… Say it’s illegal, disenfranchises investors’ proxy

By Nkiruka Nnorom

Domestic investors in the Nigerian capital market have kicked against the on-going conduction of Annual General Meeting (AGM) by quoted companies using proxies as approved by the Corporate Affairs Commission (CAC), saying that it amounts to disenfranchisement of shareholders who reserve the right to attend the meetings and make contributions.

The shareholders under the aegis of New Dimension Shareholders Association (NDSA), said that compelling shareholders to subscribe to proxy arrangement as well as forcing a proxy on the shareholders who have the right to choose their preferred proxies infringe on their fundamental right under Section 227 (1) of the Companies and Allied Matter Act (CAMA) Act as amended, which guarantees the right of shareholders to physically attend such meetings.

They, therefore, described the act as unethical, saying that going ahead with it would give room to company’s board to undermine the role of shareholders and the  principle of corporate governance.

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In a letter addressed to the Registrar General, CAC, titled: “Guidelines on Holding Annual General Meeting by Quoted Companies”, signed by the association’s chairman, Mr. Patrick Ajudua, they said: “Under Sec  230 of CAMA as amended, the nomination of a proxy by a member of a company who is unable to attend the meeting and have to appoint someone who is not a member of the company is in order, but the issue here is that you do not compel somebody to issue a proxy if he has the intention to attend the meeting.

“Most companies that have adopted this guideline have appointed almost the same proxy name, recommending to shareholders to adopt them as their proxy. This is unethical and against the principle of corporate governance.”

They explained that rather than hurriedly holding AGMs,  companies could explore the provisions of Sec 213 of CAMA, which  allows them to stay up to 18 months in operation  before having their AGM. With this provision,  companies have the liberty to convert and  pay more than 90 percent of proposed final dividend as interim, they said.

They expressed concern that members who were nominated for election into the audit committee might be sidelined as a result of the lockdown order in place, adding that the proxy form does not contain list of additional prospecting shareholders, who may want to contest the election.

According to them, the recommendation by the CAC that companies should only concentrate on the ordinary business/resolutions at the AGMs due to the coronavirus (COVID-19) pandemic, goes against Section 211 (1) of CAMA, which stipulates that shareholders present at an AGM should be at liberty to discuss any matter relating to their companies as presented in the circulated Annual Reports.

“The proxy form does not address this as it only contains the resolutions. Companies will always say that you can put your questions in writing to them but you may wish to know that they do not reply neither do they put a call across to you for clarification where needed. Even at the meeting, most companies will deny you the opportunity to ask questions for want of time or deliberately refuse,” they said.

Other issues raised include approval of remuneration of directors of the companies, which falls under special business. “Where will the company derive its power to pay the directors if the matter has been rightly excluded in the proxy AGM?  Will it not amount to unlawful act if the payment is made to the directors without shareholders’ approval? Will the companies organize Extra-ordinary General Meeting (EGM) to address this in future,” they queried.

Recall that following the approval by CAC for proxy AGM, some companies have announced their intention to conduct their AGM using the model, while Guaranty Trust Bank (GTB) has already held its AGM under the new arrangement.

Vanguard

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