Story by Olabode Jegede
Shareholders in the capital market have commended the Securities and Exchange Commission’s (SEC), action to stop listed companies from giving gift items at their Annual General Meetings (AGMs).
The proposal by SEC is to carry a penalty of not less than N10 million for companies that default.
According to the shareholders, AGMs are meant for shareholders to be briefed on companies’ performance and contribute to the affairs of the company, and not for sharing of corporate gifts.
The President, Progressive Shareholders Association of Nigeria (PSAN), Mr. Boniface Okezie, in a chat with our correspondent said SEC’s proposed rule is a welcome development.
According to him, “I have been advocating that the sharing of gifts should stop because people do not attend AGMs to know or contribute meaningfully to the affairs of their companies but to fast-track the meetings only to collect the gifts.
“Some of them buy one unit to five units of shares so as to get entry to the AGMs and that is why I have been writing SEC to stop it.
“I think they are acting on that letter now which I posted to the Nigerian Stock Exchange (NSE) as the gifts have blindfolded everybody and set confusion.
“So, SEC should be commended on taking that bold decision to such situation because it has a lot of embarrassment to foreign investors/shareholders that come to the AGMs and any companies that do not comply should pay the penalty.
“Anybody who wants to come to meeting should come on the basis of listening on how the companies have been fairing over years, whether to criticize on their poor performance or commend such firms on their good performance.”
Also commenting, Mr. Adebayo Adeleke of Independent Shareholders Association said that, “AGMs have become very rowdy in recent times as a result of gifts. It is unfortunate that the purpose of AGM is not to share gift. I think what SEC is trying to do is to ensure that there is reformation of order to help shareholders to focus more on their investment.
“We have a situation whereby so many people do not have business with the stock market have come to the market simply because of gifts.
“How it will be implemented and whether it will affect the sanitation that we intended is left to be seen but at times some abnormal situations will demand abnormal solutions.”
Recall that SEC last week published an exposure draft of sundry amendments to its rules and regulations.
It was a proposed amendment to its rules and regulations of Part N Rule 602 titled “Miscellaneous Rules”, just as it seeks to create a Sub-rule 4 and 5 pertaining to organizations and conduct of annual general meetings.
SEC, justifying the proposed rules lamented the huge amount spent by such public companies on corporate gifts at AGMs/EGMs, which has a great impact on their profitability.
“Few of the companies are making reasonable profits and even fewer can afford to pay dividends. If the amount budgeted for gifts at AGMs/EGMs can be reserved for other relevant operational or administrative expenses, it would positively impact on their earnings per share,” SEC said.
According to the Sub-rule 4, which stated that, “Public companies shall not distribute gifts to shareholders, observers and any other persons at Annual General Meetings/Extra-ordinary General Meetings.”
In addition, the regulator intends to create another sub-rule, 5, which states that, “Public companies shall not convene any meeting with select group(s) of shareholders prior to an Annual General Meeting/Extra-ordinary General Meeting.”
It explained that the sub-rule 5 is being proposed because it has 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.
“Any company that violates the provisions of (4) and (5) above shall be liable to a penalty of not less than N10 million,” SEC noted.