Zenith Bank Plc, Nigeria’a biggest lender in terms of balance sheet size and one of the five biggest banks in Nigeria is the latest of the Nigerian lenders to adopt the holding structure (Holdco) for its operations. Other tier 1 lenders namely FBN Holdings, UBA Holdings, GTHoldco, and Access Holdings has already adopted the form of operations that allows financial companies and money lenders to consolidate all their business units and affiliates into one reporting line structure.
The tier 1 lender made this announcement in a statement published by The Limited (NXL) today 4th of February 2023. The statement was titled “ANNOUNCEMENT: CENTRAL BANK OF NIGERIA (CBN) GRANTS APPROVAL-IN- PRINCIPLE (AIP) FOR ZENITH HOLDCO PLC (IN-FORMATION)”
The statement signed by Mr.Michael Osilama Otu, the Company Secretary and General Counsel reads “This is to inform the Nigerian Exchange Limited (NGX), shareholders and the general public that the CBN has granted Approval-In-Principle for Zenith Bank Plc to operate a non-operating Financial Holding Company structure.
“Furthermore, the CBN approved Mr. Jim Ovia as the Chairman of Zenith Holdco Plc (in-formation) and for Mr. Jim Ovia to also continue as the Chairman of Zenith Bank Plc until the commencement of Zenith Holdco Plc.
“Further details in respect of this will be communicated to the market in due course.”
What is a Holding Company?
A holding company is a business entity—usually a corporation or limited liability company (LLC). Typically, a holding company doesn’t manufacture anything, sell any products or services, or conduct any other business operations. Rather, holding companies hold the controlling stock in other companies.
Although a holding company owns the assets of other companies, it often maintains only oversight capacities. So while it may oversee the company’s management decisions, it does not actively participate in running a business’s day-to-day operations of these subsidiaries.
A holding company is also sometimes called an “umbrella” or parent company.
A holding company typically exists for the sole purpose of controlling other companies. Holding companies may also own property, such as real estate, patents, trademarks, stocks, and other assets.
This structure serves to limit the financial and legal liability exposure of the holding company (and of its various subsidiaries). It may also depress a corporation’s overall tax liability by strategically basing certain parts of its business in jurisdictions that have lower tax rates.
Businesses that are completely owned by a holding company are referred to as “wholly-owned subsidiaries.” Although a holding company can hire and fire managers of the companies it owns, those managers are ultimately responsible for their own operations.