Chinese Directors Drag Ceramics Company, Others to Court Over Alleged Improper Share Allocation

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By Reporter

Yang Jijian and Hao Aijun, two Chinese directors of BN Ceramics Industry Limited, Kogi, have dragged the company and other Chinese directors to a Federal High Court sitting in Abuja over alleged improper share allocation to shareholders of the company.

Midwest Herald reports that the two directors dragged the company and other directors before Justice Inyang Ekwo, in a suit marked FHC/ABJ/CS/ /2022.

The Plaintiffs are praying the Court for a determination of who has major control of the company in terms of shares.

They alleged that the improper share allotment, violating several sections of the Companies and Allied Matters Act and altering BN Ceramics’ share structure to benefit BN Technological Services.

The legal team of the plaintiffs joined BN Ceramics Industry Limited, Liu Yangxi, Zhang Qide, Chen Enlai, NB Ceramics, BN Technological Services, Abuja, and the Corporate Affairs Commission (CAC) (first to seventh defendants) in the suit.

The plaintiffs, also sought a declaration that the allotment of shares of BN Ceramics Ltd by the defendants is in contravention of Section 46(1), Section 141, Section 142, and Section 153(2) of the Companies and Allied Matters Act 2020 as well as the provisions of the Articles of Association of the company.

Counsel to the plaintiffs, Barrister Babajide Lawal told the Court that on December 8, 2013, the company in dispute was incorporated as a private company limited by shares with 10 million ordinary shares.

Lawal averred that Ordinary shares are shares in a company that grant their owners the right to vote at company meetings and to receive a portion of the company’s profits.

He added that the company subsequently increased its share capital from 10 million ordinary shares to 20 million ordinary shares.

He explained that following the increment, the un-allotted shares of the company were distributed among the directors.

The Counsel noted that as a result, Yang Jijian was allotted 5,664,000 ordinary shares (28.32%), Liu Yangxi received 4,760,000 shares (23.80%), while the remaining defendants had allotments of 21%, 18.88%, and 8%, respectively.

He, however. contended that on April 19, 2022, three days before the company’s scheduled meeting, a notice was sent to members stating that significant share transfers had occurred, displacing his clients from being the top shareholders.

Lawal, opined that the share structure of BN Ceramics had been altered and that BN Technological Services had been allotted 10,480,000 shares in the company (out of 20 million shares), making BN Technological Services the new majority shareholder.

He alleged that the actions of Liu Yangxi, Zhang Qide, and Chen Enlai were intended to transfer control of BN Ceramics Industry to BN Technological Services without the knowledge, consent, or agreement of the plaintiffs, in violation of relevant laws.

However, he prayed the court to declare the development null and void.

In his objection, counsel to the defendants, Nnamdi Nwaiwu, urged the court to decline hearing and determination of the suit.

Nwaiwu, who prayed the court to strike out or dismiss the suit, told the court that some of the defendants are residents in China, a place outside the jurisdiction of the Nigerian Court.

In his judgment, Justice Inyang Ekwo, who declined to strike out the case, however, transferred the case to the Lokoja Division of the Federal High Court.

In the judgment delivered on June 14, 2024, Justice Inyang Ekwo said
the proper court to decide the matter is the Lokoja Division.

According to Justice Ekwo, “upon studying the averments on this issue, I agree with the position of the first defendant that this matter ought not to have been commenced in this Judicial Division but in the Lokoja Division.

“By virtue of this position, this court cannot venture into any other point canvassed in the preliminary objection. Those issues are now to be determined by the Lokoja Division of this Court.

“I therefore make an order transferring this suit to the Lokoja Division of this court”,he ruled.

BN Ceramics Ltd is a Chinese-owned company in Nigeria which deals with the manufacturing of ceramic and porcelain tiles for distribution to building material stakeholders across the country.

The company owns a production base with two authentic polishing automatic lines at Ajaokuta, Kogi State; two main depots; and a distribution network of about 260 distributors.

The company is also a member of the Manufacturers Association of Nigeria (MAN) and is registered with the Corporate Affairs Commission (CAC).

Section 153 of CAMA frowns upon alleged irregular allotment of shares, especially if it is not from a public company’s statutory meetings.