Against a pending suit at the Federal High Court sitting in Abuja, seeking order of interlocutory injunction on recapitalization of insurance companies, the National Insurance Commission (NAICOM) has released further guidelines for the payment of Minimum Paid-up Share Capital by insurance and re-insurance companies.
Although NAICOM had set December 31,2020 as deadline for the first phase of its recapitalisation policy for insurance and reinsurance companies, but the Incorporated Trustees of Standard Shareholders Association of Nigeria and Mr Godwin Augustine Anono as 1st and 2nd plaintiffs respectively, had last week approached the Court seeking to restrain NAICOM from going ahead with the recapitalization process.
The Court presided by Justice Ahmed Mohammed had also given an order summoning NAICOM to appear before it on August 20, 2020 after taking the argument of Counsel to the plaintiffs, Ayodele Akintunde, SAN, in a motion ex-parte dated and filed on July 22 marked: FHC/ABJ/CS/ 835/2020 in Abuja.
Akintunde informed the court that the commission had, in circulars numbered: NAICOM/DPR/CIR/25/19 of May 20, 2019; NAICOM/DPR/CIR/25-02/2019 of July 23, 2019 and NAICOM/DPR/CIR/25-03/2019 of Dec. 30, 2019, directed all insurance and reinsurance companies in Nigeria to increase their minimum paid-up share capital, in the manner stated in the circulars, not later than Sept. 30, 2021, without compliance with the requirements of the law.
According to him, “Despite the plaintiffs/applicants solicitor’s letter to the defendant on the 16th of April, 2020, the disastrous economic consequences of the COVID-19 pandemic as a result of the total lockdown and shutdown of the economic activities which has affected all sectors of the economy in Nigeria and all over the world, the defendant is headstrong on continuing with recapitalisation process as stipulated in the defendant’s circulars.
“The 2nd plaintiff and other trustees and members of the 1st plaintiff have invested a lot of money in buying shares in insurance and reinsurance companies affected by the defendant’s circulars and they also hold policies of insurance companies.”
The lawyer expressed fear that NAICOM might continue with the implementation of the directive despite the current economic situation foisted in the country and the world by the COVID-19 pandemic.
He urged the court to grant his prayer, asking it to hear the case as a matter of urgency during the ongoing vacation pursuant to Order 46 Rule 5(1) and (2) of the Federal High Court (Civil Procedure) Rules 2019.
Justice Mohammed, after listening to the counsel, ordered NAICOM to appear before the court on Aug. 20 to show cause why the interim order of injunction being sought by the plaintiffs should not be granted.
He directed that the motion ex-parte; the motion on notice, seeking order of interlocutory injunction; the originating summon; the enroll order and hearing notice should be served on NAICOM.
However, NAICOM in its latest circular dated August 17, 2020 referenced “CIRCULAR NO: NAICOM/DPR/CIR/25 – OS/2020” to all insurance and reinsurance companies in furtherance of the recapitalization process, set September 21, 2020 as commencement date for verification of capital with the first phase of the recapitalization programme.
NAICOM in the circular signed by its Director, policy and Regulation, Mr Pius Agboola, on behalf of the commissioner for insurance, Mr Sunday Thomas, said that the guidelines were in furtherance to the commission’s earlier circulars referenced /25/2019, dated May 20, 2019, July 23, 2019 and December 30,2019 respectively on the subject matter.
Agboola said that the minimum paid-up share capital shall be through any
or a combination of either and existing paid-up share capital, cash payment for new shares, retained earnings – capitalisation of undistributed profits.
He also listed payment in kind, such as properties, T-Bills, Shares, Bonds, share premium among others for new shares issued which must be converted to cash not later than three months to the recapitalisation deadline.
According to him, the above components are to be converted to paid-up share capital in compliance with the recapitalisation exercise and applicable laws and regulations in Nigeria.
“For Private Placement, appropriate clarification have been obtained from the relevant regulatory agency to the effect that insurance and reinsurance companies may offer more than 30 per cent of the existing issued and fully paid shares.
“Submission of recapitalisation progress report shall now be monthly and the report shall be submitted not later than five working days after the end of each month, effective end of August ,” he said.
Agboola further said that timeline and activities for the first phase of the recapitalisation had been scheduled to commence on August 30 for submission of monthly recapitalisation progress report.
He said completion of the submitted reports would be after five working days after the end of each month.
He noted that all mergers for the purpose of meeting the first phase of November 30, 2020 recapitalisation would commence on Sept. 14 and shall be irreversible, except with a written approval of the commission.
According to him, NAICOM shall commence capital verification on Sept. 21, while communication of capital verification report to respective companies shall begin on November 30 and end January 21,2021
” Deadline for compliance with the first phase of the new minimum paid-up capital by all existing companies remains December 31 and issuance of letters of compliance as at date is February 26, 2021, ” he said.
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