An Extraordinary General Meeting (EGM) of HFC Bank slated for today was called off at the last minute yesterday following the filing of an application for motion for stay of execution pending appeal by a shareholder dated January 26, 2015.
The move further deepens the boardroom battle over the control of the bank.
The EGM requisitioned by Social Security & National Insurance Trust (SSNIT) was first slated for January 20 but was called off when two shareholders of the bank went to court seeking an interlocutory injunction because they had petitioned the Securities and Exchange Commission (SEC) over alleging insider trading allegation against The Republic Bank of Trinidad and Tobago.
An Accra High Court thrown out the application by the two shareholders seeking to stop the EGM.
The court, presided over by Justice John Ajet Nasam, dismissed the application on the grounds that the lawyer who filed the suit had no valid lawyers’ Annual License to practice.
Based on its ruling last Friday, the court directed the company secretary of HFC to fix the AGM for today, January 27.
But yesterday, a notice signed by HFC Bank company secretary said “notice is hereby given that following the filing of an application for motion for stay of execution pending appeal dated January 26, 2015, the extraordinary general meeting requisitioned by Social Security & National Insurance Trust (SSNIT) of HFC Bank (Ghana) Limited (the “company”) scheduled to be held on Tuesday, January 27, 2015 at Christ the King parish hall, Accra, is hereby postponed.”
SSNIT yesterday morning nominated three persons that should be elected as Directors of the HFC Bank at an emergency Extraordinary General Meeting that was initially scheduled for January 27, 2015.
The nominated directors are Ebenezer Tetteh Tagoe, Paul King Aryene, and Victoria Emefa Hardcastle.
These nominated directors are expected to replace three other persons on the board SSNIT wants removed.
It is, however, unclear for now whether one of these nominated persons will be put forward or nominated as the new Board Chair of the bank.
SSNIT, in its capacity as a shareholder of HFC Bank, raised concerns about the governance structure of the bank and requested the board of HFC Bank, on its own, to make changes to increase and broaden its representation on the board.
However, HFC Bank in a statement indicated that it has not breached any regulations with regard to the current composition of executive directors of the board.
SSNIT had, in a letter dated October 24, asked HFC to broaden its board representation to protect shareholder interest, but HFC Bank says the current composition of the board is in compliance with applicable Ghanaian law and any other relevant corporate governance standard or best practice.
It currently has three executive directors, including the Managing Director and seven non-executive directors out of a total of 10 directors.
The Managing Director of the bank, Asare Akuffo; Charles Ofori Acquah, Executive Director for Business Development; and Osei Asafo-Adjei are the current executive directors.
In its statement, SSNIT described the board as a skewed management-led majority board because the three executive directors, along with the two independent directors, act as a bloc on the board without regard to shareholder interest.
Two independent directors of HFC Bank had alleged that the stance taken by SSNIT on insider trading by the Republic Bank of Trinidad and Tobago is the reason for the Trust’s decision to remove them through an EGM.
The Republic Bank of Trinidad and Tobago categorically denied insider trading accusations.
SSNIT described as “deliberate misinformation” allegations by the two independent directors - Mrs Muriel Edusei and Francis Koranteng
SSNIT said its decision to exercise its right as a shareholder has nothing to do with any allegation of insider trading.
The HFC Board, per its regulations, has the following as composition of the board.
Any shareholder with fully paid shares representing 12.5% of the issued shares of the company can appoint one representative on the board.
A holder of 25% or more can appoint two directors.
Two persons appointed by the board as Independent Directors in addition to the Managing director.
However as at the time SSNIT raised its Board Corporate Governance concerns, the board, which is to have a maximum number of 11, had three Executive Directors, including the Managing Director, two each representing SSNIT and Republic Bank, which together holds 66% of the total shares of the bank, as well as two Independent Directors and one member representing two shareholders who have combined their shares to achieve 12.5%, a practice which is not authorised by the HFC Bank Regulations
SSNIT, therefore, requested HFC Board in its letter dated October 24, 2014 to address the following in order to broaden representation and make the board truly independent to protect the interest of shareholders.
a) Resignation of the representation of shareholders without requisite percentage of shareholding and filling of resultant vacancy.
b) Resignation of one of the Executive Directors, excluding the Managing Director, and the filling of resultant vacancy.
c) The filling of the vacancy which has occurred as a result of an earlier resignation of a Director whose shareholder has sold its shares.
HFC Bank on receipt of the said letter requested a meeting with SSNIT per a letter dated October 30, 2014.
The meeting was, however, held on Friday, November 7, 2014, where SSNIT further explained its position on the concerns.
By a letter dated November 20, 2014, HFC Bank wrote to SSNIT and declined the request to make changes on the board.
In a reply dated November 27, 2014, in response to HFC, SSNIT restated that the HFC Bank board as presently constituted is not an independent and broadly represented board.
According to SSNIT, it is a skewed management-led majority board. This is because three executive directors along with the two independent directors act as a bloc on the board without regard to shareholder interest.
The quorum for a board meeting is five and they can constitute a quorum for a meeting to the detriment of the shareholders.
The statement went on to add that by the refusal of HFC Bank to effect any change to have a more broader representation to protect shareholder interest, SSNIT decided to invoke the provisions of Section 297 of the Companies’ Act 1963 to requisition an EGM to remove one executive director and two independent directors and then have the EGM appoint three new directors to fill the resulting vacancies to protect shareholder interest.
SSNIT says as at the time it started raising concerns and subsequently requisitioned the EGM, the issue of insider trading allegation was a subject matter of a suit pending in court and the issue of appointment of a new board chair had not risen.
Therefore, its decision to exercise its right as a shareholder has nothing to do with any allegation of insider trading.
Republic Bank shares in the position taken by SSNIT to reconstitute HFC bank board.
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