According to a government gazette published on December 31, shareholders who include Finsbury Investment Limited, Credit Suisse Investments, Clarkwell Limited, Job Albert T Samuel, Estate of the late Pat Bwalya Puta and Patrick Chamunda, have ceased to hold shareholder interest in the bank.
BoZ concluded that in its opinion, FBZL was failing and would have continued to fail to conduct its business in accordance with the law.
In the Bank’s opinion, FBZL was conducting its business in an unsafe and unsound manner, and that it would have been unable to continue its operations in the ordinary course of business.
BoZ has concluded that FBZL had weak corporate governance and risk management systems which facilitated the perpetration of wanton violations of the provisions of the Banking and Financial Services Act (BFSA), subsidiary legislation and other regulations.
It was also noted that FBZL through its shareholders, directors or senior management, either collectively or individually, violated various provisions of the BFSA and its Statutory Instruments.
One of the shareholders, Dr Rajan Mahtani, through Finsbury Investments Limited, with shares held by nominees or otherwise, effectively controlled 56.5 per cent of FBZL’s shareholding in contravention of the 25 per cent limit.
FBZL also violated provisions of the Act by failure to act in the best interest of the bank and failure to exercise due care, diligence and skill by allowing indiscriminate approvals and granting loans to insiders contrary to sound lending practices.
FBZL failed to declare interest relating to contracts, facilities and also exposed itself to a single risk exposure of 62 per cent, among many other violations.
According to the gazette notice, the BoZ has statutory and legal authority to terminate the interests of shareholders in FBZL, with compensation to be determined by a court of law.
The gazette further states that the purported holding of shares by Finsbury, Clarkwell Limited and Mr Samuel in FBZL was characterised by complex trust and transfer arrangements whose final consequence was that the beneficial shareholding in FBZL was not that of the declared entities, but converged on the Executive Chairman of Finsbury, Dr Mahtani.
The BoZ had reason to believe that the indirect acquisition of shares into FBZL by Dr Mahtani via complex arrangements violates the provisions of the BFSA, as neither the declared shareholders nor Dr Mahtani disclosed these obscure arrangements to the bank.
BoZ in exercise of the powers contained in section 81(1)(c)(i) and (ii) of the BFSA took possession of FBZL on 10th December, 2010.
BoZ further terminated the shareholder interest in FBZL on December 22, 2010.
The decision to take possession of FBZL was made after BoZ conducted inspections on FBZL.
BoZ also conducted a due diligence inquiry in May 2010, in which all the declared shareholders, including the natural persons behind the corporate entities holding shares in FBZL, were invited to participate in person , and they informed BoZ that they were nominees for Dr Mahtani.
Relevant documents in possession of the Bank in connection with the shareholding by Mr Samuel, who did not attend the meetings, confirm that he, too, is a nominee of Dr Mahtani.
[Zambia Daily Mail]