ANALYSIS OF THE LAW ON COMPANY MEETINGS IN CONTEMPORARY CORPORATE GOVERNANCE IN NIGERIA
CHAPTER ONE GENERAL INTRODUCTION
Meetings, are undoubtedly the primary communicative practice of humanity, particularly institutions and groups. It is used to accomplish goals, disseminate vital information and solve problems. It gives opportunity for social contracts and development of inter-personal relationships. Families, schools‟ management, town leadership, grass root movement, Governmental department, organisational councils and even the legislative and executive arms of the Government, all function through the mechanism of meetings. Thus, meetings cut across every facet of life and from the foregoing; it shows that there are different kinds of meetings that can be convened.
This work is principally concerned with meetings conducted by incorporated companies. Meetings conducted by companies are governed by law or regulations relating to the convening and conduct of the meetings and ancillary matters. In Nigeria, the meetings of incorporated companies are governed by the Companies and Allied Matters Act1 hereinafter referred to as the CAMA.
Company meeting, is an indispensable tool of corporate governance. It is meant to be a key instrument for the protection of investors (shareholders and creditors) and the means by which members tame the activities of overzealous and recalcitrant orcorrupt directors and officers of the company. Thus, it is the most viable means of improving the management of a company.
The importance of meetings in the affairs of the company is indeed very central in corporateGovernance. At pre-incorporation, the promoters or members need to meet, discuss and arrange how to set up a company.
First, the members must agree on the company‟s charter of operations, the name of the company, registered office, objects or businesses for which the company is incorporated, status, the authorised share capital, the fact of association and the extent of members‟ interest in the company. These will be lucidly spelt out in the company‟s Memorandum of Association.The members, at this stage, must also work out the internal regulation of the company. The members must meet to resolve on the classes of shares, alteration of capital, meetings, voting, seal, notices, number of directors, borrowing power of the company, proceedings at directors‟ meeting, the company‟s bankers, winding up etc. This inter-alia will form the contents of the company‟s Articles of Association. The Articles and memorandum of Association constitute the company‟s constitutional documents and define the entire field of the company‟s operation.
As a going concern, the company‟s charter or its very existence can be abrogated, altered or modified by a resolution of the members at the company‟s meeting.
The key officers of the company are put in office at the company‟s meeting. The first directors of the company are determined in writing by the subscribers to the Memorandum of Association or a majority of them or the directors may be named in the Articles2. The subsequent directors are appointed by the members at the Annual General Meeting3. In the event of all the directors and shareholders dying, personal representatives of the shareholders may apply to court to for an order to convene a meeting of personal representatives of the shareholders to appoint new directors to manage the company and where the personal representatives fail to convene a meeting the creditors have the right to apply to court for an order to call a meeting of creditors to elect new directors to manage the company4. Where there‟s a casual vacancy on the board owing to death, resignation, retirement or removal, the directors at their board meeting can fill such casual vacancy, pending the approval by members at the next Annual General Meetings5.
From the foregoing, directors can be appointed into office at meetings of members, directors, shareholders, personal representatives of shareholders and creditors. Conversely, directors are removable from office by a simple resolution of members at General Meetings. Consequently, the place of company meetings in contemporary corporate governance can never be over-emphasized. The health of any institution, hinges essentially, on financial discipline and accountability. To ensure sound corporate governance, the law has ascribed to shareholders at general meetings the power and the right to appoint monitors of its finances who submit formal report on same. To achieve this, every company at each annual general meeting must appoint an auditor to audit the financial statement of the company6. In the case of public companies, in addition to appointing auditors, the company shall also constitute an Audit committee comprising of an equal number of directors and shareholders‟ representatives. The Audit Committee is to examine the Auditor‟s report and make recommendation thereon to members at the Annual General Meeting7.
At a closer glance, company meetings, serve variety of purposes and variety of interests.To the members, it provides them the forum to be heard on matters affecting their investments. Here, the members are sure of meeting face to face with their Corporate Chieftains in one place and questioning them on the company‟s position and
4 Section 248(2) CAMA.
5 Section 249 Ibid.
6 Section 357(1) Ibid.
7 Section 359(2) Ibid.
prospect. It is one place where members meet, discuss and ventilate their grievances on matters affecting their interest and are able to exact some measure of accountability from management. Further, the members can actuate at meetings the potency of their ultimate control over the affairs of the company by getting their acts together and sacking the directors. Meetings therefore, provide to the members a tool for intervention in corporate administration8. In certain exceptional cases, under section 63(5)(a)(b)of the CAMA members in general meetings may assume managerial responsibilities of the company. This is termed the default powers of the general meeting.
To the company, meetings provide the opportunity for the election of its key officers charged with steering the ship of the company. The directors, auditors and members of the audit committee are put in office at the company‟s meetings. Also company policies and decisions are collectively taken at company meetings, be it the board of directors‟ meetings or members in general meeting. To the company therefore, meetings become the fora where the course of the company is charted.
However, in practice, the general meeting of members,has in reality turn to a yearly gala affair or an annual ritual and the Board of Directors, through inducements and diverse means of influence, have perpetuated their interestsand continue to expropriate investors through these meetings and the instrumentality of the present laws in Nigeria.Since commercial corporations attained corporate personality and the kindred characteristic of limited liability as basic attribute, it became highly imperative that certain grounds for protection be canvassed for investors and trade creditors of the company. It was on this consideration, that a gradual evolution of a body of rules grew, requiring disclosure of certain minimum information regarding constitution, management and viability of the company to give an informed notice to whoever transacts with the
8Agom, A.R., (2000) Power of Court to Compel Company Meetings. Modern Practice Journal of Finance and Investment Law Vol.4, No.3, P.42.
company, as to be forewarned is to be forearmed. The philosophy of disclosure which now permeates every facet of company law is at given practical expression at the meeting of the company. Here at, the financial statement is presented, pre-incorporation contracts are discussed, approved or disapproved, directors interest in the company‟s contracts and such other sensitive and allied matters are discussed.
However, there are some limitations against the powers of the general meetings in corporate governance. These limitations flowing from the reality of dispersal of share ownership, directors effective control and manipulation of the proxy machinery and proceedings at meetings, the growth and expansion of the capital market, increasing sophistication of modern management, the technical complexities of production processes, the emergence of professional cadre of managerial technocrats, shareholders apathy arising from lack of expertise, knowledge etc., have torrentially, wane the strength of company meetings as a primary organ in corporate administration. These limitations question the practical utility of company meetings.
These factors have in no small way, helped to gradually enthrone directorial oligarchies in some Companies, with practically little or no control at all, from members of the company. This is so, notwithstanding that the two primary organs of the company are the members in general meeting and the board of directors. These oligarchies in some cases, have turned up the problems of corporate mal-administration which in most cases eventually leads to corporate failure and collapse.
It is against the foregoing background, that this work principally analyses the legal provisions on company meetings under the CAMA, its various kinds and practical relevance in the scheme of company law, identified some of the provisions inhibiting the effectiveness of the members‟ company meeting as an effective tool for exercise of
corporate powers in spite of the fact that members‟ meeting is the most viable mechanism of corporate governance. As a way out, suggestions are provided on the founded lacunae.