By Yemisi Izuora-Lagos
The Lagos Chamber of Commerce and Industry (LCCI) has opposed the Private Companies Coversion and Listing Bill. Saying that it will not only discourage foreign investment but will also negatively affect the business environment.
The chamber said it undertook a review of the Bill and found out that it would create undesirable and unnecessarily cumbersome regulation and scrutiny on the companies under Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) rules and regulations.
The Bill seeks to provide for the private companies whose shareholders funds exceed forty billion Naira or its annual turnover exceeds eighty billion naira or its total assets exceed eighty billion, to convert to public liability company and get its shares listed in the stock exchange market thereby promoting growth for both the company and the Nigerian Capital Market. The LCCI submits as follows:
However in a sharp reaction to the proposed law, Director General of the LCCI Muda Yusuf in a statement in Lagos yesterday said though the 1999 Constitution vested on the National Assembly the powers to make laws regulating the ownership and control of business enterprises operating in Nigeria but the proposed Bill breaches representations made to attract foreign investors.
Yusuf also said that it will negatively affect Nigeria’s reputation and that it is counter-productive to the drive for foreign investments because foreign investors prefer to operate under stable economic policies.
According to him, the proposed Bill would negatively impact on local investment and the broader economy and would lead to considerable loss of revenue to the government and break up of companies to circumvent the requirement of the Bill.
“Also, the Nigerian Stock Exchange may not have the depth and liquidity needed for the investment arising out of the mandatory listing of these companies.
It would negatively affect the business environment by creating undesirable and unnecessarily cumbersome regulation and scrutiny on the companies under CAMA, SEC and NSE rules and regulations. Moreover, the procedure for going public is expensive and onerous and not every investor or would-be investor whether local or foreign has the temperament for such” the D-G noted..
Speaking further Yusuf observed that the law would also have a negative impact on corporate governance which is the engine room critical for the survival of any company.
He said “Listing on the floor of the stock exchange is not a ticket to a successful company as some companies that have been listed were delisted, and those that converted to public were re-registered to private companies. Going public and being listed on the floor of the stock market are critical business decisions that only the companies’ management can make.
The mere listing of a company’s shares does not guarantee success of the relevant business. The main benefits of buying publicly quoted shares are capital appreciation and the ease of disposal.
These two concepts depend largely on the operational success of the relevant business. Bringing so many companies into the picture without any sound and strong basis for so doing other than complying with some laws could create a situation whereby the All Share Index continues to nose dive to the absolute embarrassment of the Nigerian state” he said..
He further tated that contrary to the supposed intention of the Bill to redistribute wealth, just a insignificant percentage of the populace, particularly the money bags would benefit as it would give them opportunity to channel their wealth to purchasing shares in some target companies.
He said the move would lead to a situation where investors in the stock market would sell their investments in some companies to acquire the shares of these target companies, thus grossly distorting the stock market.
” The Bill is anti-entrepreneurship and discourages innovation. A lot of people have worked assiduously hard to bring their companies to where it is today. The decision of whether to raise funds from the public through the stock market or to allow the public own shares in their companies should be absolutely theirs to make.
The Bill has no stipulation for the minimum percentage of the share capital to be offered to the public. It could lead to loss of absolute shareholder and Board control of the company” he warned.
He dismissed the argument that the Bill will provide employment saying that it does not necessarily create employment opportunities as many foreign investors have expatriates in their employment.
” Some even run highly mechanized or automated businesses so this cancels out this so called benefit of this Bill” he argued..
