A CRITIQUE OF THE SEPARATION OF OWNERSHIP AND CONTROL OF COMPANIES UNDER COMPANIES AND ALLIED MATTERS ACT 2004


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TABLE OF CONTENTS

Title Page
Table of Cases
Table of statutes
Abbreviations
Table of contents
Abstract

CHAPTER ONE
GENERAL INTRODUCTION
1.1       Background to the Study
1.2       Statement of the Research Problem
1.3       Aim and Objectives of the Research
1.4       Scope of the Research
1.5       Research Methodology
1.6       Review of Related Literature
1.7       Justification
1.8       Organisational Layout

CHAPTER TWO
OWNERSHIP, MANAGEMENT AND CONTROL OF A COMPANY
2.1       Introduction
2.2       The Concept of Ownership
2.3       The Theories of Corporate Purpose
2.3.1 Shareholding Theory or Contractarianism
2.3.1.1 Inherent Property Rights Theory
2.3.1.2 Agency Theory
2.3.1.3 Stewardship Theory
2.3.1.4 The Finance Model
2.3.1.5 The Myopic Market Model
2.3.2    Stakeholding Theory or Communitarianism
2.3.2.1 Social Entity Theory
2.3.2.2 The Pluralist Model
2.3.2.3 The Trusteeship Model
2.4       Management and Control of a Company
2.5       Supervisory Power of the General Meeting over the Board of Directors
2.6       Supervisory Power over Control of Company‟s Litigation
2.7       The Benefits of the Separation of Ownership and Management
2.8       Shareholders‟ Rights and Nature of Interest in a Company
2.9       Classification and Enforcement of Shareholders‟ Rights
2.9.1 Economic Rights
2.9.2 Control Rights
2.9.3 Information Rights
3.9.4 Litigation Rights

CHAPTER THREE
DUTIES AND LIABILITIES OF DIRECTORS
3.1       Introduction
3.2       Meaning, Appointment and Removal of Directors
3.2.1    Meaning of Directors
3.2.2    Appointment of Directors
3.2.3    Removal of Directors
3.3       Powers and Proceedings of Directors
3.4       Duties of Directors
3.4.1    General Duties
3.4.1.2 Fiduciary Duty of Good Faith
3.4.1.3 Duties of Care and Skill
3.4.1.4 Statutory Duties
3.5       Breaches of Directors‟ Duties
3.6       Liabilities And Sanctions For Breaches of Directors‟ Duties
3.7       Remedies for Breaches of Directors‟ Duties
3.8       Defences Against Liability For Breaches of Directors‟ Duties

CHAPTER FOUR
CODES OF CORPORATE GOVERNANCE FOR COMPANIES IN NIGERIA
4.1       Introduction
4.2       Code of Corporate Governance by Securities and Exchange            Commission
4.2.1    Main Features of the Code
4.2.2    The Composition and Responsibilities of the Board of Directors
4.2.3    Remuneration and Compensation
4.2.4    Shareholders‟ Rights and Privileges
4.2.5    The Audit Committee
4.3       Code of Corporate Governance for Banks by Central Bank of Nigeria
4.4       Impact of the Codes on Corporate Management

CHAPTER FIVE
CONCLUSION
5.1       Summary
5.2       Findings
5.3       Recommendations
BIBLIOGRAPHY



ABSTRACT

Undoubtedly, the corporation has become one of the most powerful forces in twentieth century economies. It is both a method of property tenure and a means of organizing economic life. The corporation’s separation of ownership into component parts, control and beneficial ownership has brought into sharp focus the fundamental divergence between shareholder and management interests. With sole proprietorships, the owners are usually the same people who manage and operate the business. But in large companies, corporate officers manage the business on behalf of the owners. This separation of ownership and control creates a potential conflict of interests. In particular, managers may care about their salaries, fringe benefits, or the size of their offices and support staff; or perhaps even the overall size of the business they are running, more than they care about the shareholders’ profits. This agency problem caused by the separation of ownership and control has long been a great concern globally. This is particularly so in the wake of mass corporate scandals witnessed in the past couple of years. Just like any other country, Nigeria has faced the same problem. In Nigeria, the Companies and Allied Matters Act, Cap. C20, LFN, 2004, was enacted as the principal statute regulating the formation and management of companies. The central tenets of the Act have been accountability, efficiency and objectivity on the part of management. However, cracks are visible in many areas of the Act with gross attendant consequences for directors. It is found out that the exercise of the powers as conferred by the Act on the directors to direct and manage the business of the company is vulnerable to abuse. This is particularly the case when directors are partially permitted to deal in contracts with their own companies. There is therefore the need for amendment of the Act. This study examines the relevant provisions of the Companies and Allied Matters Act, 2004 as well as the two Codes of Corporate Governance for public companies in Nigeria using doctrinal method. The objective is to ensure that there is corporate accountability.




CHAPTER ONE


GENERAL INTRODUCTION


1.1              BACKGROUND TO THE STUDY


A company once incorporated is a legal person; distinct and separate from the members

that established it1and is also endowed with all the powers of a natural person of full

capacity for the furtherance of its authorised business or objects specifically set out in its

Memorandum  of  Association.2  The  Company  being  an  artificial  person    in  contra-

distinction to a natural human being, therefore, can only function or operate through the

instrumentality of its human organs, officers and agents.3  This view was observed and

more vividly stated by Viscount Heldane L.C. in Lennands Carrying Co. v. Asiatic

Petroleum Co. Ltd4


A corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who for some purposes may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation.



Aniagolu, JSC (as he then was) approved and aptly summed up the view in Trenco (Nig) Ltd v. African Real Estate Ltd5 that ...a corporation, although having a corporate personality is deemed to have human personality through its officers and agents”. 6

This human element is as constituted in the body of directors referred to as the board of directors and also in the body of members constituted in the general meeting.7 The conception of company as a separate entity, and as such the exclusive owner of its own property is not just a convenient device for the ownership of business assets but also has a significant effect on the position of the members of the company, its directors and those who deal with it. While the nature of the relationship between the company and its directors is often described as that of principal and agent,8 on the one hand, that of the board of directors and the general meeting is still vague and has been a source of controversy for decades......


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