In a twist of events surrounding the purported takeover of Flour Mills of Nigeria by Honeywell Group Limited, Ecobank Nigeria Limited has advised Flour Mills of Nigeria Plc against going forward with its proposed acquisition of an equity stake in Honeywell Flour Mills Plc.
According to Nairametrics, the bank alleged that Honeywell Group Limited, the parent firm, had not been servicing its loans with the bank.
In a letter addressed to the Managing Director of Flour Mills of Nigeria and signed by solicitors to Ecobank, Kunle Ogunba and Associates, the company, as well as the public and corporate bodies, were warned of the "danger inherent in dealing in any shares of the company."
The bank alleged that Honeywell Flour Mills had defaulted on honoring several loan agreements, stating that as a result of the failure of the company to liquidate its loan facilities, it 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.
The letter says, "However, while the said action was dismissed at the Federal High Court and the Court of Appeal, it is pertinent to state that an appeal with appeal no. SC/700/2019 has been filed challenging the said decision at the Supreme Court (the Notice of Appeal is herein enclosed and marked as Annexure C).
"Hence, the effect of the above is that there is currently a winding-up action/proceeding pending against the said Honeywell Group Limited."
The bank quoted a provision of Section 577 of the Companies and Allied Matters Act 2020 as saying, "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."
According to the bank, this prevents Honeywell Group from moving ahead with the sale of Honeywell Flour Mills to Flour Mills of Nigeria.
"Consequently, we hereby demand 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 added.
"Our in-house analyst believes that there was no way Flour Mill of Nigeria would not have known about the total liabilities of Honeywell Flour Mills".
He stressed further that it would be in the best interest of both parties to settle out of court and come to an amicable agreement to reschedule the loan payment in such a way that a 50% down payment is made. The remainder is spread over a maximum period of two years because the Flour Mill of Nigeria has the financial muscle to accommodate such a payment.
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