Wema Bank Plc has announced it will hold an Extra Ordinary General Meeting (EGM) on the 20th of October 2017. At the meeting, it will seek shareholders approval to embark on a share reconstruction exercise, and writing off its negative retained earnings using its share premium. Share premium is the difference between a company’s current trading price and the nominal price at which its shares were listed.
The bank will also be writing off impaired assets totalling N544 billion.
The bank has decided to embark on the exercise because negative retained earnings had prevented it from paying dividends to shareholders and raising capital. Corporate governance laws, prevent a company from paying dividends if it has negative retained earnings. Figures from the bank’s results for the half year ended June 2017 show it had negative retained earnings of N36.7 billion.
Following the consent of the Shareholders, the Bank will subsequently make an application to the Federal High Court for the approval of the scheme.
The exercise would have no effect on the current holding of shareholders, as the bank will create a capital reduction account to write off the impaired accounts, while an equivalent amount will be moved from its share premium account to balance both entries.
Wema bank at its 2nd quarter conference call hinted at a possible bond raise in 2017, and equity raise in 2018.