More than three decades after opening its doors to save lives, Eko Hospital, one of Lagos’ most popular health facilities, is currently battling to save its own life amid a fierce ownership battle threatening to rip the hospital apart.
The facility is the only hospital business quoted in the Nigerian Stock Exchange under the auspices of Ekocorp Plc. And now, what appears the hospital’s increasingly prospects, with at least three facilities in Ikeja, Surulere, and Ikoyi areas of Lagos, are at the centre of a bitter confrontation between its founders and shareholders, court documents show.
“This is a battle for the life of Eko Hospital,” one of the lawyers in the suit said.
Established in 1982 by three medical doctors, Alexander Eneli, Sunday Kuku, and Augustine Obiora, the trio merged the first letter of their surnames to form the hospital’s name, EKO. The hospital has grown into a private teaching hospital expanding from Ikeja to Surulere and beyond.
After it became a public liability company in 1991, the hospital’s name was changed to Ekocorp Plc in 1994.
Court papers detail how the founding directors are locked in an ownership battle with Geoffrey Ohen, a shareholder in the company.
In his statement to the court, Mr. Kuku narrated how Mr. Ohen surreptitiously acquired the company’s shares to become the majority shareholder.
According to Mr. Kuku, in the course of business, the hospital was exposed to huge financial liabilities and was unable to pay its creditors, including the founders’ entitlements and emoluments of office.
“Between June 2001 and December 2007, the three founding directors who are the petitioners in the suit were being owed various sums of money which the 3rd Respondent (Ekocorp Plc) has been unable to pay them till date,” Mr. Kuku said.
A breakdown of the money owed the directors showed that Mr. Kuku is owed N43 million; Mr. Obiora N42 million; and Mr. Eneli N27 million.
After the passing of one of the founding directors (Mr. Eneli), the company was unable to pay the emoluments and other entitlements accruable to the estate of the deceased as a result of the financial constraints it faced.
“Consequently, the management proposed and persuaded the family of the deceased and the other founders to consider the option of converting greater part of the debt owed to them to equity through debt-equity swap,” Mr. Kuku said.
In its bid to raise funds to meet its financial challenges, the company offered Mr. Ohen’s company, Geoff Ohen Ltd, by way of a special placing 110 million ordinary shares of 50 kobo each at N4 per share.
“The offer of special placing was purportedly executed by a Share Purchase Agreement between Ekocorp Plc and Geoff Ohen Ltd in August 2007 and Dr. Ohen and one Olusegun Olusanya became nominees of Geoff Ohen Ltd and they started to sit at the board of Ekocorp Plc,” Mr. Kuku continued.
“Sequel to the weak financial standing of Ekocorp Plc, the Board of Directors, with a view of reducing the huge financial liabilities of the company, decided and approved at its several meetings held in 2007 and 2008 that the indebtedness to its founding directors and one of its directors (F.G.A Cole) amounting to N118 million be liquidated by a debt-equity conversion at percentages of 75 percent of the debt to be converted to equity whilst the remaining 25 percent to be paid to the directors in cash.”
At the time of the special placement of the 110 million shares, Mr. Ohen had told the directors, according to Mr. Kuku, that he held only 63 million shares (19 per cent) in the company.
Mr. Kuku also stated that Messrs Ohen and Olusanya were in attendance at the Board of Directors meeting where the debt-equity swap was discussed and they gave their approval “after exhaustive discussions.”
“The said 25 per cent of the debt was paid out of the proceeds of the special placing paid by Dr. Ohen. He (Dr. Ohen) approved and actually signed that 25 per cent of the debt be paid to the directors in accordance with the several decisions of the board of directors meeting in they (Ohen and Olusanya) actively participated,” Mr. Kuku said.
After the approval of the debt-equity swap and share purchase agreement, the board scheduled an Annual General Meeting of Ekocorp Plc in October 31st 2007 where the shareholders would pass a resolution to give effect to both decisions.
Mr. Kuku said a broader resolution which increased the authorized share capital of Ekocorp Plc and gave the Board powers to allot the new increased shares as they deem fit were passed at the annual general meeting.
“The essence of the increase in the authorized share capital of Ekocorp Plc from 250 million to 500 million was to give the directors the liberty to apply the increment in the authorized share capital to effect the debt-equity swap and allot 110 million shares to Geoff Ohen Ltd in accordance with the decision already reached and re-affirmed in several board of directors meetings,” he added.
However, after the post-offer completion of the special placing, the registrars to the offer informed Ekocorp Plc that the Securities and Exchange Commission needed a more specific resolution as the one they submitted was “too broad.”
Mr. Ohen’s company then procured a specific resolution without reverting to Ekocorp Plc’s General Meeting for approval, according to Dr. Kuku, and no resolution for the special placing was tabled or passed.
THE NEW BOSS
After he was allotted the 110 million shares by special placing, and in addition to other shares he had acquired from Guaranty Trust Bank Plc, GTB, and Security Swaps; Mr. Ohen’s shareholding in Ekocorp Plc jumped to 53 percent, shocking the founding directors.
Mr. Kuku accused Mr. Ohen of deception by failing to disclose to the Board of Directors that he already “illegally” acquired other shares of Ekocorp Plc from GTB and Security Swaps Ltd, who acted as financial adviser and issuing house for the subscription of Ekocorp Plc shares in 1997.
