AN ANALYSIS OF THE EFFICACY OF MINORITY PROTECTION UNDER NIGERIAN COMPANY LAW


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TABLE OF CONTENTS

Title Page
Table of Cases
Table of Statutes
Abbreviations
Abstract
Table of Contents

CHAPTER ONE
GENERAL INTRODUCTION
1.1       Introduction
1.2       Statement of the Problem
1.3       Aim and Objectives of the Research
1.4       Justification of the Research
1.5       Scope of the Research
1.6       Research Methodology
1.7       Literature Review
1.8       Organizational Layout

CHAPTER TWO
CORPORATE PERSONALITY, CORPORATE MANAGEMENT AND NATURE OF MAJORITY RULE
2.1       Introduction
2.2       The General Meeting
2.3       The Board of Directors
2.4       The Managing Director
2.5       Corporate Management and Nature of Majority Rule
2.6       The Principle of Majority Rule
2.7       The Rule in Foss vs Harbottle
2.8       Statement of the Rule
2.9       Reasons for the Rule
2.10     Analysis of the Rule
2.11     Exceptions to the General Rule

CHAPTER THREE
MAIN REMEDIES AND PROTECTION FOR THE MINORITY
3.1       Introduction
3.2       Analysis of the Exceptions to the General Rule
3.2.1    Entering into any transaction which is illegal or ultra vires
3.2.2  Purporting to do by Ordinary Resolution an act which by its Constitution or the Act requires to be done by Special Resolution
3.2.3 Where any act or omission affects the applicant‟s individual rights as a member
3.3       Personal and Representative Action
3.4       Derivative Action
3.4.1    Who May Apply
3.5       Petition for Relief on Ground of Oppressive or Unfairly Prejudicial Conduct
3.5.1   Oppressive or Unfairly Prejudicial Conduct

CHAPTER FOUR
ANCILLARY REMEDIES AND PROTECTION FOR THE MINORITY
4.1       Introduction
4.2       Investigation of Companies and their Affairs
4.2.1.   Investigation based on Application by Members
4.2.2.   Investigation based on Application by the Company
4.2.3. Investigation by Order of Court
4.2.4.   Investigation on the Commission‟s own Motion
4.3.      Powers of Inspectors and Duty of Officers of the Company
4.4.      Inspector‟s Report
4.5.      Investigation of Company‟s Ownership
4.6       Winding up on the Just and Equitable Ground
4.7.      Meaning of a Contributory
4.8       Action by the Corporate Affairs Commission
4.9       Other Statutory Remedies/Protections
4.10     Codes of Corporate Governance
4.11     Intervention of Regulatory Institutions
4.12.    One Man Meetings
4.12.1. One Man Meeting By Court Order
4.12.2. One Man Extra Ordinary General Meeting
4.12.3  One Man Meeting By Proxies
4.12.4  One Man Meeting In Wholly-Owned Subsidiaries

CHAPTER FIVE
SUMMARY AND CONCLUSION
5.1       Summary
5.2       Findings
5.3       Recommendations
            Bibliography


ABSTRACT

This dissertation  entitled „‟An Analysis of the Efficacy of Minority Protection under

Nigerian Company Law‟ which analyzed the principle of majority rule vis-à-vis remedies for protection of minorities under Nigerian company law was aimed at ascertaining whether the Nigerian company law had made enough protection for minority shareholders in the face of majority rule, and whether such protection were adequate, realistic, practically realizable and enforceable. It is trite law that a registered company is a separate legal entity different from the shareholders or members of the company. The officers of the company are usually appointed by the general meeting to conduct the affairs of the company in a manner that would serve the best interest of the company and also the members. The shareholders of the company can be categorized into two – majority and minority shareholders. The decisions regarding the affairs of the company and issues affecting the welfare of the shareholders were ordinarily supposed to be taken at a general meeting in a democratic manner. In other words, where matters were put to vote, each member was entitled to one vote, unless a poll was taken in accordance with the provisions of the company‟s articles or the Companies and Allied Matters Act 2004. However, most times it was found that the majority shareholders (who may also be directors or officers of the company) would want to impose their views on the minority shareholders, in order to have their way. Similarly, the majority often ran the affairs of the company in an illegal, irregular or oppressive manner, just to satisfy their own selfish or pecuniary interests, without considering the interests of the company or the minority shareholders. In arriving at decisions at meetings and to justify the implementation of such decisions, they usually labeled them „‟majority decisions‟‟ or „‟majority rule‟‟ in order to stifle minority opinion. In such situations, what can the minority do to assert their rights and redress the wrongs being perpetrated on them by the majority or is their situation hopeless, helpless and without any remedy? It was the existence of this problem that motivated this work. The work attempted to review the adequacy cum efficacy of the remedies available to minority shareholders in the face of oppression of the majority vis-à-vis current events in company transactions in Nigeria. The sources of information used here is doctrinal method of acquiring data, thus combining several documents, including statutes, law texts, journals, law reports, pamphlets, conference proceedings, and internet to accomplish the work. In conclusion, the researcher found that the doctrine of minority protection seemed not to be much of a reality under the Nigerian company law. The research found that the lack of award of damages for personal action or representative action as provided in Section 301 of CAMA could discourage aggrieved minorities to pursue remedies. It was also found that in Section 300 (d) CAMA, the expression committing „‟fraud‟‟ is strong and connotes commission of crime; so by law of evidence, it requires a higher standard of proof, that is, beyond reasonable doubt. It was equally found in Section 301 (4) CAMA that the provision for security for cost by the court unnecessarily raises the standard of requirement for enforcement of rights or enjoyment of protection afforded a minority by that provision. Accordingly, it was recommended (among others) to provide stiffer penalties in the law and for our courts to be courageous to apply the sanctions with full weight, without prejudice to the status of the offender. It was also recommended that there is need to include the award of damages as one of the remedies available to an applicant under Section 301 CAMA especially where he could prove any financial loss suffered as a consequence of any breach by the company or director.


CHAPTER ONE

GENERAL INTRODUCTION


1.1              Introduction


When a company is incorporated, it acquires legal personality and it becomes a separate legal entity different from the members of the company.1 However, since the company is an artificial person, it can only act and function through natural persons. These persons may be members in general meeting or the board of directors or other officers of the company, who are entrusted with the day-to-day management of the affairs of the company.2

In the conduct of company affairs, the management team is supposed to act in the best interest of the company. Accordingly, decisions are supposed to be reached through a democratic consensus. In other words, the issues are to be discussed at the general or board meeting, and resolutions passed by a unanimous consensus or by majority decision upon taking a vote. Even where, the majority shareholders will ultimately have their way, it is always important that the minority shareholders are allowed to have a say in the matter, before a decision affecting the company or the minority interest is reached.

In some instances, you find majority shareholders (who may be directors) who are in control of the company running the company in an illegal or irregular manner, without regard to the provisions of the law. At times they run the company in an oppressive manner to the detriment of the minority shareholders, under the cover of „majority rule‟ simply because they are in the majority.....

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