Why First Bank Shareholders Want Femi Otedola Removed as Chairman

Some shareholders of First Bank of Nigeria Holdings Plc have called for the removal of the bank’s chairman, Femi Otedola, during a meeting held on Wednesday, the 8th of January, 2025.

This group of shareholders, which holds 10% of the company’s shares, is demanding an Extra-Ordinary General Meeting (EGM) within 21 days, as stipulated by Section 215(1) of the Companies and Allied Matters Act (CAMA), to address their concerns, among other issues.

What are the demands?

The shareholders claim that Otedola became chairman after acquiring a significant number of shares with the help of former Central Bank of Nigeria (CBN) governor, Godwin Emefiele.

They allege that the former CEO of the bank, Adesola Adeduntan, played a role in facilitating Otedola’s acquisition of control over the bank, as directed by Emefiele.

The shareholders also argue that Otedola was appointed as a non-executive chairman despite lacking security clearance from the State Security Service (SSS) and the Economic and Financial Crimes Commission (EFCC).

According to these stakeholders, under Otedola’s leadership, he has effectively taken control of the bank by placing his personal employees both at the holding company and the bank itself. They are concerned that the proposed private placement of N360 billion worth of shares will allow him to gain absolute control, turning the bank into his personal asset without oversight or corporate governance.

The shareholders contend that without Emefiele’s influence, Otedola would not have passed the “fit and proper” test, given his past history of bank failures due to non-performing loans sold to the Asset Management Corporation of Nigeria (AMCON).

Reports from ThisDay suggest that the African Export-Import Bank (Afreximbank) has provided Otedola with a loan of between $45 million and $50 million (approximately N90 billion) and it is believed that this loan will facilitate his complete takeover of the bank during the planned N360 billion private placement.

However, some shareholders have voiced opposition to the private placement, advocating instead for a rights issue or public offer of shares.

A source has even suggested that Otedola’s preference for a private placement is part of a strategy to gain control of the bank as a private venture.

A group of shareholders claimed Otedola had mismanaged the bank since becoming the chairman of FBN Holdings.

It will be recalled that Folake Ani-Mumuney, resignation was prompted by the bank’s chairman, Femi Otedola.

Otedola was further alleged to had a hand in the abrupt resignation of Adeduntan, eight months before the expiration of his tenure violated the CBN corporate governance guidelines. The exit of a former chairman of First Bank of Nigeria Limited, Tunde Hassan-Odukale, and the removal of an executive director, Tosin Adewuyi, whom Otedola was said to have side-stepped for the position of the CEO.

What CAMA says about shareholder removal

Section 288(1) of the Companies and Allied Matters Act (CAMA) grants members the authority, through an ordinary resolution at a general meeting, to remove a director before the expiration of their term.

This right to remove a director is not influenced by any provision in the company’s articles of association or any agreement between the company and the director being removed.

Subsection (6) of Section 288 clarifies that the provision in Section 288 does not affect other powers to remove directors that may exist outside of this section. This has led to the development of an “alternative removal scheme,” which allows a company to remove a director using procedures outlined in its articles of association or employment contract. For instance, if the company’s articles of association grant the board the authority to remove a director via resolution, such removal is valid, provided the correct procedure is followed.

A key statutory alternative removal scheme is found in Section 46(3) of CAMA, which states that if the company’s memorandum or articles empower a specific person to appoint or remove a director, this power is enforceable, even if the person holding this power is neither a member nor an officer of the company.

Can a minority shareholder remove the chairman of a company?

Although minority shareholders have limited powers under the Companies Act 2006, unresolved disputes can cause significant disruption to a company if not addressed promptly.

Shareholders with a 10% stake can call for a poll vote at a general meeting and request an audit, while those holding 25% have the authority to block special resolutions or compromise arrangements.

Additionally, shareholders have a pre-emptive right of first refusal to purchase new shares issued by the company, unless this right is explicitly removed in the shareholders’ agreement. Any offer for sale must be made on terms that are no less favorable than those offered to other parties.

While there are strict procedures for removing a director or chairman, it is advisable to seek legal advice before taking action. Shareholders will also need to secure at least half of the votes cast to proceed.