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

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

ABSTRACT

This study 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 visà-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.

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