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Uche Usim, Abuja
The Securities and Exchange Commission (SEC), is seeking to create a sub-rule to regulate the conduct of Annual General Meetings (AGMs) in its efforts to ensure that investors get more value for their investments and thereby swell their earnings per share. This among other developmental initiatives is contained in a draft Exposure of Sundry Amendments to the Rules and Regulations published by SEC. When these rules are perfected and become operational, defaulting quoted firms risk a N10 million fine, among other penalties.
The sundry amendments include Proposed amendment to Rule 42 (2)- half-yearly returns, proposed amendment to Rule 67(2)- Individual Sub-broker and Proposed amendment to Part N Rule 602 – Miscellaneous Rules.
Proposed amendment to Part N Rule 602 – Miscellaneous Rules 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, regulator 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.”
SEC in the 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 profit 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.”
“Public companies spend a significant amount of money on corporate gifts at AGMs/EGMs and this 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” the Rule stated.
