Lack of Shareholder Rights laws in Barbados makes investors “meat on the table”

“Although saying that the laws of Barbados permit directors to issue new shares by means of a private placement (that is, selling to private investor without an initial public offering) without shareholder approval and without first offering the shares to existing shareholders, Group Chairman and CEO Dodridge Miller yesterday admitted in a statement that the private placement effectively resulted in diluting existing shareholders shares by four per cent of their previous holdings.”

… from the Caribbean360.com news story Sagicor says no money problems despite private sale of shares

Sagicor’s silent memo to its shareholders is a warning to all investors: “We, the Directors, own you.”

Early in January we covered the story of how Sagicor issued an additional 11.7 million common shares to the National Insurance Board of Barbados via a private placement at a 5% discount to the trading price on the BSE at the date of the issuance. (See BFP’s story Did Sagicor’s private placement of additional shares dilute the holdings of existing shareholders?)

What did Sagicor use the money for? Why was there no prior offering to current shareholders? Why was there no explanation to shareholders until the complaints started to roll in to the news media?

On one level, these questions don’t matter at all because everything the Sagicor Directors did was apparently legal under the laws of Barbados. So what if they reduced the value of shareholders’ assets by 4% overnight with no notice? It was all legal.

The newspaper articles have faded out, but the bad taste in the mouths of thousands of Sagicor investors still remains – which is why we’re publishing this reminder to facilitate discussion.

Moral of the Story

Let this be a lesson to Barbados investors both foreign and domestic… Under the laws of Barbados, you’re meat on the table for the big boys.

6 Comments

Filed under Barbados, Business & Banking, Consumer Issues, Offshore Investments

6 responses to “Lack of Shareholder Rights laws in Barbados makes investors “meat on the table”

  1. too big to fail

    There are few companies in Barbados, if any, that can help the government out of the Clico fiasco.

    Sagicor may be the only insurance company of sufficient size to properly assist in shifting assets around so that National Insurance and the goverment can avoid showing huge losses on the books as a result of their failure to force Clico years ago to put in extra capital and to question the quality of their investments.

    Its somewhat akin to the huge US companies such as AIG being bailed out by government as a direct result of corporate greed and mismanagement. AIG was too big to fail and the consequences too staggering.

    This is about a higher national interest than any individual shareholders rights. Sad but true.

  2. 4man

    This is indeed broader than individual shareholder rights if you are now suggesting that the future retirement income of all hardworking Barbadians could be used to fund the acquisition of an ailing insurance company.

  3. Saying Nuttin

    Deal with the directors at the AGM or call a SGM to fire them. When you are a minority shareholder in a public company you are along for the ride. Know that before you invest. What may be best for the Company may not be best for the individual small shareholder. what may be best for the large shareholders may not be best for the small ones. Such is company life anywhere even with minority relief rules and recourse. You BFP always happy to make things seem worse in Barbados than elsewhere while not doing the requisite research.

    How do minority relief provisions in the US, Canada and the UK differ from Barbados?

    How effective are they and at what cost?

    Have they protected in any way small shareholders in the recent economic debacles which have unfolded throuout the world e.g

    Tyco; parmalat; Enron; with about 20 more medium size examples not given international exposure?

    What are the current global trends espoused by regulators regarding minority relief and what do they aim to correct or effect?

    When you research those things then you can write a balanced objective critique of the Barbadian situation not this drivel.

  4. Donald Duck, Esq

    Our companies act, which was copied from Canada back in 1982, permits what was done.

  5. 4man

    Sagicor has acted within the applicable legislation with regards to its recent private placement – I am not questioning this fact. However, long gone are the days where compliance is satisfied by simply meeting the minimum requirements of the relevant statutory legislation. Corporate Governance is much broader than the requirements of our Companies Act or our Securities legislation. Good corporate governance is critical to the integrity of corporations, financial institutions and markets, and central to the health of our economies and their stability.

    The Directors of Sagicor chose against communicating proactively with their shareholders on this matter. In fact, it was not until a number of Trinidadian shareholders raised concerns publically that Sagicor published an announcement in the press explaining and justifying the private placement. I believe that this announcement was a reactionary attempt to quell the fears and speculation arising from Trinidad and seeping into Barbados in regards to the group’s financial condition.

    A general lack of transparency and a commonly held belief amongst most Directors in Barbados that shareholders are not sophisticated enough to appreciate board room deliberations, continues to hamper the development of our capital markets.

  6. Anonlegal

    I am not familiar with all the details of this situation.

    Just out of curiosity, did the company always have 11.7 million unissued ordinary shares?

    Why did the company have so many shares available for issue? (unless the idea was to to issue bonus shares rather than declare dividends)

    Regarding the shareholder’s right of first refusal, is that provided for in the articles of the company?