Ecobank issues ‘caveat emptor’ to Flour Mills over Honeywell shares

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The plan by Flour Mills Nigeria to acquire 71.69 percent of Honeywell Group Limited, appeared to have run into stormy wasters, as Ecobank Nigeria Limited has placed a caveat on any share of the company on the grounds of huge indebtedness which is currently a subject of litigation.

The “buyers beware” notice was contained in a press statement released by Ecobank Nigeria Limited through its counsel, Kunle Ogunba & Associates, titled “Purchase of Honeywell Group Limited’s 71.69% stake in Honeywell Flour Mills Limited- “Caveat Emptor”.

Honeywell is owned by businessman, Mr Oba Otudeko, former chairman of First Bank and the share sale is believed to be part of arrangements to liquidate humongous debts owed the bank by Otudeko.

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The Central Bank of Nigeria had earlier demanded that the debt be paid up after Otudeko was removed from the board alongside Ibukun Awosika, the immediate past chair.

However, Ecobank in the statement released by its lawyer cautioned the general public and the corporate bodies on the danger inherent in dealing in any shares of the company.

The bank said it advanced several loan facilities, which included working capital disbursements to Honeywell Flour Mills Plc and that due to the failure of the company to liquidate the said loan facilities, Ecobank was constrained to commence winding up proceedings against Honeywell Group Limited at the Federal High Court, Lagos in suit no: FHC/L/CP/1571/2015;

Ecobank said that Honeywell Group Limited, being Respondent to the winding up petition, objected to the jurisdiction of the trial court to preside over the said suit, this the bank said was upheld by the trial court,

Aggrieved with the decision of the trial court, Ecobank said it filed an appeal (with appeal No: CA/L/1041/2016) at the the Court of Appeal, Lagos Division and that upon review of the case, the appellate court found merit in the appeal, and held that the winding up proceedings against Honeywell Group Limited was properly commenced and that the Federal High Court had jurisdiction to hear the said petition.

Ecobank said that while the said decision of the Court of Appeal has been appealed to the Supreme Court, the Court of Appeal’s judgment remains valid and subsisting till date.

The bank stated that the effect of the Appeal Court Court judgement is that there is currently a winding-up action/proceeding pending against the said Honeywell Group Limited.

Ecobank added that the provisions of Section 577 of the Companies and Allied Matters Act 2020 “CAMA” : “Where a company is being wound up by the Court, any attachment, sequestration, distress or execution put in force against the estate or effects of the company after the commencement of the winding up is void”

The bank said the estate or effects of Honeywell Group Limited includes (but is not limited to) its 71.69% stake in Honeywell Flour Mills Plc, which it now seeks to divest to Flour Mills contrary to the express provisions of the law which prohibits the said sale/transfer or divestment during the course of the winding up proceedings.

It added that it is clear that Honeywell Group Limited is legally estopped from sequestering and/or disposing any of its assets pending the final determination of the winding up action commenced against it.

Furthermore, Honeywell Flour Mills Plc in which the shares are held is also currently indebted to Ecobank by virtue of the Court of Appeal judgment delivered on the 14th day of December, 2020 in appeal number: CA/LAG/CV/975/2019, wherein the Appellate Court held that the company did not repay its debt to our client in line with the agreement of parties. While the said judgment is subject of a further appeal to the Supreme Court.

Consequently, the bank demanded that Flour Mills of Nigeria Plc in its best corporate interest immediately cease and desist from consummating the subject transaction, which aims to divest the assets of a company being wound-up (Honeywell Group Limited).

“Please be further informed that the assets of both Honeywell Group Limited and Honeywell Flour Mills Plc. are the subject of the winding-up action and thus based on the doctrine of “lis-pendens” (in addition to the provisions of CAMA supplied above) you are advised to refrain from dealing with the subject asset which forms part of the subject matter of litigation. ”

The bank said that while it believes that Flour Mills or any other interested person or group will adhere to its wise counsel and comply with its demands as a responsible and publicly listed entity, it stated that it shall not hesitate to deploy all available legal options to prevent this audacious illegality from coming to fruition.

“Moreover, we are constrained not only to demand an urgent reversal of the alleged ‘divestment processes’ as epitomised by a counter publication, notification or caveat in that regard”.

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