Bank of Ghana (BoG) has issued new directives on Mergers and Acquisitions with emphasis that it still has the sole right to approve any merger, acquisition or transfer of shares and stakes in any regulated financial institution.
BoG’s new Mergers and Acquisitions directive provides that the Central Bank can annul any such takeover or acquisition of a regulated financial institution in the country if its stipulated rules are contravened.
According to the Central Bank, a proposed transaction that has the effect to substantially lessen competition shall not be approved unless it finds that the anti-competitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served.
It indicated that its new directives are based on the Banks and Specialised deposit-taking institutions Act passed by Parliament in 2016.
Accordingly, the Central Bank defines “Merger” as the fusion or amalgamation of two or more Regulated Financial Institutions and “Acquisition” as the purchase or take-over, by an acquirer, of a Regulated Financial Institution which gives the acquirer control in that Institution.
The advent of the banking sector clean-up and the need for institutions to shore up their minimum capital requirements witnessed some mergers and acquisitions in the universal banking space.
One of such examples is the Consolidated Bank Ghana, which was formed out of the merger of Beige Bank, Sovereign Bank, Construction Bank, Royal Bank, and uniBank.
In the case of listed banks or SDIs, the regulator of the banking industry said a person who acquires shares of a bank or specialised deposit-taking institution in connection with a takeover, merger or amalgamation shall meet the requirements of this directive before applying for a review and approval of the takeover, merger or amalgamation under the Securities Industry Act, 2016 (Act 929).
The BoG further said it may approve a merger or acquisition if it is satisfied that a proposed merger or acquisition arrangement shall be for the benefit of the stability of the financial system as a whole, and is in compliance with all regulatory requirements under the Securities Industries Act where any of the parties involved is/are listed on the Ghana Stock Exchange.
The Central Bank pointed out that there shall be a three-stage approach to the application procedure, with two inherent approval stages of an application for a merger or acquisition by a bank or SDI.
These are pre-merger/ acquisition consent, provisional approval and final approval.
Should institutions fail to follow these directives, the BoG may by order annul the transfer, merger, amalgamation or reconstruction; prohibit the exercise of voting rights in respect of the shares; prohibit the payment of dividend in respect of the shares, or prohibit the issue of ‘bonus shares’ or ‘rights issue’ in respect of the shares.
In addition to any penalty provided under the Anti-Money Laundering Act, 2008 (Act 749), a person who contravenes a directive will be liable to pay to the Bank of Ghana an administrative penalty of not less than 2,000 penalty units and not more than 10,000 penalty units.
