Ecobank warns Prospective buyer of Honeywell Flour LTD Says Company Facing Winding Up Proceedings

Consequent upon media reports on the move by Flour Mills Nigeria PLC to acquire 71.69 percent of Honeywell Group Limited, Ecobank Nigeria Limited  has placed a, Caveat on any share of the company on the ground that the company is hugely indebted to the bank and that the debt is currently a subject of litigation.

The buyer beware was contained in a press statement released by Ecobank Nigeria Limited through its counsel, Kunle Ogunba & Associates, tittles “Purchase of Honeywell Group Limited’s 71.69% stake in Honeywell Flour Mills Limited- “Caveat Emptor”  .

Ecobank in the statement released by it lawyer said that consequent upon a press release circulates in several online publications and as further contained on Honeywell Group Limited’s website: “honeywellgroup.com” wherein notification of the proposed divestment of Honeywell Group Limited’s 71.69% stake in Honeywell Flour Mills Plc, cautioned the general public and the corporate bodies on the danger inherent in dealing in any shares of the company.

Ecobank while narrating it’s interest in the company, said it advanced several loan facilities which includes working capital disbursements to Honeywell Flour Mills Plc and that due to the failure  of the company  to liquidate the said  loan facilities, Ecobank 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;

Ecobank said that Honeywell Group Limited, being   Respondent to the winding up petition, objected to the jurisdiction of the trial court to preside over the said suit, this the bank said  was upheld by the trial Court,

Aggrieved with the decision of the trial Court, Ecobank said it  filed an appeal (with appeal No: CA/L/1041/2016) at the  the Court of Appeal, Lagos Division and that  upon review of Ecobank’s case, the appellate court  found merit in the appeal, and held that the winding up proceedings against Honeywell Group Limited was properly commenced and that the Federal High Court had jurisdiction to hear the said petition.

Ecobank said that  while the said decision of the Court of Appeal has been appealed to the Supreme Court, the Court of Appeal’s judgment remains valid and subsisting till date.

The bank stated that the effect of the Appeal Court Court judgement is that there is currently a winding-up action/proceeding pending against the said Honeywell Group Limited.

Ecobank added that the provisions of Section 577 of the Companies and Allied Matters Act 2020 “CAMA” : “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”

The bank said the estate or effects of Honeywell Group Limited includes (but is not limited to) its 71.69% stake in Honeywell Flour Mills Plc which it now seeks to divest to Flour Mills  contrary to the express provisions of the law which prohibits the said sale/transfer or divestment during the course of the winding up proceedings.

It added that it is  clear that Honeywell Group Limited is legally estopped from sequestering and/or disposing any of its assets pending the final determination of the winding up action commenced against it.

Furthermore, the  Honeywell Flour Mills Plc in which the shares are held is also currently indebted  to Ecobank by virtue of the Court of Appeal judgment delivered on the 14th day of December, 2020 in appeal number: CA/LAG/CV/975/2019, wherein the Appellate Court held that the company did not repay its debt to our client in line with the agreement of parties. While the said judgment is subject of a further appeal to the Supreme Court.

Consequently, the bank demanded 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 said that while it believe that Flour Mills or any other interested person or group will adhere to its wise counsel and comply with its demands as a responsible and publicly listed entity, it stated that it shall not hesitate to deploy all available legal options to prevent this audacious illegality from coming to fruition.

Moreover, we are constrained not only to demand an urgent reversal of the alleged “divestment processes” as epitomised by a counter publication, notification or caveat in that regard.

The Managing Director

Flour Mills of Nigeria Plc.

1 Golden Penny Place

Wharf Road

Apapa, Lagos.

Dear Sir,

PURCHASE OF HONEYWELL GROUP LIMITED’S 71.69% STAKE IN HONEYWELL FLOUR MILLS LIMITED – “CAVEAT EMPTOR”

We are solicitors to Ecobank Nigeria Limited “Ecobank” and author this instant correspondence at the specific behest of our client, sequel to the press release circulated in several online publications and as furthercontained on Honeywell Group Limited’s website: “honeywellgroup.com” wherein notification of the proposed divestment of Honeywell Group Limited’s 71.69% stake in Honeywell Flour Mills Plc. with you as a direct beneficiary was published.

Please be informed that our client, Ecobank advanced several loan facilities which includes working capital disbursements to Honeywell Flour Mills Plc due to its failure to liquidate the loan facilities, Ecobank was constrained to commence winding up proceedings against Honeywell Group Limited at the Federal High Court in suit no: FHC/L/CP/1571/2015; Honeywell Group Limited, the Respondent to the winding up petition, objected to the jurisdiction of the trial Court to preside over the said suit which said objection was upheld by the trial Court, aggrieved with the decision of the trial Court, Ecobank filed an appeal (with appeal No: CA/L/1041/2016) to the Court of Appeal; Consequently, the Court of Appeal (Lagos Division) upon review of Ecobank’s case found merit in the appeal, inter alia deciding that the winding up proceedings against Honeywell Group Limited was properly commenced and that the Federal High Court had jurisdiction to hear the said petition, (a copy of the winding-up petition and the judgment of the Court of Appeal is herein enclosed and marked as Annexures A and B respectively for your record). While the said decision of the Court of Appeal has been appealed to the Supreme Court, the Court of Appeal’s judgment remains valid and subsisting till date.

Please be further informed that sequel to the inability to repay the loan facilities availed to Honeywell Flour Mills Plc., Ecobank, (in addition to the winding up commenced against Honeywell Group Limited) commenced a winding up action against Honeywell Flour Mills Plc. in suit No: FHC/L/CP/1569/2015, 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 (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(commenced since 2015). Therefore, it is apposite to refer your good-selves to the provisions of Section 577 of the Companies and Allied Matters Act 2020 “CAMA” which provides thus:

“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…”

Thus based on the above, you will agree that it is indeed elementary that the estate or effects of Honeywell Group Limited includes (but is not limited to) its 71.69% stake in Honeywell Flour Mills Plc which it now seeks to divest to your good-selves; contrary to the express provisions of the law which prohibits the said sale/transfer or divestment during the course of the winding up proceedings. Consequent upon the foregoing it is indeed crystal clear that Honeywell Group Limited is legally estopped from sequestering and/or disposing any of its assets pending the final determination of the winding up action commenced against it; also of importance is the provision of “CAMA” (supplied above) that any such transaction is “void ab initio”.

Furthermore, the said Honeywell Flour Mills Plc in which the shares are held is also currently indebted to our client by virtue of the Court of Appeal judgment delivered on the 14th day of December, 2020 in appeal number: CA/LAG/CV/975/2019, wherein the Appellate Court held that the company did not repay its debt to our client in line with the agreement of parties. While the said judgment is subject of a further appeal to the Supreme Court a copy of same is herein enclosed and marked as Annexure D for your record.

Consequently, we hereby demand that Flour Mills of Nigeria Plc in itsbest 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.

While we believe you will adhere to our wise counsel and comply with our demands as a responsible and publicly listed entity, please be informed that we shall not hesitate to deploy all available legal options to prevent this audacious illegality from coming to fruition.

Moreover, we are constrained not only to demand an urgent reversal of the alleged “divestment processes” as epitomized by a counter publication, notification or caveat in that regard with a copy thereof annexed to your response to this correspondence within 7 (seven) days from the date of your receipt of this correspondence, failing which, we shall assume your non-readiness to comply in furtherance of which we may be compelled to take step(s) as may be deemed appropriate/commensurate in that regard.

Thank you.

Yours faithfully,

EHIMEN ORIAIFO ESQ.,

PP: ‘KUNLE OGUNBA & ASSOCIATES.