Key Highlights
- Shareholders are calling on the SEC to ensure companies follow CAC guidelines for AGMs in 2023.
- They want companies to hold AGMs both physically and virtually to increase participation and transparency in decision-making.
- Shareholders believe that virtual-only meetings disenfranchise their rights and hinder their ability to dispassionately approve the election/re-election of directors, which defeats the purpose of the resolution and cast doubt on corporate governance.
Shareholders under the aegis of the New Dimension Shareholders Association have called on the Securities and Exchange Commission (SEC) to intervene and ensure that companies abide by the guidelines set by the Corporate Affairs Commission (CAC) for their 2023 Annual General Meetings (AGMs).
Specifically, they are urging companies to hold their AGMs both in-person and virtually, allowing individuals to attend either physically or virtually. The shareholders believe that this approach will increase participation and promote transparency in the decision-making process.
The shareholders expressed their concerns in a petition sent to the regulator, protesting against the recent presidential assent to the amendment of the Business Facilitator (Miscellaneous Provisions) Act 2022’ allowing companies to hold their general meeting electronically provided such meetings are conducted in accordance with the articles of the company.
Combination of physical and virtual
The petition signed by the National Chairman, Patrick Ajudua and the National Secretary, Mr Moses Okorie noted that the combination of both virtual and physical will no doubt ensure the protection of the fundamental rights of shareholders, the protection of minority shareholders and ensure good corporate governance.
Avoid the collapse of companies
It added that such measures will avoid the collapse of companies in the capital market as can be seen in the case of Cadbury Nigeria Plc in April 2008 where investors later realise that they bought shares in the company based on cooked-up audited financial statements.
- “A situation that that company allegedly overstated its account by N13.25 billion through stock buy-back, also the recent sacking of the board of FBN Holdings by CBN for lack of good corporate governance,” part of the petition noted.
The fundamental right of the shareholders
The shareholder noted that the amendment failed to consider the fundamental right of the shareholders of the company to attend the AGM of the company physically if they chose to in line with sec 252(1) of CAMA 2020 as amended.
- “The question is that some companies have decided to go virtual in their AGM notices, hence we ask the following: How will this arrangement not disenfranchise the shareholder’s right under Sec (1) and 107 of CAMA to physically attend the AGM of the company they invested in?
- “A company with over 5000 shareholders, how are they going to ensure fair treatment to all its shareholders who desire to connect to the meeting virtually and have the ability to buy data, pay for air time, express its opinion, consider the technological breakdown in communication when speaking and most online platform provided has no capacity for online real-time conversation during the meeting. This to me is in contravention of Sec 235 (8) of CAMA 2020 as amended which says that members of the company at the statutory meeting are at liberty to discuss any matter relating to the formation of the company, its commencement of business or arising out of the statutory report,” they said.
Audit committee nomination
They explained that those virtual meetings will deny the shareholders who have submitted their names for audit committee nomination to be voted for in line with CAMA and present themselves for election, thus allowing shareholders to decide who to vote for.
- “It is also our submission that virtual meetings will not justifiably serve the utmost interest of investors when considering critical issues under a special resolution that will affect their investment. Their inability to vote, physically attend the meeting and ask relevant questions before the passage of such resolutions will cast doubt on the credibility of the meeting.
- “It will objectively hinder the shareholder’s ability to dispassionately approve the election/re-election of Directors subject to their convincing ability to effectively contribute to the company’s growth. This no doubt will defeat the purpose of the resolution and cast doubt on corporate governance of the company,” they said.
What you should know
In the recently signed law by the president titled ‘Business Facilitator (Miscellaneous Provisions) Act 2022’. Among other amendments was a consequential amendment of Sec 240 (2) of the principal act which deletes the word ‘private’ and now reads “A company may hold its general meeting electronically provided that such meetings are conducted in accordance with the articles of the company.