ABUAD JOURNAL OF PUBLIC AND INTERNATIONAL LAW — (AJPIL) Vol. 1, No. 1 June, 2015 This Journal is to be cited as AIPIL, 2015 A Ee \ DEPARTMENT OF PUBLIC AND INTERNATIONAL LAW, COLLEGE OF LAW, AFE BABALOLA UNIVERSITY, ADO- -EKITI, NIGERIA. i Ss \| | AJPIL [2015] VOL.1, NO. 1 Vv TABLE OF CONTENTS From the Editorial Suite. Powers of the UN Secretary-General: Between Law and Persuasion O.S. OYELADE & MISBAU ALAMU .. The Impeachment Powers of the Legislature under the 1999 Constitution (as Amended): Issues in Controversy BOBAI PAUL ALI, ESO... Bail in Nigeria: Myth Or Reality SMARANDA OLARINDE & IFEOLU J. KONI... Curbing Mlicit Money Flows and the Use of International Tax Havens and Corporate Structures to Avoid Taxation in Nigeria SESAN FABAMISE.. Emerging Trends in the Enforcement of International Commercial Arbitral Award PRECIOUS-ANN N, AHIARAMMUNNAH Legal Appraisal of Corporate Criminal Liability under International Law PROF.T. I. KOMOLEDE & B. ABEGUNDE..., The Roles of Shareholders" Association in Corporate Governance in Nigeria O.B.AKINOLA& A. 0. ABOHESQ..AJPIL [2015] VOL.1, NO. 4 116 The Roles of Shareholders’ Association in Corporate Governance in Nigeria 0. B. Akinola' and A. 0. Aboh Esq." Abstract This paper examines the various roles which the shareholders association(s) plays by way of checks and balances for smooth corporate governance. The paper examined the structure and modus operandi of shareholders associations of. ‘Australia and New Zealand vis-a-vis what obtains in Nigeria. The paper also peeped into the roles of the shareholder as assigned 0 it by the new code of corporaie governance approved for use in Nigeria by the Securities and Exchange ‘Commission vis-d-vis the Companies Regulations of 2012 and other related statutes. The paper further discussed the challenges faced by shareholders association and proffer suggestions for sustainable reforms. Introduction By virtue of section 37 of the Code of Corporate Governance for Public Companies in Nigeria, a shareholder means any person who lawfully acquires shares in the capital of a company: A shareholder is a person who ‘owns or holds a share or shares in a company, especially a corporation.’ He is simply a person who commits capital in order to gain financial returns. He is also someone who holds shares of stocks in a joint fund or property.° He has rights, privileges and liabilities where applicable. A corporate entity has anumber of organs ranging from members in general meeting, the board of directors, the company officers etc. It is a settled principle of law that a company is distinct from its members and itis an artificial person. In Alhaji Olalekan v, Wema Bank Plc’, the Supreme Court held that the plaintiff and EE TLE Hons), (Unilorin), LLM (ABSU), Ph.D (UNIZIK), Barrister at Law, Lectist Department of Corporate Law Practice, Nigerian Law School, Augustine Nnamant Campus, Enugu, Enugu State, Nigeria, Email: kinobukky @gmal.com, FA. . Aboh, Esq. LL.B (Hons), Legal Practitioner, Makurdi, Benue State, “Pant. Section 39, Code of Corporate Governance for Public Companies in Nigeria 2011 ‘GamerA. B., Blacks Law Dietionary, West Publishers, USA ‘9th Edition, 2009, Pg, 1500. are polder is alsoan owner of corporation whose ownership is represented by shares of sibel the corporation, He may also be referred to asa stockholder with rights conferred Py law. 006) S.CN.. 158. In addition, the Supreme Courtheld thatthe state of mind and will of deena rd managers represent the directing mind and will ofthe company and i treated bythe lawas such. P 163.AYPIL [2015] VOL.1, NO. 1 17 the company are separate and distinct though the plaintiff is the Chairman/Managing Director of the company and the sole signatory to its Account. The court went further to hold that the company is a legal person and is legally different from the plaintiff though a company can only act through human agents and officers. The shareholders which form the bulk of the members in general meeting are the most powerful organ in corporate governance. The day to day administration of the company lies in the hand of the board of directors. The shareholders appear to be at the receiving end of companies’ administration in the sense that they actually do not oversee the day to day running of the company. The poser is: are the shareholders the most powerful organ of the company. The law recognizes minority rights and protection of shareholders but a more forceful force exists where the shareholder comes under an umbrella of shareholders association, This can only be birthed by shareholder activism. Shareholder activism cannot erupt in the absence of the knowledge of the operations of the company in its day to day activity. Gower lends credence to the above assertion when he opined that: “In reality, the boards of director of some widely local public companies are self- perpetuating oligarchies which control the general meeting rather than it controlling them...’” Commenting on the powerlessness of the average shareholder in corporate governance, Shonekan‘ remarked thus: “Unless there is some measure of disunity or factionalism among the member of the board themselves. There is very