An Examination of Investors’ Protection Under Nigerian Law

An Examination of Investors’ Protection Under Nigerian Law.

ABSTRACT

A company has over time proven to be a very viable form of business, the company has grown tremendously in size and number of shareholders base making it necessary that a few people be selected to manage the company on behalf of the investors since all of them.

Laws are put in place to put a check on these managers to prevent corporate abuse and ensure that the company is managed with due care and skill to the benefit of the investors.

This research has shown that the government lacks the will and determination for the prompt implementation of its laws despite all the efforts made in providing the law, there are also some loopholes can through which fraudulent and dishonest persons can take advantage of for their own personal gains thereby defeating the very essence of the laws which are investors protection.

An examination of some of the laws provided to protect investors in Nigeria shows their inadequacies and the fact that it has become a mere academic exercise, ink on paper and is quite different from what is obtainable in practice.

Doctrinal method of research was used in this research referring to statutory laws, textbooks, journals, newspapers and internet materials.

The findings were that; there is the lack of will by the regulatory bodies to implement the law, company meetings have been provided as an important tool for investors’ protection in Nigeria but that has been circumvented through late delivery of the notice of meetings or inefficiency of the postal system.

The Companies and Allied Matters Act did not provide for qualifications for people to be appointed as members of the audit committee and the inspectors to investigate the affairs of a company and also in a bid for the provision of Section 63 of the Companies.

Allied Matters Act to provide for division of powers among the board of directors and the shareholders it ended up bringing in terms as’ good faith’ and ‘due diligence’ which are subjective terms.

It is therefore recommended that; The regulatory bodies should ensure prompt implementation of its laws and policies; it should be mandatory that companies should use the message alerts and emails in addition to the traditional form of notice to inform share holders of any company meeting.

The Companies and Allied Matters Act should provide for people to be appointed as members of the audit committee should be people with knowledge in accounting, company law and vast experience and section 63(4)of the Companies and Allied Matters Act should be Expunged.

In conclusion it can be said that investors’ protection does not lie on the Government alone but on all stakeholders, it lies on the investors sought to be protected to be vigilant, exercise all their rights provided by law and for the regulatory bodies to live up to their role and enforce the provisions of the law when there is any violation.

TABLE OF CONTENTS

Title page……………. i

Declaration………… ii

Certification………..iii

Dedication…. iv

Acknowledgement……  v

Abstract……  vi

Table of content……  vii

Table of cases………   viii

Table of statute…….ix

CHAPTER ONE GENERAL INTRODUCTION

1.1 Background to the study………. 1

1.2 Statement of the problem…  5

1.3 Aims and objectives of the study…  5

1.4 Justification………… 5

1.5 Scope of the study…….6

1.6 Research methodology……6

1.7 Literature review………6

1.8 Organisational layout………  9

CHAPTER TWO  THE EVOLUTION OF CORPORATE FORM OF INVESTMENT

2.1 Introduction…………   10

2.2 The Evolution of Company……  11

2.2.1 The Joint Stock System……   13

2.2.2 The Beginning of Public Dealings…   14

2.2.3 The Companies Act of 1844……     18

2.2.4 The Introduction of Limited Liability……   19

2.2.5 The Consolidation of Company law…  20

2.3 The Evolution of Company in Nigeria…  23

2.4 The Capital Market…………     27

2.5 The Stock Exchange…     29

CHAPTER THREE THE LEGAL FRAMEWORK FOR INVESTORS’ PROTECTION IN NIGERIA

3.1 Introduction…………      35

3.2 The Companies and Allied Matters Act 1990 (CAMA)…   36

3.2.1 Division of corporate powers…… 37

3.2.2 Investigation of companies affairs……  38

3.2.3 Disclosure……………    45

3.2.4   Company accounts…  48

3.2.5   Financial statement……     51

3.3 The Investment and Securities Act 2007……   66

3.3.1 Disclosure under the Investment and  Securities Act 2007………..  67

3.3.2   Public issue and the disclosure system……    70

3.3.3   Investigation under the Investment and Securities Act… 74

3.3.4   Investors protection fund         75

3.4 Nigerian Investment Promotion Commission Act 1995…… 77

3.4.1   Investment Protection Assurances…  78

3.5 The Trustees Investment Act 1990…    79

CHAPTER FOUR CHALLENGES TO INVESTORS’ PROTECTION IN NIGERIA

4.1 Introduction………………82

4.2 Lack of effective corporate governance 83

4.3 Corporate powers…………    85

4.4 The poor performance of auditors and the audit committees…88

4.5 The directors control of general meetings and shareholders apathy…93

4.6 Directors control of proxy instrument… 96

4.7 High illiteracy rate in Nigeria…   97

4.8 The postal system in Nigeria…100

4.9 Corruption in Nigeria……   101

CHAPTER FIVE SUMMARY, CONCLUSION, FINDINGS AND RECCOMMENDATIONS

5.1 Summary… 105

5.2   Conclusion……   108

5.3 Findings…    110

5.4 Recommendations…       111

INTRODUCTION

Background to the Study

An investor is a person who puts money into financial schemes, shares, or property with the expectation of making a profit.

An investor is someone who commits capital in order to gain financial returns or a person who commits money to investment products with the expectation of financial return.

An investor is a person, company, or Organization who has money invested in a venture with a hope of returns especially one that holds stock in publicly owned corporation.

Generally, the primary concern of an investor is to minimize risk while maximizing return. An investor can be a shareholder or a creditor.

A person who buys shares or owns shares in a company becomes an investor in that company and a person, company or organization that lends money or supplies goods on credit to a company becomes a creditor of that company.

The company is a dominant feature in every facet of the Nigerian economy from banking to oil and gas, health to recreation, construction to agriculture just to mention a few.

In every company there are investors. Gone are the days when sole proprietorship was the most preferable form of business wherein the capitalists invested and earned profits out of the business for themselves.

Though sole proprietorships still exist, they are not the most common forms of business today. Taste of the consumers have changed, technology has advanced manifold and production at large scale.

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