Synopsis On The Nigerian Stock Exchange’s Rules & Regulations – Series 2: Meeting Rules

The Rules of the Nigerian Stock Exchange (the “NSE” or “Exchange”) on Board Meetings and General Meetings (“Rules”) as approved by the Securities and Exchange Commission (“SEC”)1 are intended to guide directors and trustees of listed companies in ensuring compliance with the standards set by Nigerian company laws as regards their fiduciary duties of skill, care and diligence. The provisions of these Rules are aligned with those of the Companies and Allied Matters Act2 (“CAMA”); however, in some areas, these Rules stipulate requirements which are ancillary to the provisions of CAMA, particularly, with respect to its notification and reporting requirements for listed companies.

Board Meetings: With respect to board meetings, the Rules require that an Issuer notifies the Exchange within 24 hours after a relevant board meeting or after receipt of any required approval from its primary regulator(s) of a proposed change in its capital structure, redemption of securities, dividend/bonus recommendation, etc. There is also a requirement to notify the Exchange in writing at least 14 days in advance of a Board of Directors’ meeting wherein recommendation of dividends will be discussed.

General Meetings:

Pre-meeting: Generally, meetings of members of a listed company are to be in accordance with the provisions of CAMA, the Rules, other relevant legislation’s, as well as the company’s Articles of Association. The Rules stress the right of members at an Annual General Meeting to question the company’s Board/Management on the accounts and reports presented before the meeting provided such questions are relevant to the Issuer or its business and do not result in the release of commercially/price sensitive information. In addition, the Rules encourage directors to utilize pre-meeting sessions with shareholders or holders of other securities to resolve issues which may create controversy at the actual general meeting. Further, on Notices, the Rules stipulate that the Notice of meeting in the proxy form attachment must include clearly worded resolution proposals to properly guide members during vote cast. Any Notice of meeting to be issued must receive the NSE’s approval prior to publication. The same applies to any changes made in the contents of the Notice.

Where a meeting has been convened, it shall not be postponed or cancelled and no resolution proposals listed in the Notice may be cancelled without any justifiable cause. However, Issuers may, due to unforeseen circumstances, postpone or cancel the meeting in an announcement in at least 2 national daily newspapers and explain the reasons therein at least 3 working days (or any shorter period approved by the NSE) before the earlier scheduled meeting. It is important to note that the Rules do not expatiate on what will constitute justifiable cause or unforeseen circumstances; it will therefore be at the NSE’s discretion to determine these circumstances so it is advisable to notify it promptly on any proposed change to an already scheduled meeting. Following approval of the notice by the NSE, an Issuer is required to publish on its website, the notice, annual reports, schemes documents and any other information memorandum to be considered at such meeting.

At the Meeting: The Notice is restricted to attendees specified under section 219 of CAMA any other attendee shall be identified as an observer of the proceedings and distinctly segregated as such. Clear rules on the order of proceedings i.e. questions, time for questions, contributions, etc. must be stated at the commencement of the meeting. Any adjournment by the Chairman must be communicated to the NSE within 24 hours of the general meeting. Under CAMA, a director is required to merely disclose his interest in any contract with the company.4 The Rules however provide an additional obligation; it stipulates that a shareholder in a similar position i.e. being a related party/interested person in a contract, must abstain from voting in the matter either in its personal capacity or as a proxy unless specific instructions as to voting is given in the latter case. The notice convening such a meeting must state that related parties/interested persons shall abstain from exercising voting rights act said meeting.

The Rules empower the NSE to censure any Issuer which contravenes the provisions of the Rules. The directors of the company could also be penalized individually or jointly by censure or subjected to a fine of not more than 50% of the Issuer’s listing fees. Every member, director, auditor (for time being), secretary of the company and such other person(s) upon whom the ownership of a share devolves (legal representative, receiver or trustee in bankruptcy of a member) Section 277 of CAMA

The Rules also stipulate a number of other provisions with regard to company meetings such as the conduct of shareholders, responsibilities of directors/trustees in a company, venue, date of meeting, voluntary, procedures, etc. It is noteworthy that the NSE takes compliance with these Rules assiduously and non-compliance could be seen as grounds for invalidating the proceedings of the meeting of an Issuer upon application by an aggrieved member/minority to the NSE. Our final synopsis on the Nigerian Stock Exchange’s Regulation will focus on the Rules governing Investor Protection.