little of which the average shareholder can do to exercise any significant degree to control the affairs of the company even if the company is not doing well” The poser is: how powerful are the shareholders in corporate governance? Could the shareholders wield so much power and grope in the dark room instead of lightening the room of corporate governance? Often times, there might be disputes between the directors and shareholders, what is the way out without recourse to protracted Kitigation? All these questions beg for cower L.C-B.. Principles of Modern Company Law (London Sweat & Maxwell Ltd) 1992, SthEd, pp 530-531 ‘Sh E. Nj * The Powerlessness of the Average Shareholder” - Being a paper Presented ata Workshop on Corporate Practice atthe Hilton Hotel Abuja, 28th March, 1997 iAJPIL (2015) VOL.1, NO. 1 118 answers. Disputes between the Ghareholders and controllers of a company can arise for all sorts of reasons, from disagreement over the direction and development of a company to poor personal relationships, conflict of interests where individuals have interests in other businesses can also cause problems where such interests are not disclosed to the members of the company at the general meeting. Section 280 (1) Companies and Allied Matters Act 2004 provide that the personal interest ofa director should not conflict with any of ‘their duties as directors for the time being under the Act. In Arberdeen Railway Company ¥ Blaike,” a contract between the company and a partnership of ‘which one of the directors was a member without having to disclose the fact to the members of the general meeting was held to be voidable at the instance of the company even though the terms of the contract were perfectly fair. Furthermore, owing to the need to protect the interests of members at the general meeting and to ensure members participate actively in the business and activities of a company and to be able to hold the directors accountable for their actions in managing and directing the affairs of the company, the shareholders ought to be given a role in corporate governance. My view is that the shareholders have been given roles ‘and it remains for them to play these roles well in their corporate interest. This is because the directors constitute the directing limbs and arms of the artificial entity called the corporation to attend to its routine executive and non executive functions.” ‘The seeming gap between the shareholders ‘and the directors has resulted in ‘the blockage of the corporate path between the directors and the shareholders. itis against the above backdrop, that this paper seeks to examine how the corporate gap between the various organs of the company and the shareholders can be bridged. The paper also seeks to examine the role of the shareholders’ association” in corporate governance in Nigeria. A foray into the history of shareholders association activism will be geared towards an examination of some statutory limitations on the association to perform (1854) 1 MACQ, HI. 461. Bolton Engines Co Ltd v hrabam & Sons Ltd (1957) | (B159, Leanards Carrying Co Lid ¥, gine roleum Co Ltd (1915) AC 705, Kate errs Lid v Daewoo (Nig) Lid (198)2 (PT.5) Sern 63(1) of CAMA. Alhaji O. Olalekan ¥. ‘Wena Bank Plc (2006) 7 SCNJ 158. Sectietample of a shareholder, association Nigetia_is Progressive Shareholders ae Gation of Nigeria which hasMr. Boniface Okezie as its Chairman.AJPIL [2015] VOL.1, NO. 1 113. their functions effectively. One therefore wonders how the association would be able to discharge their duties effectively in the context of the statutory limitations imposed. : Brief History of Shareholder Activism in Nigeria Shareholder activism” is a way in which shareholders can influence a company's behaviour by exercising their rights as stakeholders in the company." It started in the early part of the year 1970 when there was a serious row between the directors and shareholders as a result of some deadlock and factionalism in the board brought about by some complaints on the path of some minority shareholders. When remonstrated, the directors failed to take into consideration the interests of the company as a whole while carrying out their managerial functions. In addition, large sums. of money were received by directors as salaries, more especially those on service contract while delivering a completely mediocre and lethargically lackluster performance leading to huge financial loss to the company as a corporate entity."