“Dr. Ohen and Geoff Ohen Ltd purportedly acquired the said shares during the pendency of suit FHC/L/CS/1482/98 Capital Consortium and Ekocorp Plc wherein the latter is challenging the propriety or otherwise of GTB and Security Swaps registering the said shares in their names and Dr. Ohen and Geoff Ohen Ltd were aware of the pendency of the suit.
“Dr. Ohen and Geoff Ohen Ltd also in bad faith urged Ekocorp Plc to discontinue with the suit without disclosing its actual intentions and interest in the shares,” Mr. Kuku said.
With his new status as the majority shareholder, Dr. Ohen moved to block the debt-equity swap of the founding directors, according to Mr. Kuku.
“They have used their claims of having the majority shareholdings to block the swap on the grounds that the October 31, 2007, Annual General Meeting of Ekocorp Plc resolution authorizing the debt-equity swap was too general and an omnibus resolution and did not specifically refer to the debt-equity swap.
“Dr. Ohen has been writing petitions to regulatory authorities in his purported authority as a majority shareholder,” Mr. Kuku said.
“Dr. Ohen and Geoff Ohen Ltd in objecting to the execution of the debt-equity swap have deliberately concealed, misrepresented or ignored the fact that it was the same resolution, for which there was no specific AGM approval, that formed the basis of the allotment of 110 million shares to Dr. Ohen and he has benefited under the same resolution,” he added.
The impasse at Ekocorp Plc has led to a deadlock as the public listed company had not held its Annual General Meeting for over three years, a situation that could lead to severe sanctions from statutory agencies.
Mr. Kuku accused Mr. Ohen of maintaining the deadlock by using fierce-looking, heavily armed police officers to disrupt meetings of the directors.
“Ekocorp Plc is at the risk of being blacklisted and this situation may eventually affect the jobs of over 350 employees currently in their employment,” said Mr. Kuku.
“And more particularly, the impasse could cause the disruption of the quality and remarkable services which include professional training to prospective doctors, internship, referencing, general medical practice and its research centre for cancer treatment which is currently the only cancer research centre in Nigeria,” he said.
ACCUSATIONS OF MISMANAGEMENT
In his reaction to the claims against him, Mr. Ohen insisted that Ekocorp Plc was not indebted to its founding directors, adding that the prospectus upon which they based their invitation to invest never disclosed such liability. He also stated that he had not been perturbed about the 75 per cent debt-equity swap because any decision of the board of directors would still require ratification by the company in a general meeting for it to have business efficacy.
“The huge financial liabilities referred to was a direct result of the mismanagement of the two surviving directors (Messrs Kuku and Obiora) who were directly and solely responsible for running and management of Ekocorp Plc,” Dr. Ohen said.
“It was in order to satisfy a preconceived but hidden agenda that the two surviving founding directors concocted a strategy to further emasculate the company financially under the guise of an alleged debt-equity swap,” he added.
On his acquisition of the company’s shares elsewhere without the knowledge of the founding directors, Mr. Ohen said that he was unaware of any obligation to make such disclosure.
“Such information was already in the possession of the Registrar and company secretary whose duty it is to report to the Board of Directors,” Mr. Ohen said.
With his new status as the majority shareholder, Mr. Ohen said that he became privy to the records of Ekocorp Plc, including a letter addressed to the Securities and Exchange Commission, SEC, seeking their permission to their proposed debt-equity swap.
The regulatory agency declined to grant the permission, insisting that there must be a shareholders meeting to that effect, according to Mr. Ohen.
He denied that there was a Board of Directors resolution to create more shares for the purpose of allotting the 110 million shares to him, insisting that the deal had been concluded and he had paid the N440 million three months before the October 2007 Annual General Meeting.
He also denied stalling the company’s Annual General Meeting; instead, accusing the founding directors of “frustrating” efforts to hold the meeting so as to prevent discussion of their plan to disguise secret profits as debts owed them.
“After it (Geoff Ohen Ltd) acquired its controlling shares and had access to the records of the company, it discovered that the alleged debt was not genuine but was secret profits made by the founding directors,” Mr. Ohen said.
“There was never any lawful debt owed by Ekocorp Plc to the founding directors and in no circumstances will the majority shareholder approve the looting of the company resources under the guise of a debt-equity swap.
“It was in realization of this fact that it continually requested the holding of an annual general meeting which proposal was continually blocked by the founding directors who realized that the first agenda at the annual general meeting would be their removal as directors for misfeasance and not the regularization of a bogus debt-equity swap,” Mr. Ohen added.
Mr. Ohen further denied using fierce-looking and armed police officers to disrupt meeting, stating that it was the founding directors who are fierce-looking and whose threatening mien and determination to seize their secret profits by force that were disrupting the meetings.
The N440 million was meant to improve the operations of Eko hospital, said Mr. Ohen, adding that were it not for the money the hospital would have gone out of business.
“There is no debt owed to the founding directors nor is there any debt-equity swap approved by the annual general meeting of the company and the interest of the directors is only to gather secret profits,” Mr. Ohen said.
“This interest is an activity unfairly prejudicial to the interest of Geoff Ohen Ltd as majority shareholder and Ekocorp Plc who is the victim of bad faith of its two directors,” he added.
The case continues in court.
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