Shareholders in the Nigerian capital market have said that the planned exclusion of company directors and majority shareholders from exercising voting right in any take-over bid is illegal as the Exchange lacks the power to take such action.
Though a cross section of shareholders, who spoke with Financial Vanguard in separate interviews, observed that it is a good idea, they said that it would be unachievable unless the Companies and Allied Matters Act, CAMA, is amended to reflect the new position.
The NSE had recently said it would ban directors and controlling shareholders from voting in transactions such as takeovers to protect minority investors.
The proposal, according to Tinuade Awe, Head, Legal and Regulation Division, NSE, is part of measures to strengthen corporate governance and would be introduced “as soon as possible.” She explained that the recommendation has already been released for public comment and is subject to the approval of the Securities and Exchange Commission, SEC.
Reacting, Ambassador Olufemi Timothy of Renaissance Shareholders Association, said that going ahead with the proposal would be unfair to the directors and majority shareholders involved as it is against the investment law (CAMA).
According to him, “There are other legal means to achieve the aim. They may be asked not to own block shares individually. All of them put together must not control more than 60 percent of the company.”
“There could also be voluntary disqualification of themselves (the directors and majority shareholders) in voting on such transactions in order to show fairness,” he added.
Boniface Okezie, Chairman, Progressive Shareholders Association of Nigeria, PSAN, observed that stripping these groups of shareholders of voting right in the instance would be a good idea only if the Nigerian Stock Exchange has the power to do so.
“Under what law will they execute the programme. Will a tenant have the power to evict his landlord from his house,” he queried, adding “For me, if the answer is no, then they cannot enforce it because they lack the power to do so. The NSE cannot operate outside the CAMA. In as much as the companies are still operating under CAMA, the NSE lacks power to do so. You cannot suddenly say that the minority shareholders should become the majority, while the majority becomes the minority.”
However, if the law is amended, it will be good for shareholders so that the majority shareholder will not continue to oppress the minority, he affirmed.
Also speaking, Alhaji Gbadebo Olatokunbo, one of the founding fathers of Nigeria Shareholders Solidarity Association, applauded the idea, saying that promoters of companies that also hold majority shares in those companies should be neutral in matters that involve takeovers and other serious issues in the companies.
“When companies are doing well and they are churning out good result that is when we start hearing stories about upgrading investment by the foreign investors with full support of the directors and management team, to the disadvantage of local investors. They should stop taking shareholders for granted.
“Take a look at all the companies that have delisted, proposed mergers and reduction in shareholding; they were companies with very good fundamentals that Nigerian investors helped to the current level before the parents companies came up with idea of take over through the back doors. The policy, rules and regulations of the capital market needs to be amended against sharp practices,” he stressed.