* On the other hand, it is a notorious fact that corporate executives complain with litile justification, though, to the effect that shareholders have been obstructing the company's legitimate businesses with tiresome requisitions and objections and have their nuisance value exploited more especially at the extraordinary general meetings of tie company." In Foss v Harbottle the court opined that an advantage of statutory roles for shareholders is that itcloses the door to the flood gate of litigations and prevents multiplicity of frivolous, vexatious and malicious suits. The court opined further that, if each shareholder were permitted to sue, the company may be harassed by a succession of civil actions started by innumerable plaintiffs who are either cantankerous or who wish to harass the directors for purely extortionist 4 sharcholder activist is a person who attempts to use his or her right as a shareholder of a publicly traded company to put pressure en the level of corporate governance to bringabout a Prcial change for the common good. Shareholder activism is a way in which shareholders an influence a corporation's behaviour by exercising their rights as owners. Although, Shareholders don't run a company, there are ways for them to influence the board of directors and management. These can range from dialogue with management to voice their concems about burning issues or areas of conflict before the resolution is passed by voting during the veneral meeting. “Investopedia Encyclopedia (2004) P.10 ‘Op. citp.8 "Sections 215(2) and of 294 of the 2004 Act.AJPIL [2015] VOL.1, NO. 4 420 purpose. In this vein, the need for shareholders to speak with one voice cannot be over emphasized. Hence, there is a need for shareholders association's progressive activism. Shareholders’ association in Nigeria has grown from a few thousand investors in the early 1970s to an estimated 10 million as at December 31st, 2013." The privatization programmes have had tremendous impacton share ownership. Between 1955 and 2005, government ‘owned companies were offered for sale to the public and over 800,000 shares and many of whom were first time buyers purchased them. In a bid to shore up public participation in the ownership of business corporations, the federal government facilitated a network of shareholders’ associations.” The Role of Shareholders’ Association in Corporate Governance inNigeria Shareholders association are the independent voice of the private shareholder. One of the reasons which justify the establishment of shareholders’ association in Nigeria is their ability to educate their members and protect their rights and interests by making sure those appointed to manage and direct the affairs of the company are held accountable for their actions, Considering the current rapport between shareholders’ groups and companies, one may ask ifthe association is performing her responsibilities as expected. This difficult situation is further exacerbated by the fact that in a large limited liability company, ownership is separated from management and that often leads to waste. The company is owned by shareholders while management is in the hands of the directors. The Code of Corporate Governance 2011 places obligations on institutional shareholders on the need to ensure compliance by corporate stakeholders on the letters and spirit of the Code.” The shareholder association ought to be the watchdog of companies, but instances where the directors have successfully won the hearts of the shareholders through corrupt practices isunacceptable. The Code® also mandates that shareholders should be provided with biographical information of the proposed directors of the company. This could be effectively done through the shareholder association. The new code recognises the unique role of independent directors and the need to saturday Vanguard 10th February, 2014. "Op. cit "Section 1.3 (b) of the Code of Corporate Governance for Public Companies in Nigeria 2011 “bid. Pa. 4 10AJPIL [2015] VOL.1, NO. 1 121 comply with the provisions of section 5.5 of the Code in its appointment. This appointment, if well monitored by the shareholder association, will serve as the eagle eye of the shareholders in the board of directors. For instance, the Australian Shareholders Association (ASA) has a functional website” where the corporate evaluation of the compliance with the code of corporate governance is posted, discussed and a feedback mechanism exists for erring directors to sit up or sit outside the board in the corporate interest, Another instance seems to be where most of these companies are not making sufficient money to declare and pay dividends; but they may make enough which may be frittered away through a leaking misplacement of priorities. The directors should not induce chairman of acclaimed shareholders’ association and sometimes some recognized individuals. How in the interest of the corporate markets or minority shareholders can it be rationally explained that a company which was unable to pay or declare dividends after years of trading in the corporate market and has no outlook todo so even soonest has such excess tospend in compromises? Suffice to say that it is the role of the association to ensure that members perfectly understand the financial intricacies involved before investing in any company. This is usually known through a well regulated and edited Prospectus before publication to’ potential shareholders. Shareholders associations may borrow a leaf from ASA which floats the EQUITY’ magazine to enlighten members on the performance level of their investments from one company to another, They help their members by ascertaining those who constitute the management team of the company before putting in their money as investment and the type of business which the company does, the assets and liabilities of the company