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NCB loosens insider loan policy

Published:Sunday | August 14, 2011 | 12:00 AM
NCB's Atrium headquarters in New Kingston - File

Steven Jackson, Business Reporter

National Commercial Bank of Jamaica (NCB) said ahead of a vote last Friday, that its plan to offer loans to buy shares in the bank and associated companies was motivated by the new Companies Act rather than its majority owner Michael LeeChin.

The amended policy, which was subject to approval at its extraordinary general meeting, will allow existing NCB shareholders, staff and directors to apply for NCB loans to purchase additional shares in NCB or related companies, including its latest associate Jamaica Money Market Brokers.

The bank barred media from Friday's 4 pm meeting to amend and adopt new articles of association, claiming once again that it was in a 'quiet period' ahead of the launch of its initial public offering (ipo)on the New York Stock Exchange.

The new loan policy could potentially open up a source of funding for stakeholders wanting to participate in the bank's New York share float

The articles were approved at Friday's meeting, and owners of the bank also voted to increase NCB's authorized captial to faciliate the IPO, Sunday Business has learned .

The date of the IPO has not been set. On Thursday, sources inside the bank said the timing of the offer is being assessed "on an ongoing basis"; but it remains unclear how much the volatility on Wall Street may affect the debut.

Other IPOs by American companies have been delayed.

Savvy shareholders will need to seek out NCB's new loan offer rather than expect to see it as a stand-alone loan product.

"A shareholder can seek a loan from the bank in order to buy shares in NCB or other companies, subject to them complying with the bank's credit and other requirements. It should be noted that strict requirements are followed by the bank in relation to loans to connected parties," said NCB in response to Sunday Business queries.

The bank does not expect the offering to affect its capital or profitability.

"We are not aware of any plans by Mr Lee-Chin to access loans from the bank to acquire shares in the bank or any other entity," said NCB.

The bank said that under the old Companies Act "it was not lawful" for a company to conduct such activity.

"However, NCBJ's articles are being amended to make the position clear, given the wording of the new Companies Act and the approach taken by other companies which have amended their articles," it said.

NCB reasoned that Section 184 of the new Companies Act allows the bank to "give financial assistance by means of a loan, guarantee or otherwise: (a) to a shareholder, director, officer or employee of the Company or affiliated company, or to an associate of any such person for any purpose; or (b) to any person for the purpose of, or in connection with, a purchase of a share issued or to be issued by the Company or a company with which it is affiliated".

It added that under Section 185, a company may give financial assistance to any person by means of a loan, guarantee, or otherwise in the ordinary course of business, if the lending of money is part of the ordinary business of the company.

NCB recorded J$3.1 billion of profit in its third quarter and J$9 billion over nine months ending June 2011. Its total assets hit J$348 billion, a 7.9 per cent increase over year-earlier levels.

Business Reporter, Sabrina Gordon contributed to this story.