44 companies to face NSE’s sanctions over default filing

A total of 44 companies quoted on the Nigerian Stock Exchange, NSE, may face sanctions from the Exchange for failing the timeline in rendition of 2020 audited financial results.

Periodic and timely rendition of financial results to the NSE, is one of the key elements in the post-listing requirements of the Exchange which attracts penalties. The companies, which include, Conoil Plc, Oando Plc, Wema Bank Plc, Okomu Oil Plc and Presco Plc among others, failed to meet the March 31, 2021 cut off date (the 90 day timeline required by the rule of the Exchange for quoted companies to file their audited full year result) and will now face financial sanctions as enshrined in the rules of the Exchange.

The affected companies represent 28 percent of the companies listed on the Exchange. In the list of defaulting companies are, Thomas Wyatt Nigeria Plc, Deap Capital Management & Trust Plc, African Alliance Insurance Plc, Afromedia Plc, Briclinks Africa Plc, C&I Leasing Plc, Chams Plc, Cornerstone Insurance Plc, Coronation Insurance, E-Transact International Plc, Goldlink Insurance, Guinea Insurance, Japaul Gold & Ventures Plc, Lasaco Assurance, Medview Airline, Morison Industries Plc, Mutual Benefit Assurance, Niger Insurance, and NPF Microfinance Bank,Others include R.T Briscoe Nigeria Plc, Royal Exchange Plc, Smart Product Nigeria Plc, Studio Press Nigeria Plc, Tantalizers Plc, The Tourist Company of Nigeria Plc, Unity Bank, and Universal Insurance Plc.

Of the 44 companies that breached the rule, 12 have been listed as inactive, and they include Roads Nigeria Plc, Nigeria German Chemical Plc, Aso Savings & loans Plc, Capital Oil Plc, Evans Medical, International Energy Insurance, Juli Plc, Resort Savings & Loans, Staco Insurance Plc, Standard Alliance Insurance Plc and Unic Diversified Holdings Plc. The post-listing rules of the Exchange in respect of financial accounts submission, stated: “An issuer shall announce the financial statements for the full financial year immediately after the figures are available, but in any event not later than ninety (90) days after the relevant financial period.”

Meanwhile, three of the defaulting companies, Cornerstone Insurance Plc, NPF Microfinance Bank Plc and Deap Capital Management & Trust Plc have explained the reason for their failure to meet up with the deadline. Cornerstone Insurance Plc said that it encountered some delay in completing the actuarial valuation audit review and assured that the 2020 audited accounts would be submitted to the exchange upon finalization and upon receipt of approval from its primary regulator the National Insurance Commission (NAICOM). In its own explanation, NPF Microfinance Bank stated that its failure followed non-receipt of approval of its audited account by its primary regulator the Central Bank of Nigeria (CBN).

According to the company, it is engaging the CBN to ensure that the required approval is secured and promised to make it public on or before April 20, 2021. Deap Capital Management & Trust, on the other hand, blamed its failure on the resignation of the entire Board of Directors on December 31, 2020, saying that the interim management appointed by the CBN is currently working with the Corporate Affairs Commission (CAC) to convene a general meeting where another Board would be constituted for the company. “All regulatory filings will be effected as soon as a Board is constituted for the company,” the company said in a regulatory filing to the Exchange. Financial Vanguard’s analysis of the status of financial results filing as at March 31, 2021, indicated that a total of 112 companies, representing 72 percent of the 156 listed entities, fulfilled the post-listing requirement within the stipulated timeline. The Exchange affirmed that timely release of financial information, which is periodic disclosure, as well as on-going material information disclosures enable it to efficiently perform its function of maintaining an orderly market.

Meanwhile, shareholders in the market have frowned at the continued failure of companies to comply with the post-listing rules obligation, saying that it dampens investors’ confidence.

Patrick Ajudua, President, New Dimension Shareholders Association (NDSA), said: “It is unfortunate that despite the warning from NSE for companies to file their financial reports before the close of the window on March ending, some companies failed to meet the deadline.

“Timely submission of financial results helps us to understand the true financial state of our company and the future of our investments. And for the market, publication of financial results enables the stakeholders to either invest more in the company or take the exit door where there is uncertainty in expected returns.”

He said that the NSE should continue to wield the big stick against the directors of the companies by ensuring that apart from fines and other penalties, the directors are made to forfeit 50 percent of their emoluments for the financial year. According to Moses Ogundeji, member of Independent Shareholders Association of Nigeria (ISAN), the failure of the companies to comply with the post-listing obligation is not excusable in view of the fact that the companies are not new to capital market standards.

“They all have qualified personnel handling these functions, so why the perennial failure. “To some investors, this is a red flag that something is amiss and that calls for caution. If the directors of the defaulting companies are made to pay the penalties, things might change,” he said. Also speaking, Comrade Lawrence Oguntoye, President, Distinct Shareholders Association, said: “Investors do not have confidence in the market when companies keep defaulting in publishing their financial results.” According to him, constant payment of fines affects companies’ profitability, which in turn erodes shareholders’ dividends.