so as to avoida situation in which members would begin to have regrets should the company go into liquidation or becomes bankrupt few months after investment. Another role of the shareholders association is to encourage the members of a company participate actively in the affairs and activities of the company through the instrumentality of the general meeting. The general meetings of a company are the avenues through which shareholders are afforded the 3 www insharcholders.com.au last visited on 28th October, 2014. ASA hasa monthly magazine called ‘EQUITY* which is recurrently circulated to the public on the prog report of corporate entities. This make s the association a stakeholder in corporete governance and its health for investment and economic development. jAUJPIL [2015] VOL.1, NO. 1. 122 opportunity to confront the directors on the management of the company. Thus, the shareholders may question the accuracy or otherwise of some of the businesses to be transacted at the AGM of the company such as the directors’ reports, auditors’ reports, the accounts and the company's Positions and prospects. The New Zealand Shareholders Association (NZSA) advocates activism before, during and after the AGM of New Zealand companies. NZSA advocates for shareholders and acts as a check on the activities of company officers in compliance with the principles of corporate governance. Furthermore, the Nigerian Companies and Allied Matters Act” specifically reserve certain matters in the general meeting. These include powers to alter the company's memorandum and articles, alteration of authorized share capital, reduction of authorized share capital, removal of directors by ordinary resolution and voluntary winding-up or liquidation. These are avenues in which shareholders associations should enlighten their members and ensure compliance by working hand-in-hand with the sectorregulators. The directors are to be subjected to an annual re-election process and that Constitutes a restraining influence on their conducts.” In Longe v FBN™ the court held that a director of a company may be removed from office at any time before the expiration of their term of office notwithstanding anything to the contrary in the company’s articles or any contract between the company and them. However, this is subject to the payment of compensation. It is for this reason statutory duty is imposed on the directors to convene AGMs willy-nilly whether or not they want one. The association does not only owes its members the sacred duty of holding AGM but to ensure that critical matters affecting the soul of the object for which the company is formed are not merely ratified by pooling a wool on the face of the members by way of misinformation but by placing the facts on the table and collectively arriving at a reasonable resolution which pleases the majority. The extent to which the law hallows the periodic holding of meetings as a platform for effective shareholder participation in the affairs of the company is manifested in the statutory measures designed to ensure if directors fail in their primary duty to convene the requisite meetings, the Cap C 20L.F.N. 2010 “Section 246-250 of the 2004 Act. *(2010) 6NWLR (Pt. 1189) 1 SCAJPIL [2015] VOL.4, NO. 1 123 courts, the Corporate Affairs Commission, or even members may do so under the circumstances as stated in the Act." Judicial decisions have attested to this fact, recognizing the powers of the courts to make consequential or ancillary orders for meetings of companies to be held.* Furthermore, in Iro » Park, the Court observed that it could make such Consequential or ancillary orders pursuant to Section 223 of CAMA, upon the application ofa member ofa company directing that a person Present in person be allowed to hold a meeting which will be binding on all other members of the company. Such a court- ordered meeting will be deemed to beameeting of the company orboard, duly called, heldand conducted, In furtherance of the above, shareholders association should be able to Participate actively in the affairs of the company through the aid of some Statutory provisions which have also prevented members of the board from frustrating activities of the company. For instance, refusing to act when they are supposed to do so is actionable asanegligent act.” The lawhas conferred tesidual executive powers in the general meeting to act for and on behalf of the company if the board will not or cannot exercise them. The shareholder association can institute a class action or approach the Multidoor Courthouse within Jurisdiction to seek redress, In Borton v Potter, the article of association of the company gave the board of directors powers to appoint additional directors, Owing to disagreement and factionalism among the members of the board, no board meeting could be held for that purpose. It was held that the company retained power in the general meeting to appoint additional directors, The Superiority of the shareholders was therefore confirmed by the court in ascribing the powers to the members in general meeting. Warrington J, observed: thus “The director having certain Powers are unable or unwilling to