail. Hence, it would be perfectly legal for the CBN to remove a Bank Director(s) under BOFIA, even though such process may conflict with the provisions of Section 288 of CAMA.
- Was the removal of the Board and Management of
Union Bank ,Keystone Bank andPolaris Bank under BOFIA Legal? The CBN purportedly dissolved the Management and Board of the banks due to their non-compliance with the provisions of Section 12(c), (f), (g), (h) of BOFIA. Interestingly, Section 12 of BOFIA speaks specifically to the revocation of a Banking License and what must be done by CBN if aFinancial Institution does not conform with its License obligations. Nowhere does Section 12 of BOFIA speak to the removal of a Director or the dissolution of Bank's Board as the appropriate regulatory intervention for the contravention of Section 12 of BOFIA. It is however instructive that Section 34 (2) (e) and (f) (i) of BOFIA empowers the CBN Governor to remove, for reasons to be recorded in writing with effect from such date as may be set out in order, any manager, officer or Director of a Bank, where after a special examination under Section 33 of BOFIA, CBN is satisfied that the Bank is in grave situation based on the outcome of the special examination.
- CONCLUSION: Following from the above, it is our reasoned opinion that the recent dissolution of the Board and Management of
Polaris Bank ,Union Bank and Keystone Bank Boards by the CBN is legal, statutorily recognized and within the ambit of the powers of the CBN Governor as contained in BOFIA. We however further opine, that the Memorandum circularizing the Board dissolution should have been made sequel to the provisions of Sections 33 and 34 of BOFIA and not Section 12 as contained. The powers of the CBN under Section 34 of BOFIA is quite enormous and would have been a better fit for purpose than Section 12 of BOFIA. For mischief, one can argue that the appropriate response for a contravention of Section 12 of BOFIA is revocation of the Bank's license, which was not done in this case, and not the removal of the Directors or dissolution of the Board.
Footnotes
1.
2. Via a circular on the CBN website https://www.cbn.gov.ng/ and accessed on
3. Ibid
4. Section 2 (d) of the
5. Sec 42 (1) (b) of CBN Act
6. Companies and Allied Matters Act (CAMA) 2020.
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