The Application Towards Improving Notice Of Meeting Under Nigerian Company Law

Notice of Meeting

According to the Code of Good Corporate Governance for Insurance Industry in Nigeria 2009, shareholders have the right to participate in the company meetings, and they shall be given sufficient information on all corporate matters, including being informed about a meeting. In the same context, the Code of Corporate Governance for Public Companies in Nigeria 2011 requires the management of a company to ensure effective communication between the shareholders and the company which is only possible through notice of meeting. In this regard, the Rules and Regulations of Nigerian Stock Exchange, 2015 requires that a draft copy of the notice of meeting, circulars, annual report, audited account and any other accompanying document shall be sent to the Nigerian Stock Exchange (NSE) for review before it is served on the shareholders. This requirement seeks to protect the interest of shareholders against defective notice of meeting. According to Respondent 3, “Notice is a fundamental requirement for attendance at AGM, without the notice, you won’t be able to attend and exercise your powers or right as a shareholder. Notice is a very fundamental, very critical right of a shareholder. From my understanding, most of the powers of the shareholders are exercise at the AGM,” (Interview, Respondent 3, October 26, 2016).

The right to receive notice of meeting is a legal requirement that must be complied with by the company (Amupitan, 2006; Wijayati, Hermes & Holzhacker, 2016). In Young v. Ladies Imperial Club (1920) 2 KB 523, the court held that failure to serve notice of shareholder’s meeting invalidates all the proceedings at the meeting. In the Malaysian case of Jerry Ngiam Swee Beng v. Abdul Rahman bin Mohd Rashid and Anor (2003) 6 MLJ 448, the court held that, except where proper service of notice has been effected, the meeting shall be invalid. Similarly, s. 221 of the CAMA 1990 provides that where notice of meeting has not been issued as stipulated by law, such meeting shall be invalid.

A shareholder must be served with the notice irrespective of the fact that he has earlier expressed his intention to the company that he need not be served with notice of meeting (Speechley & Others v. Alott & Others (2014) EWCA Civ 230). However, in Young v. Ladies Imperial Club (1920) 2 KB 523, it was held that shareholder’s right to receive notice of meeting can be waived due to the critical health condition of a shareholder. According to the Malaysian case of Phuar Kong Seng v. Lim Hua (2005) 2 MLJ 338, the defendant was entitled to 14 days’ notice although he refused to attend the meeting earlier on. The court maintained the view that the defendant shall be served with the notice because the company has only two shareholders and failure to attend by the defendant could result in a deadlock. The above case explained the significance of notice of meeting to the extent that even where a shareholder on a previous occasion refused to attend the meeting, nevertheless the right must be protected.

On the contents of a notice, s. 218(1) of the CAMA 1990 as well as the Rule and Regulations of the Nigerian Stock Exchange (2015) provides that “notice of meeting shall specify the place, date and time of the meeting, and the general nature of the business to be transacted thereat in sufficient detail to enable those to whom it is given to decide whether to attend or not. Where the meeting is to consider a special resolution, shall set out the terms of the resolution.” Where a notice has been sent to shareholders, its content cannot be changed except where a company has the approval of the Nigerian Stock Exchange. All these were put in place to protect the interest of shareholders so that shareholders should not taking by surprises during AGM. In the case of Indian Corridor Sdn Bhd and Anor v. Golden Plus Holdings Bhd (2008) 3MLJ 653, the court held that, notice of meeting needs not be too detail. A notice of meeting that does not contain details of the meeting may satisfy legal requirement provided it is attached with a circular that contained details of the business transaction at the meeting (Mohd Tahir bin Abdul Rahim & Ors v. Syarikat Permodalan Kebangsaan Bhd & Ors [1991] 2 CLJ 1155).

