NSE set to become public company

Taofik Salako, Deputy Group Business Editor

NIGERIA’s apex corporate regulatory agencies are combing through the final documents for the conversion of Nigerian Stock Exchange (NSE) from a non-profit, member-owned mutual company limited by guarantee to a public limited liability company with issued share capital and shareholders.

The reviews are for the final approvals that will kickstart the implementation of the scheme of arrangement for the conversion, a culmination of the transition processes. The Federal High Court (FHC) had, in May 2020, sanctioned the scheme of arrangement for the conversion after shareholders at a court-ordered meeting and extraordinary general meeting last March approved the scheme of arrangement and major changes in the organisational structures of the post-demutualisation NSE.

Sources at the weekend said the final documents for the conversion, otherwise known as demutualisation, were being reviewed by the country’s apex capital market regulator, Securities and Exchange Commission (SEC) and corporate entities’ regulator, Corporate Affairs Commission (CAC), preparatory to final approvals that will herald the change in corporate status of the six decades old NSE.

Sources said the timelag between the FHC sanctioned and final approval of the much-awaited demutualisation was due to the disruptions caused by the COVID-19 pandemic and the novel nature of the transaction, which required extensive reviews by several departments of the government agencies, especially legal and compliance departments.

They noted that the NSE occupies a critical position as a national infrastructure and everything must be done to ensure a hitch-free transition.

Source said there were credible indications that the culmination of the conversion process may be this quarter, noting that most stakeholders remain convinced that demutualisation is the best step forward for the Exchange. Both SEC and CAC had earlier given preliminary “No Objection” to the conversion documents and processes.

The final approvals include re-registration of the NSE as a public limited liability company, approval of share capital allotment, registration of the resultant new ordinary shares, management structures and corporate structures, among others.

It should be noted that the representatives of the Federal Government, which holds a stake as a founding member of the Exchange, had voted in favour of the conversion at the court- ordered meeting. To achieve the demutualisation, not less than three-quarters of the interests of members present and voting either in person or by proxy had voted in favour of the scheme. Voting at the meeting was by poll with each member representing one interest or one vote for or against the resolution.

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Under the approved scheme of arrangement, the NSE will transit into a holding company, Nigerian Exchange Group (NEG) Plc, which will be the parent company for the Nigerian Exchange Limited, the successor that will carry on the securities trading business of the Exchange, and other subsidiaries. Shareholders will own shares in NEG Plc while NEG will own the main company and other subsidiaries.

According to the scheme of arrangement for the conversion, the post-demutualisation shareholders’ base will consist of 255 institutional shareholders and 177 individual shareholders.The post-demutualisation shareholding arrangement was arrived at by converting the existing dealing members of the Exchange to institutional shareholders and ordinary members to individual shareholders.

Shareholdings will be on equal basis in the immediate conversion period with each institutional shareholder holding 6.01 million ordinary shares of 50 kobo each while each individual shareholder will hold 2.44 million ordinary shares of 50 kobo each.

Thus, each institutional shareholder will hold 0.3 per cent equity stake while each individual shareholder will hold 0.1 per cent equity stake, in line with the current membership-share conversion ratio of 78 per cent for dealing members and 22 per cent for ordinary members.