Shareholders and directors of quoted companies are known to clash over some resolutions that require endorsement at Annual General Meeting, AGMs. Most times, the shareholders consider the resolutions in question unfavourable to them, but directors exploiting their majority stake usually resorts to use of polls to resolve the issues. In this interview, Charles Fakrogha, Chief Relationship Officer, Foresight Securities & Investment, explained the legality of use of polls and advised shareholders to pursue their rights where they feel dissatisfied.
By Nkiruka Nnorom
What is your thought on use of poll by companies to get through resolutions their shareholders are opposed to?
You know that secretariat of the company, may be the company secretary or the legal adviser must have advised the company on what should be done to make sure they act within the rules and regulations and most importantly, ensure that they act within the Companies and Allied Matters Act, CAMA. So, if they want to pass a resolution and they need shareholders to vote or they want to use a poll, of course, that poll is conducted by the registrar of the company and it will follow the rule.
If at the end of the day, the poll is well conducted and it is in favour of the management, I don’t see anything illegal in it. It is not that they are using it to manipulate or undo the shareholders. Once the poll is conducted within the rules and regulations, whatever decision is arrived at is binding on everybody.
How would you explain the instance when GSK United Kingdom wanted to increase its stake in GSK Nigeria, but the Securities and Exchange Commission over-ruled GSK’s attempt to use pool?
What really happen sometimes is that there is what is called mandatory take-over. If a company has bought over 20 per cent of another company’s shares and is now the majority shareholder, obviously, the law requires such company to make a mandatory take-over bid to the minority shareholders. A good example is what happened recently between Mobil Oil Nigeria and Nipco. Now, not all the shareholders will agree, but the company will want majority of the shareholders to sell. Some people will choose to remain in the new company, while some others will sell their shares because the management of the company has changed.
In this case, the company cannot use poll; it is different from when the a company is handling an internal issue. What happened in GSK was that their foreign partners wanted to buy-out the minority shareholders and in this instance, a poll cannot be used. That can only be done by mandatory take-over by making an offer to the minority shareholders at a price, which will be higher than the market price to encourage then to sell.
What do say about the recent case where the Nigerian Breweries proposed a dividend, but turnaround around to say that it is converting it to shares, but because shareholders were opposed to it, they used poll to get through the resolution. Don’t you think that companies are using polls to manipulate shareholders?
It is a matter of perception. As long as the poll is conducted within the rule, there is nothing illegal about it. There are laws guiding poll in Annual General Meetings, AGM, and there are laws regarding voting and conduct of AGMs. As long as all those laws are followed and are applied, then there will be no proof of manipulation. Fine, companies may want to exploit polls to manipulate their shareholders, but as long as it is within the laws, then it is difficult to say it is manipulative. Shareholders that are not satisfied with the outcome can seek redress in the court. For me, I think the rules are clear, the law is there; it is difficult for anybody to say that the poll is being used for manipulation.
Seeing that the minority shareholders are vulnerable to the whims of directors and management as far as use of poll is concerned, don’t you think it is high time for review of law around poll and election at AGMs?
Yes, I agree with you. Even the whole Companies and Allied Matters Act, CAMA, is long overdue for review. Initially, it was reviewed in 1965 and the latest review was in 1990. It is overdue for review. 1990 is a long time and I still believe that the authorities – the Securities and Exchange Commission, SEC, and other stakeholders should call for a stakeholders meeting and review CAMA. It is very very due for review.
What would be your advise to shareholders that always kick against the use of poll to resolve thorny issues at AGMs?
Shareholders are also co-owners, there should be a robust relationship between shareholders and their companies. They all want the progress of the company. If the companies are no longer existing, there will be no shareholders and if there are no investors, there will be no issuer. Let the shareholder bodies become strong and know their rights as shareholders and if they have any issue, they can confront the management of the company because at the end of the day, it will be beneficial to the shareholders and the company.
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