Lack of Recognition of ICT under the CAMA 1990

According to Chen (2017), application of internet saves time, costs and improve effective communication. However, there is no provision under the CAMA 1990 that recognised the use of ICT in sending notice of meeting (Atte, 2015, p. 64). Thus, 14 Respondents were interviewed on the application of ICT under CAMA 1990, and they unanimously opined the need to incorporate ICT under CAMA 1990. Some of the excerpts from the interview are reported. According to Respondent 9, “When you look at the law, there is no place where the use of ICT is mentioned. I honestly think that stakeholders need to come together and take a position and possibly channeled that to the National Assembly and see how it could be repealed. The use of ICT should be taken into consideration under the CAMA 1990 particularly for public companies because we should be moving with time,” (Interview, Respondent 9, November 14, 2016). In the same regard, Respondent 3 mentioned, “Our CAMA is a legislation of the 1990s. It was enacted in 1990, and when it was enacted, the world has not developed to this extent and therefore is understandable that it has not made any provision regarding the ICT. Technology is a necessary imperative today. It is permitting all aspects of our lives, and all successful corporate organisations employ technology to facilitate their production processes. Therefore, the company management structure and the legal framework should also move with the time to recognise the role that ICT can play in advancing corporate management and administration in Nigeria,” (Interview, Respondent 3, October 26, 2016). All the above responses pointed out on the need for the CAMA 1990 to incorporate ICT as that would facilitate service of the notice.

Based on the responses, it is essential for the CAMA 1990 to consider the incorporation of ICT as relates to service of the notice. Additionally, the analysis of the interview suggests that ICT can be applied under the CAMA 1990. In this regard, Respondent 7 believed, “If the law can make provision for ICT, it is okay. Everybody wants things to be easier and faster. Make sure the right environment is there,” (Interview, Respondent 7, October 27, 2016). In the same view, Respondent 5 added, "Application of ICT may be a gradual process, and it will be good,” (Interview, Respondent 5, October 25, 2016). The above responses indicate the prospect of using ICT under the CAMA 1990, although there may be some challenges.

Method of Service

As earlier mentioned, s. 217 of the CAMA 1990 only recognised two methods of service of notice namely, personal service and service through postal delivery. These two methods were not effective. In this regard, Respondent 2 believed, “It is an understatement to talk about the efficiency of the postal service in the country. This is a problem because it takes a longer period, time or duration between postage and receipt of notices of AGM,” (Interview, Respondent 2, October 27, 2016). This necessitates the examination of other methods that facilitate effective service of notice under the CAMA 1990. In this regard, 9 Respondents out of the 14 that were interviewed representing 64.2% maintained that, “email addresses” should be used in sending notice of meeting to shareholders while 5 Respondents out the 14 representing 35.7% suggest the use of “mobile text messages” or “websites” to publish notice of AGM.

From the excerpts, Respondent 5 mentioned, “I would recommend sending notices via emails so that they can be received anywhere on time before the 21 days,” (Interview, Respondent 5, October 25, 2016). In the same context, Respondent 14 believed, “At least majority of us 60-70% of Nigerians have e-mail addresses. A company can use email to send notice of AGM to its shareholders,” (Interview, Respondent 15, November 28, 2016). Based on the above responses, it may be concluded that application of ICT in sending notice would help significantly in improving shareholder participation at the AGM.

The findings in this study reveal that, both methods of service prescribed under the CAMA 1990 namely; personal and postal service were not effective in Nigeria. Furthermore, the requirement for additional publication of notice in a newspaper is equally ineffective because only small percentage of people read newspapers in Nigeria. In this regard, Respondent 11 states, “How many people read newspapers, most people are inclined to watching foreign stations. They don’t have the time actually to see those notices.” It is of great significance if the CAMA 1990 can make provision that facilitates service of notice that will be very effective, namely using of the ICT.

To draw inference as a guide to reform the CAMA 1990 some provisions of the CA 2006 and CA 2016 were cited. In this regard, s. 308(a)(b)(c) CA 2006 provides, “Notice of a general meeting of a company must be given in hard copy form, in electronic form, or by means of a website or partly by one such means and partly by another.” The above provision recognised advancement in ICT by making provision for electronic service of notice. Similarly, s. 333(1) of the CA 2006 provides that, where an electronic address is given in relation to notice of meeting, such address is to be used for any proceedings at the meeting. Furthermore, the CA 2006 set details regarding publication of notice of meeting on the company website. It provides, “Notice of a meeting is not validly given by a company by means of a website unless it is given in accordance with this section” (s. 309(1) CA 2006). For the validity of notice of meeting published on company website, s. 309(3) of the CA 2006 provides, “The notice must be available on the website throughout the period beginning with the date of that notification and ending with the conclusion of the meeting.” All the above provisions explicitly recognised the use of email and website to send/publish notice of AGM which the qualitative interview above also suggest.