bid. Section 213(2),215(2) & 223 “In Re El ~ Sombrero’s (1958) CH 900, two out of the 3 members of a company whose Hote of his Ineneglberately refuse to hold any meeting’ The third members gave spect Rotice of his intention to move an ordinary resolution to remove the Gearon ie next ehiuordinary general meeting of the company, he then applied to court fy onl. meeting a quarection 223 of CAMA and fora director that one member presentin pester nes quorum. {twas held that in the circumstance the application should be erosted, “Section 300 (f) of CAMA which buttresses thie assorter Provides as follows: Without Resasice fo the tights of members under sections 303 to 305 and sections 310 te v1 cent Act or any other provisions of this Act, the cou-t on the pplication of any member, may by injunction or decfaration restrain the Company fromthe following ~ das” the directors are likely benefit, or have profited or negligence or from their breach of uy. sa SiaAJPIL [2015] VOL.1, NO. 1 124 exercise them, are in fact a non- existence body for the purpose. These must be some power in the company to do itself which under the circumstances would be otherwise done..........” Another role of the Association has been the organization of public enlightenment campaign through public lectures, symposia, on corporate governance practices and code of corporate governance for shareholders, production and distribution of hand bills on the workings and operations of the capital market. That is usually done through the collaboration of the Securities and Exchange Commission (SEC) and the stock exchange market, more especially those companies whose shares are listed and quoted on the floor of the stock exchange. For instance, shareholders of companies are not well abreast with some of the SEC rules and the procedure for transaction and speculation on the floor of the stock exchange market, May I submit that such educational outreaches should not be limited to major cities such as Lagos, Abuja, Port Harcourt etc but should be extended to state capitals and semi urban centres in the overall interest of investors. This public campaign informs the shareholders about their respective rights and duties, as members of the company. They have a duty to ensure they do not disrupt the company's legitimate businesses through tiresome requisitions and objections and exploit their nuisance value thereby opening the flood of ligation which in itself is an activity which does not markedly contribute to the happiness of mankind although it is sometimes unavoidable. In this whise, the relevance of the shareholders association cannot be over emphasised. The rights of the shareholders on the other hand could take the following forms: the right to be entitled to notice of meetings unless such right is waived or the failure to serve such notice is due to an accidental omission on the part of the persons issuing or serving the notice. Failure to servenotice of meetings to persons entitled to receive it invalidate the meetings and all such proceedings conducted therein becomes a complete nullity. In Re: West Canadian Coll Eries Ltd, the failure to serve notice of general meeting was as a result of an electrical fault inherent in the radiograph with which the letters were being sent out. It was held that the failure to serve the notice was asa result of an accidental omission so that the proceedings of the meetings were not invalidated. However, in sharp contrast, where the failure to serve the notice is as a result of an error of law, the meeting will be invalidated asAJPIL [2015] VOL.1, NO. 1 125, such is not an accidental omission within the ‘meaning of CAMA. Another aspect of the rights of shareholders of which the shareholder association must strive to inform their members about is the right to the Payment of dividends as constituting financial reward for their capital contributions to the growth of the company. The payment of dividends to shareholders is a personal right the breach of which entitles a member to bring an action in their name on behalf of the company against the directors as affecting their individual and personal rights as members. in Edwards v Halliwell, in that case, the observed that the matter in question was not a mere irregularity in the internal management of the company but was a matter of substance and linked with oppression. That the individual and personal right of membership of each of the plaintiffs had been invaded bya purported, but invalid infraction and in these circumstances Foss y Harbottle has no application at all; for the individuals were suing not in the right ofthe company but in their own: tights to protect them from invasion. In addition, another way in which the law has succeeded in protecting the interests of shareholders association in Nigeria is in the area of gifts to Companies and the requirement for altering the articles of association of companies. Companies may wish to give gifts for various reasons: it may wish to make an ex gratia payment to some employees in recognition of long services or what is generally called golden handshake. Also trading companies usually set apart a portion of their income