Nigeria’s Securities & Exchange Commission (SEC), on Friday morning published an exposure draft of sundry amendments to its rules and regulations,” just as it seeks to create a Sub-rule 4 and 5 pertaining to organization and conduct of annual general meetings.
The new sub-rule specifically seeks to reduce the cost of organizing shareholder meetings, by making illegal the distribution of gifts to shareholders, observers and any other persons at annual and extraordinary general meetings.
Should the rule be agreed on, “public companies shall not convene any meeting with select group(s) of shareholders prior to an Annual General Meeting/Extraordinary General Meeting.”
Justifying the proposed rules, the SEC observed: “that some companies arrange meetings with select groups of shareholders ahead of general meetings to discuss proposed resolutions and agree on strategies which are often detrimental to the interest of other shareholders.”
Companies that violate these provisions, the SEC warned, “shall be liable to a penalty of not less than N10m.”
The SEC in its exposure draft lamented the huge amount spent by such public companies on corporate gifts at AGMs/EGMs, which greatly impact their profitability.
It argued that at a time when few companies are making reasonable profits and even fewer can afford to pay dividends, the latest move would positively impact on earnings per share of many if the amount “budgeted for gifts at AGMs/EGMs can be reserved for other relevant operational or administrative expenses.”