In Malaysia for example, there is equally a provision under the CA 2016 that recognised service of notice through the electronic form, in addition to the hard copy of the notice (s. 319(1)(b) and (c) CA 2016). The section further provides that, “Unless otherwise provided in the constitution, a notice given in electronic form shall be transmitted to the electronic address provided by the member to the company for such purpose or by publishing on a website” (s. 319(2)(b) CA 2016). This provision clearly recognised not only the application of ICT but, the use of electronic address or website to send or publish notice of meeting as it is the case of the CA 2006. Furthermore, s. 320(1) of the CA 2016 provide that, notice of a meeting of members published on a website shall only be considered valid when a notification to that effect is given in accordance with this section. In this regard, members must be informed about the publication of notice on the website. Based on s. 320(2)(a)(b) & (c) of the CA 2016, the notification shall be in writing either in a hard copy or electronic form stating the following, “that it concerns a meeting of members, the place, date and time of the meeting and in the case of a public company, whether the meeting is an annual general meeting.” Additionally, s. 320(3) of the CA 2016 provides “Notice shall be made available on the website throughout the period beginning from the date of the notification referred to in subsection (2) until the conclusion of the meeting.” Despite the absence of the above provisions under the CAMA 1990, there is a prospect that if this is incorporated in the future, they would have a great impact on shareholder participation at AGM in Nigeria.

Application of ICT

The advancement in technology allows shareholders to participate in an AGM through electronic means and thus improves the value of the company in several ways (Boros, 1999; Chen, 2017). The prevalent view today centered on the incorporation of ICT to improve and ensure the effectiveness of the AGM. Chen (2017) argued that the use of Internet would help in saving time, costs and as well as effective communication. In another word, the difficulty associated with shareholder participation at the AGM may be remedied by the advancement in the ICT (Hayati & Hasani, 2015).

Thus, electronic communication is a necessary imperative of business today (Marthinus, 2015). Currently, electronic mail (email) is one of the most widely means that facilitates business communication (Gluck, 1994; Hoffmann & Aeschlimann, 2017). In one study, it shows that 84% of communications through electronic medium uses email (Arvey, 2009). Rule 19.8(b) of Rule and Regulations of the Nigerian Stock Exchange 2015 states that upon request of a shareholder and where practicable, a company must send to the email addresses of shareholders the soft copies of the approved documentation.” This clearly recognised the use of ICT in sending relevant documents to shareholders through email addresses supplied by the shareholders to the company. It is one of the recent Rules that recognise the use of ICT in a corporate meeting in Nigeria. However, since the CAMA 1990 does not recognised service of notice by electronic means, it would be unrealistic to attribute to the legislature that they intent the use of ICT to send notice of meeting (Bolodeoku, 2007). Shareholders may not be willing to provide their email addresses to the company except where there is a law that sanctioned the confidentiality of their email addresses (Bidin, 2013). However, no such provision under the CAMA 1990 recognised electronic service of notice of meeting (Atte, 2015).

The Telecommunication Industry as Internet provider

The Nigerian telecommunication industry provides internet access to subscribers (Israel, 2015; Oladipo et al., 2016). There are challenges affecting internet access ranging from the slow pace of network, lack of constant electricity supply, cost of subscribing data among other reasons (Adomi, 2005). In Nigeria, many of the shareholders are relatively the working class, most of whom reside in the cities where Internet services are readily provided (Bolodeoku, 2007). However, for one to access the internet uninterruptedly, a subscriber must have a stable electricity supply in addition to the costs of subscribing internet data. This is a challenge since not every subscriber can afford stable electricity and internet subscription (Adomi, 2005). Today, the telecom industry in Nigeria is taking a new phase regarding development and service delivery. This was facilitated by a series of reforms aimed at transforming the sector by allowing private sector participation in the industry (Iwuagwu, 2014). The Nigerian telecom industry is described as one of the world’s fastest growing telecommunications markets (Connors & Maylie, 2011; Ojo, 2017).

Based on the recent (Report of the Nigerian Telecommunication Services Sector, 2016) there is a significant improvement in the number of subscribers in the telecom industry. The report indicates that as at the end of 2005 there were only 19,519,154 subscribers, but by December 2015 there were 151,017,244 which signifies an increase of about 13,149,809 every year. In the same report, it shows the total number of Global System for Mobile Communications (GSM) subscribers as at March 2016 was 147,398,854, which represents an increase of 5,756,018, or 4.06% compared to the statistics in March 2015. This indicates some of the prospects for the application of ICT in sending notice of meeting, because many Nigerians are now having access to mobile phones and the internet by extension.