with charitable objects with motives varying from an interest to assist in its social responsibility to the employees, the host community and the country at large aimed at preserving the company's good name or a public relation gimmick. The shareholder association should also help the company fulfill the sacred mandate of compliance with corporate responsibility while checkmating ultra vires act of gift to political parties or associations.” The apparent value of the provisions of the law is the prohibition of reckless i aaiction 38 (2) of CAMA 2010 frowns at giving donation or gifts to political partes or associations when it provides that: 'A company shall not have or exercise power either clecily or indirectly to make a donation or gift of any of its property or funds to a political party or politcal association, or for any political purpose; and if any company, in eater sug subsection makes any donations or gift of its property toa political party or association, ¢f for any political purpose, the officers in default and any member who voted for the breach shall be jointly and severally liable to refund to the. gompany the sam or value o the onation Cpilt and in addition, the company and every such officer or member shall be guilty of an offence and liable toa fine equal to the amount or value of the donation or gift."AJPIL [2015] VOL.1, NO. 4 : 126 and unauthorized use of the shareholders’ money in pursuit of some political ends. The subsection seeks to prevent the directions from using shareholders’ money contributed for a particular purpose, specific aims and objectives in pursuit of political objectives and ambitions. In Hurron v West Cork Railway Co, Bowen L.J observed to the effect the gift must either directly or indirectly be for the purpose of enhancing the financial profitability of the company and no more. That means charity cannot be allowed to sit on the board of directors que charity. On the other hand, while altering the articles of association of a company, As whole, in order to protect the shareholders, such an altercation must be done bonafide, honesty and in the best interest of the company as a whole; it is for the shareholders are not the court or the directors who are to determine what amounts to be in the best interest of the company as a whole. If they have acted honestly, bonafile, in good faith and without any elements of malice, fraud malafides, the court will not interfere unless there are no grounds on which reasonable men would have reached the same decision. The phrase the ‘company as a whole’ not in this context mean the company as a commercial entity distinct from the corporation. It has been held that the ‘corporations as a general entity' mean both present and future members of the company. Another role of the shareholders ‘Association in corporate governance in Nigeria is to take steps towards ensuring that members place the interest of the company above individual and personal interest and to avoid conflict of interests in their dealings with the director of the company. The conscience of most members of the association must not be bought over through bribes, gifts, etc. In instances where most of these companies did not make enough profit to declare and pay dividends out of the distributable profit of the company in a given period, it is suggested that such company must not be seeing distributing corporate gifts for popular festivities such as Christmas etc, it is further suggested that on no occasion should corporate executives or officers be seeing to offer bribes or any form of inducement by way of contracts to chairmen of acclaimed shareholders' association. This is because, sometimes some recognized individual shareholders find it difficult to strike a delicate balance between their personal interests and dhities to the company asa whole. Taking a cue from the earlier discourse, the association also plays the roles of collaborating with the regulators such as SEC to facilitate the adoption ofAJPIL [2015] VOL.1, NO. 1. 127 some clectronic systems of transactions during proceedings at the general meetings of the company; thus, company meetings can be successfully convened, held and conducted without the necessity of the members being physically present in the same place or being a face-to-face conduct. In Bynlz v London Life Association, in taat case, the English Court held that the general meeting of a company could be validly held without the members having to be in one room at the same time, so long as there is adequate interconnected system of electronic network in the places andhigh level possibility of participating actively in the proceedings of the meeting. This principle of law has recognized the importance of modem trade and commerce having great impact on company meetings and proceedings. It is suggested that the shareholders associations should sensitize their members on the usage of video conferencing for general meetings in the near future.” Another aspect of this electronic intervention through the instrumentality of the shareholders' association in Nigeria is in the area of e- Dividend payment policy. This refers to the payment of dividends