Court Begins Hearing in Celtel Shares Sale

A Federal High Court in Lagos, has begin hearing in the suit brought by President of the Nigerian Stock Exchange (NSE), Oba Otudeko, Foluke Otudeko and Broad Communications Ltd.The suit is against Jubril Adewale Tinubu and Henry Efe Imasekha, over sale of their Vee Network Ltd shares to some organisations without first offering them (plaintiffs) the right to buy them. The plaintiffs want the court to declare that since O and O Networks Ltd and Bromley Investment Ltd owned by Tinubu and Imasekha sold their shares, their seats on the board of directors of Vee Networks Ltd should automatically be vacated. Defendants in the suit are Vee Networks Ltd (formerly Econet Wireless Nigeria Ltd, EWNL), Celtel Nigeria BV, Jubril Adewale Tinubu, O and O Networks Ltd, Henry Efe Imasekha, DSTG Econshares Ltd (formerly Bromley Investments Ltd), Delta State Ministry of Finance Inc, Delta State government, Corporate Affairs Commission (CAC) and Econet Wireless International (EWI). Plaintiffs in the suit are contending that the purported sale of O and O Networks Ltd shares on July 15, 2003 and

Bromley Investments Ltd (now DTSG Ecoshares Ltd) on July 21, 2001 respectively, to Delta State Ministry of Finance Incorporated and Delta State government, are unlawful sale, transfer, encumbrance or disposal of all the 9,906,250 ordinary shares and 5,000,000 held by Tinubu and Imasekha respectively, in Vee Networks Ltd. They are contending that the acquisition by the Delta State Ministry of Finance Inc and Delta State government of the additional membership rights accruing upon the 9.90-6.250 ordinary shares of 5,000,000 shares held by Tinubu and Imasekha respectively in Vee Networks Ltd, was unlawfully acquired by way of right issues and bonuses.Plaintiffs also want the court to declare that the purported sale of O and O Networks and DTSG Ecoshares Ltd are each a "triggering event," within the meaning of clause 17.4 of the Shareholders Agreement (SA) dated April 30, 2002, which are automatically subject to legal consequences prescribed in Shareholders Agreement. Otudeko claims in the suit that he was the principal promoter of the company which was formed on December 21, 2000, as a joint venture vehicle for the purpose that the promoters would in partnership bid for a Cellular Mobile telephone "GSM" licence presented for auction by the Federal Government of Nigeria through the Nigeria Communications Commission in 2001.

The Nigerian promoters that he assembled shared 40 per cent of the shares between themselves, agreed that a fundamental term of the partnership established prior to the Shareholders Agreement was the "maintenance of proportionate ownership and control of the capital of the venture," and accordingly extensive anti-dilution provisions were inserted into corporate documents and the relevant agreements. It was also fundamental to the existing agreements that the shareholding qualifications for the allocation of seats on the board of directors would be strictly complied with.

The parties then agreed to hold their respective shareholdings in company names to facilitate financing. Plaintiffs claims that without notice to partners and under cover of a variety of steps calculated to hide this secret, Tinubu and Imasekha and officials of the Delta State Government in 2001 and 2003 reached secret and unlawful agreements to transfer the legal and beneficial interest in 5,000,000 ordinary shares and the 9,906;250 ordinary shares of the company's equity held by them respectively, to the Delta State Ministry of Finance Inc. and the Delta State Government, at a premium through the instrument of companies, which were created exclusively to hold the Vee Network shares. All these deals came to the open, through statements made to the EFCC by Imasekha, Tinubu and David Edebvie, the then Delta State Commissioner for Finance, the plaintiffs contended. The Shareholders Agreement, which the plaintiffs are relying on had provided that: "no party shall have the right to sell, transfer, encumber or otherwise dispose of all or part of its shareholding interest in the company, whether voluntarily, involuntarily or assign or create a beneficial interest in its share of net income, net losses, or distributable cash, notwithstanding the fact that such proposed assignment. encumbrance or creation of beneficial interest would not involve a substitution of a new person as a party under this agreement except as provided in this agreement. "Except by way of testamentary or probate document, any attempted sale, transfer, encumbrance or other disposition of all or any part of an interest in EWN by a party not in compliance with this Agreement shall be a breach of this Agreement, shall be null and void ab initio and shall confer no rights on the purported transferee.

And the Shareholders' Agreement confers on shareholders a ""Right of First Refusal"" in relation to the disposal by any conceivable means of shares or interest therein and outlines procedures to be followed for giving of notice of intention to dispose and further mechanisms for dealing in such shares". Plaintiffs are contending that they are ready and willing to take up their rights of pre-emption in the said shares and contends that the intent and actual effect of the said unlawful dealings is to unlawfully dilute or diminish the equity or shareholding power of the applicants contrary to agreements binding the shareholders and also the company itself.