Zenith Bank, GTB, Others Move to Acquire Other Companies Under New Structure, and What Holding Company Means
- Zenith Bank is going to change its name and its operating structure soon
- The bank received CBN's approval in principle to become a holding company with a new name
- Holding companies are created to buy the shares of other companies and ultimately control them
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On Friday, March 3, 2023, Zenith Bank, one of Nigeria's most prominent banks, received approval in principle from the Central Bank of Nigeria to become a holding company.
In a statement signed by its Secretary, Michael Otu, the bank said that with the new move, it would have a banking group with subsidiaries in the financial services industry.
Source: UGC
Per the statement, Jim Ovia will serve as the new chairman of Zenith HoldCo and continue as Zenith Bank chairman until the new company becomes operational.
The statement partly reads:
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"Furthermore, the CBN approved Mr Jim Ovia as the Chairman of Zenith Holdco Plc (in-formation and for Mr Jim Ovia to continue as the Chairman of Zenith Bank until the commencement of Zenith Holdco."
What a Holding Company is
With its intended transmutation to a holding financial institution, Zenith Bank will seek to acquire and control other companies under its new structure.
A holding company is created to buy and own the shares of other companies and then control them.
According to Investopedia, a holding company owns the assets of other companies but rarely participates actively in the day-to-day running of a business of its subsidiaries.
The primary business of a holding company is a controlling interest in the securities of other companies. Usually, a holding company does not produce goods or services. Its sole purpose is own shares of other firms and to form a corporate group.
It is sometimes called an umbrella or a parent company.
Key features
- A holding company owns a controlling interest in other companies called subsidiaries.
- The parent corporation can control the subsidiary's policies and oversee management decisions but doesn't run its day-to-day operations.
- Holding companies are protected from losses accrued by subsidiaries—so if a subsidiary goes bankrupt, its creditors can't go after the holding company.
Upsides of a holding company
Holding firms enjoy the advantage of protection from losses. In the event of bankruptcy by any subsidiary, the holding firm only experiences a capital loss and decline in net worth but cannot be sued by creditors.
Companies might structure as parent companies while forming subsidiaries for each brand line.
The Downsides
The downsides of a holding company include difficulty in finding an accurate view of the entire financial health of the holding company, thereby creating opaqueness in the process.
Unethical directors can hide financial losses, moving debt among subsidiaries.
Holding firms can be exploitative by forcing subsidiaries to appoint handpicked directors or coercing them to buy products from each other at higher-than-market value.
A holding firm can ask a subsidiary to lay off staff or loot its acquisitions or assets.
List of financial holding institutions in Nigeria
With the new move, Zenith Bank joins the list of growing financial holding companies in Nigeria.
Other holding companies are Access Holdings Plc, FBN Holdings Plc, FCMB Group Plc, FSHD Holding Company, GTB Hold Co, and Stanbic IBTC Holdings Plc.
Zenith bank’s top director Adaora Umeoji retires in assent to CBN’s new tenure rule
Legit,ng earlier reported that Dr Adaora Umeoji, Deputy Managing Director at Zenith Bank Plc, has retired from the financial institution in adherence to the new tenure limits for bank executives recently released by the Central Bank of Nigeria (CBN).
Her retirement became effective on February 24th, 2023.
Zenith Bank disclosed this in a notification to the Nigerian Exchange Limited signed by its Company Secretary/General Counsel, Michael Otu.
Source: Legit.ng