due to shareholders through direct credit by electronic means into their nominated bank accounts, It implies the same-day clearance for dividend payment following which registrars would send confirmation letters of the dividend payment to respective shareholders. This policy which was established in February 20, 2008 in Abuja and it is intended to stem the observed occurrences of market abuse, improve the efficiency of the capital market and enhance the level of investors’ confidence. Also, the initiative would minimize cases of the unclaimed dividends lost in transit and enhance shareholders’ ability to access and utilize their dividends immediately. To ensure the success of the initiative, respective shareholders are expected to meet their implementation modalities, that is, issues are to meet payment obligation immediately after the declaration of dividends at the AGMs. It is apposite to suggest that registrars are to upgrade their ICT infrastructure; while stock brokers and registrars share transfer forms, It is the duty of the financial institutions to authenticate shareholders' signature. *This is without prejudice to physical attendance at AGMs. This is because the fact that section 218(4) recognized the right of a shareholderto attend the meeting and vote through a Proxy clearly indicates the intendment of physical attendance at AGMs.AJPIL [2015] VOL.1, NO. 1. 128 Challenges of Shareholders Association I.Corruption Corruption is a major challenge bedeviling every strata of the corporate world. There have been so many acts of corruption in the political sphere of the country as well, yet the shareholders' association seems to be the more cortupt instead of fighting for the interest and welfare of their members as the primary reason for their formation, most of them place priority on what is less important.” ii. Conflict of interest Conflict of interest among the leaders of the association is another challenge. The executive of the shareholder association needs to bite through the legal framework put in place for company regulation over the years. This can be done by putting the general good and progress of the investors above personal interests. This is evident in the way shareholders do conduct themselves at AGMs, a situation in which most operators of the capital market are not comfortable with owing to signs of desperation exhibited by the shareholders in terms of declaration of dividends, right issues and other corporate privileges. Statutory limitations can take the following forms; the general meetings which ordinarily are supposed to be avenues for shareholders’ control of management, to hold them accountable to their actions, to question their activities and to participate actively in the affairs of the company, but the procedure and manner of calling for the AGMsS is in itself, a strong disincentive to vote and take decisions by seeing the beyond the corporate veil. The cost of attending company meetings is another deterring factor. The costs of transportation to venues of meetings which are fixed at the discretion of the directors, hotel accommodation, hazards on the road make it difficult for members to attend and exercise their voting rights without fear or favour. *Gone are the days when we had corporate leaders like the former President of Nigeria Shareholders’ Solidarity Association (NSSA) the Late Chief Akintude Asalu a corporate leader who carried his lowers along with him. This has succeeded in slowing down force with which the association is known for combating corporate governance compliance.AJPIL [2015] VOL.1, NO. 1. 129 iii. Abuse of Proxy Rights Aside from the identified challenges, the use of the proxy machinery; has given the members of the board some edge over the members in the general meeting.46 voting in a company is either by show of hand or ina pail. Ifit is by show of hand, it is one man one Vote, irrespective of the number of share he has, if it is on poll, 2 member's voting rights depends on their shareholdings and weights of the shares attached thereto.The proxy machinery was originally designed to restore the balance of power to shareholders. It is however unfortunate because it appears that the directors through alleged manipulations of the proxy system have rendered the member's right to vote at meetings a near hoax. By the use and control of the system, the decisions are taken by the directors even before AGMsare held. iv, Inadequate Funding Shareholders’ association activities require funding, a major challenge confronting the unification of shareholders in Nigeria is funding. This is because proceeds from companies where their investments could yield Profit become inaccessible simultaneously. The executives of the association would not be able to coordinate the various checks and balance roles vested on the shareholders within the available legal framework. May] submit that shareholders associations are helpless in absence of adequate funding? y. Poor Awareness among Shareholders The shareholders have all the right to know how companies which they invested in were run and directors of the company giving account of their stewardship. Besides, it is apposite to assert that quite a number of shareholders who invested their resources in one corporate entity or the other are neither aware of their rights nor were they aware of any umbrella body such as the shareholders association, This has slowed down considerably, the activities and activism of shareholder associations. Lack of awareness is one of the major reasons why we have huge amount of unclaimed dividends in Nigeria today. An uninformed shareholder about the activities of the shareholder association a pitiably a deformed investor. From the above, one is only left to wonder how the association would be able to function effectively in the light of the above statutory and practical limitations.AJPIL [2015] VOL.1, NO. 1. 