Appraising the Essence and Effectiveness of Shareholders’ Democracy in Nigeria (Published)
This paper examined the essence and effectiveness of shareholders’ democracy in Nigeria. Several materials such as Statutes, Texts, Articles, Reports, Bulletins, Case Law as well as internet materials relevant to the paper were consulted. It was observed that shareholders’ democracy otherwise known as the rule in Foss v.Harbottle or the majority rule is central to Corporate Governance and if properly effected, can serve as management’s watchdog. The majority rule states that while every member of a company has a right to take part in the decision process, he cannot insist on having his way if it is inconsistent with that of the majority. In Nigeria, the rule in Foss v.Harbottle, was firstly adopted by the Supreme Court in the celebrated case of Abubakar v. Smith, where the court was of the view that, it is only the Company that is clothed with the locus standi to sue in order to remedy a wrong that has been done to the Company and only the Company can ratify same. This Common Law rule has been statutorily recognised in S.299 of CAMA. Howbeit, strict application of this rule may lead to injustice. Thus, the majority rule has a potpourri of exceptions recognised at common law and under statutes. These exceptions include members’ direct action, derivation action, and petition for winding up the affairs of the Company on just and equitable grounds amongst others. It was also discovered that lack of activism in shareholders’ associations, illiteracy, poverty, corruption, and abuse of proxy rights are clogs to the effectiveness of shareholders’ democracy in Nigeria. The paper calls for legal and institutional reforms.
Keywords: Corruption, Democracy, Shareholders, illiteracy, proxy rights