Most shareholders of Barita Investments Limited (BIL) and Cornerstone United Holdings Jamaica Limited (CUHJ) approved the composite scheme of arrangement to move the majority ownership of Barita Investments and Cornerstone Trust & Merchant Bank Limited (CTMB) to Barita Financial Group Limited (BFGL).

According to the preliminary release posted yesterday on the Jamaica Stock Exchange, Barita Investments’ shareholder largely voted in favour of the scheme with 81.87 per cent in value of shares present at the meeting affirming the vote. With respect to Cornerstone United Holdings Jamaica, most shareholders voted in favour with the release stating over 95 per cent in value of the shares present affirming the scheme of arrangement. Both schemes were approved on Monday at the S Hotel Kingston (formerly Spanish Court Hotel).

Barita Financial Group is currently a wholly owned subsidiary of Cornerstone Financial Holdings Limited (CFHL) and was created to hold the regulated financial subsidiaries or associates amongst the Cornerstone Group of Companies. BFGL is currently awaiting a financial holding company (FHC) licence from the Bank of Jamaica (BOJ). There are currently six other entities which have received FHC licences.

CUHJ is the sole owner of Cornerstone Trust & Merchant Bank Limited (CTMB), Jamaica’s only merchant bank. CFHL currently owns 75.6776 of Barita Investments.

Under the proposed scheme, Barita Financial Group will be the direct owner of CTMB and will be the largest shareholder of Barita Investments with a 75.6776 per cent equity stake. CUHJ’s assets and liabilities would be assumed by CFHL, with CUHJ to be dissolved at a later date. The Barita Financial Group would also be required to consolidate off-balance sheet vehicles (Barita Finance Limited and MJR Real Estate Holdings Limited) in its financial reporting.

According to the presentation at the meeting, the new financial group structure would bring increased operational efficiency, customer experience and strengthened governance. The Supreme Court of Jamaica will have its next hearing on March 18 to sanction the scheme which should take effect on March 31.

Despite getting the green light from most shareholders, there were still questions by shareholders on some of the underlying events amongst the Cornerstone Group of Companies. Bruce Levy, who was the proxy for Sagicor Select Funds Limited, asked Mark Myers, chairman of CUHJ and Barita, if there would be a shareholder meeting in Barbados where CFHL is domiciled to approve the entire process as well.

“So, while we’ve been advised that it is not necessary, it is being scheduled,” Myers responded while noting that this meeting would most likely be held before March 18.

Sagicor Select Funds Limited voted against the scheme at the Barita meeting while Myers noted that there was one vote amongst the 15 CUHJ shareholders against the scheme at the CUHJ meeting. Myers was reluctant to mention the votes at the CUHJ meeting during the Barita meeting.

Even when a shareholder inquired about a subsequent scheme of arrangement and delisting of Barita Investments and listing of Barita Financial Group as mentioned in the scheme booklet, Myers said it was incorrect before Malindo Wallace intervened. Wallace was the former company secretary of Barita and legal head at Cornerstone before becoming a partner last year at Pinnacle Law.

“The document mentioned a subsequent event where Barita would be possibly delisted, and Barita Financial Group would be listed. It also went onto say that there was no guarantee that would happen and that it would be a separate scheme of arrangement. So, that is not something that is contemplated under this current scheme of arrangement that shareholders are being asked to vote on,” Wallace explained.

Wallace was amongst one of the several lawyers present at the meeting which included Lance Hylton, Ransford Braham and Garth Patterson. PWC partner Wilfred Baghaloo was also present at the Barita meeting.

In his presentation to Barita Investments shareholders, CEO Ramon Small Ferguson noted that CTMB would be pushing ahead to be a digital bank.

“The entity is the only remaining merchant bank in Jamaica and is regulated by the Bank of Jamaica given its merchant bank standing. CTMB is developing technological capabilities, and our intention is to transform the entity, we’re closer than you think, into a digital bank executing on a vision of providing an unparalleled set of services to our clients,” said Small Ferguson.

Even Dane Broadber, the CEO-designate of the Barita Financial Group, said, “Now, with respect to the deposit taking institution, that’s currently Cornerstone Trust & Merchant Bank, and among our plans is to eventually gain a commercial banking licence.”

CTMB had a job opening posted last June for a supervisor of fintech business operations at the merchant bank. CTMB saw a three per cent increase in net interest income to $368.91 million with operating revenue rising seven per cent to $490.47 million. However, a sharp jump in staff costs and other expenses resulted in profit before tax only rising 22 per cent to $20.11 million. Net profit declined 57 per cent from $22.26 million to $9.54 million.

CFHL is currently negotiating awaiting regulatory approval to complete the acquisition of a majority stake in Clarien Group Limited. NCB Financial Group is selling 30.20 per cent of the Bermudan holding company while the other two shareholders are also set to reduce their interest.

“Cornerstone is pleased with the positive results, which pave the way for reorganising the regulated companies within the Group under a financial holding company as mandated by the Banking Services Act, 2014. This initiative reaffirms Cornerstone’s commitment to strengthening the financial sector and contributing to Jamaica’s growth and development agenda which is consistent with promulgating Jamaica’s national interest,” Myers stated in a press release.