130 SUGGESTIONS This paper has examined extensively, the roles of shareholder associations in corporate governance in Nigeria in terms of their origin, roles, challenges and also efforts have been made to examine some statutory limitations of the association. In order to successfully ameliorate the current difficulties facing the associations, the following suggestions are humbly proposed: i. Abolition of preferential treatment Companies should stop giving the leaders of the association priority over the shareholders who are also capital contributors to the company if they do not deserve it. Where this is done, it amounts to abuse of corporate power including the power of control over collective resources, shareholders’ finances without a corresponding rate of responsibility. The dictates of majority rule and minority protection are fundamental to the controls allowed in this sphere. Majority will surely have their way more especially in remedies for internal wrong or and ratifying of irregularities which falls within their power to ratify. This must be done by taking into cognisance the minority shareholders where they will be prejudiced especially in a small company locked in with unrealizable profit which the majority can now exploit profit to their own advantage. ii, Adequate Enlightenment Campaign for Shareholders The shareholders should familiarize themselves with the intricacies involved in the operational workings of the nation's capital market so as to innerve the confidence of potential investors, This is because when they do not share in the visions of the capital market, inspiration to succeed will be lacking, and their working spirit will be dampened, Also, there must be proper enlightenment campaign for the members of the association on how the capital market works and the principles which are in operation in the market, and most importantly, the members should be trained to know how to behave at the Annual General Meetings and what is expected of them, in that way the directors would find it a difficult to exhort members who are wish to oppose the board's proposal and who are critical of the boards; policies.AJPIL [2015] VOL.1, NO. 1. 131 iii. Criminalisation of Secret Profit On the issue of Coluption perpetuated by the directors and leader the association, they must be made to understand that they stand in a fiduciary relationship towards the association and must have the interests of the association at heart. Any secret profits made or donations received through Non- Governmental Associations must be disclosed to the members. Where it is not disclosed, CAMA should be amended to prescribe the applicable punishment for would be violators of the penal provision. In the same vein, disciplinary measures should be put in place to instill discipline in members and impose sanctions on erring or disobedient members of the: association. iv. Proper Funding of the Association Shareholders associations should be properly funded. This may be done by setting aside distributable profits of the investors in a given year. This should be made voluntary owing to lack of proper framework for pooling resources together. Institutional shareholders are also advised to contribute immensely to the funding and growth of shareholder associations for the mutual benefit of all. Finally, in terms of the statutory limitations imposed, the relevant Provisions of the. enabling laws which seem to have given the directors edge over the shareholders, enabling them to dominate, control, manipulate Proceedings at general meetings should be amended, so that, it will no longer be possible for the directors to take some decisions on behalf of the company even before the general meetings are held. Conclusion The role of shareholders association is to speak out as a pressure group. The shareholders association is the bastion against bad corporate governance. Until the shareholders associations begin to live up to expectations, the Purpose for which they are formed will be defeated. They should genuinely interface between the regulators and the company. In essence, the role of. shareholder associations cannot be over emphasized. Shareholder ’ssociation activism will help to Teposition the corporate image and Corporate output of corporate entities. The association must play its role in member's expectation of investment performance, director behaviour and Corporate management. A bunch of broom Sweeps cleaner.