NGX suspends nine companies over poor governance

Written by on July 4, 2022

The Nigerian Exchange (NGX) at the weekend suspended nine companies over their inability to comply with the rules and best practices on corporate governance according to the nation newspaper.

The suspended companies included Ardova Plc, African Alliance Insurance Plc, Niger Insurance Plc,Royal Exchange Plc, Ekocorp Plc, C & I Leasing Plc, Mutual Benefits Assurance Plc, Coronation Insurance Plc and Premier Paints Plc.

The NGX Regulation Limited (NGX RegCo) – the self-regulatory organisation (SRO) that regulates the Nigeria’s main stock exchange, NGX, stated that the suspended companies were sanctioned for failing to submit their audited report and accounts for the 2021 business year. The suspension took effect last Friday.

In a swift response; the board and management of Ardova at the weekend allayed fears over the suspension, noting that the delay in submission of its 2021 results was primarily due to recent acquisition of Enyo Retail & Supply Limited. Ardova had earlier in April, this year notified the stock market that its audited report and accounts for the 2021 business year and the interim results for the first quarter 2022 would be delayed.

The company attributed the delay to the accounting reconciliations that followed the acquisition of Enyo Retail & Supply Limited, which was concluded on November 15, 2021.

“Enyo’s accounting has been harmonised with the IFRS accounting standard already in place at Ardova Plc, following which the group’s consolidated financial statements were completed and duly audited.

“These audited financial statements were approved by Ardova’s board of directors following its meeting on June 29, 2022, and will be filed with the NGX on or before 8 July 2022. In accordance with the NGX rules, we expect that the suspension of trading will be lifted upon submission.

“The board and management apologise for inconvenience caused by this administrative circumstance and reassure our stakeholders that Ardova Plc remains committed to the highest standards of compliance and corporate governnace,” Ardova stated at the weekend.

Ardova had noted earlier in April, this year that the late filing of the 2021 audited report would also affect the timely submission of the first quarter of the year as the company is required to file the 2021 audited report prior to filing quarterly accounts.

Ardova had completed full acquisition of Enyo Retail & Supply Limited (Enyo) in November 2021 in a major deal that seeks to expand the scope of Ardova’s petroleum-marketing business.

The completion of the deal finalised a 10-month process after Ardova’s initial notice in January 2021 of an agreement in principle with Enyo’s shareholders to acquire the business.

The acquisition made Ardova Nigeria’s largest indigenous publicly listed downstream company, as it added Enyo’s 95 retail stations to its existing 450 stations, growing the group’s portfolio to 545 stations nationwide. With the completion of the deal, Enyo also joined Axles and Cartage Limited as part of Ardova’s group of companies.

The rules at the stock market require quoted companies to submit their audited report and accounts not later than 90 days after the year-end. Also, companies are expected to submit their unaudited interim quarterly report not later than 30 days after the end of the quarter.

Not less than 85 per cent of quoted companies, including African Alliance Insurance and Royal Exchange use the 12-month Gregorian calendar year as their business year.The business year thus terminates on December 31. While March 31 is usually the deadline for submission of annual report for companies with Gregorian calendar business year, the deadline for the quarterly report is a month after the quarter.

According to the NGX, the nine companies were suspended after repeated attempts to make the companies comply with the rules failed.

Rule 3.1, Rules for Filing of Accounts and Treatment of Default Filing of the NGX outlines the process for the suspension of companies that fail to file relevant accounts by the expiration of 90-day deadline. These include initial notice of deficiency, a second notification of deficiency, suspension of trading and notification of Securities and Exchange Commission (SEC) and the market of the suspension.

“In accordance with the default filing rules set forth above, the suspension of trading in the shares of the above-mentioned companies will only be lifted upon the submission of the relevant accounts, provided NGX Regulation Limited (NGX RegCo) is satisfied that the accounts comply with all applicable rules of NGX,” NGX RegCo stated.

Market analysts said the suspension raised a major red flag on the corporate governance practices at the companies.

Analysts said the suspension could undermine investors’ confidence in the stocks as timely submission of adequate information is a major measurement of global best practices.

Suspension and compulsory delisting from the market are the highest levels of sanctions for failure to adhere to listing and corporate governance rules. The NGX also tags and applies fines on companies that fail to meet earnings reports’ deadline. Companies may pay fines that range from N100, 000 to more than N100 million as penalties for delay in the submission of their corporate earnings reports. Companies that also delayed their financial statements and accounts face threats of suspension and delisting in addition to the monetary fines.

Ignite Investments and Commodities Limited led by Prudent Energy Services Limited had in June 2019 completed the acquisition of 74.02 per cent majority equity stake in Forte Oil from the company’s erstwhile chairman, Mr. Femi Otedola. The transaction was valued at about N64 billion. The company subsequently changed its name to Ardova.

Ardova is one of Nigeria’s foremost indigenous integrated energy companies with an extensive network of over 450 retail outlets from which it distributes petrol, diesel, aviation fuel and liquefied petroleum gas (LPG). Ardova also produces its own range of lubricants and has warehouse facilities across Nigeria.

(THE NATION)


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