•Rules out electronic reports alone •To vet corporate press releases
The Nigerian Stock Exchange (NSE) will suspend any company and sanction directors of such company that fails to hold its annual general meeting (AGM) within nine months after the end of the company’s financial year-end, according to new rules on general meetings being proposed by the Exchange.
Suspension implies that there will not be any transaction on the shares of the company at the NSE. By nine month timeline, this implies that companies that run the normal Gregorian calendar year as their business year, which most of the quoted companies use, must have done their annual general meetings (AGMs) on or before September 30 of the following year. For instance, companies with financial year ending December 31, 2013 must have done their AGMs on or before September 30, 2014.
The new rules, which will undergo public review and comments till October 9, 2013, empower the NSE to sanction the directors of quoted companies or securities jointly as a board and individually as a member of the authorising organ in addition to suspension of trading on such companies or securities. While the rules place a cap of N5 million on fines, a clause leaves room for the NSE to impose other forms of sanctions “which it determines to be appropriate”.
According to the new rules, where an issuer-a quoted company or securities such as bonds and mutual funds and other derivatives, fails to hold its AGM within nine months from the end of its financial year end, the company or such security shall file a report with the NSE within 14 days of the end of the stipulated period explaining the reasons for the default and it shall make an announcement in that regard in at least two national daily newspapers within seven days of receiving the Exchange’s approval to make the announcement.
“If an Issuer or Trustees of a Bond fail to hold an annual general meeting of securities holders within the term prescribed by these Rules without justifiable cause, the Exchange shall suspend the listing of the securities, and shall require the Board of Directors or Trustees of the Bond to give explanations and make an announcement in that regard within seven days of receiving the Exchange’s approval to make the announcement,” a section of the rules states.
In another significant review, the new rules require that notice for a meeting “shall state the right of securities’ holders to ask questions not only at the meeting but also in writing prior to the meeting; and the date by which such questions must be submitted to the issuer”.
The chairman at the meeting must respond to such questions submitted prior to the meeting during the general meeting in addition to given ample opportunity to shareholders or securities holders to ask questions during the meeting.
“Securities holders may submit to the Issuer written memoranda on their observations or concerns arising from the Annual Reports or Information memorandum to the company at least a week before the general meeting and forward copies to the relevant regulatory bodies,” the rules stated.
Besides, every listed company or entity is expected to submit a draft copy of the notice of meeting, circulars and annual reports including press releases s well as copies of all supporting documentation that will be considered at the meeting to the NSE for review prior to publication or release of such documents.
“Each Director or vendor of an Issuer shall accept responsibility for the accuracy of the information in any circular that is sent to holders of listed securities and a statement to that effect, shall be incorporated in the circular,” a section of the rules places individual liability on directors and authorising individuals besides the joint board and corporate liabilities.
According to the new rules, after the notice convening a general meeting is issued, the meeting shall not be postponed or cancelled and no resolution proposals listed in the notice shall be cancelled without any justifiable cause. Where due to any unforeseen circumstance it becomes necessary to postpone or cancel the meeting, the issuer shall make an announcement in at least two national daily newspapers and explain the reasons in that regard at least three working days before the earlier scheduled date of the general meeting.
In another rule that appears to circumvent the growing momentum of companies seeking to send electronic or “soft copies” of annual reports and other documents to investors, the new rules mandate companies “to forward to the email addresses of securities holders the soft copies of the documentation in addition to the hard copies which will be sent by post”.
According to the new rules, companies are expected to ensure that the notice of meeting and the full or abridged copy of the annual reports or any other relevant documentation are dispatched and reach securities holders and the relevant regulatory authorities at least 21 days before the date of the meeting and evidence of postage shall be made available for inspection by the regulators at the meeting. Companies shall also allow at least seven days for delivery of the notice of meeting if sent out by post from the day the letter containing same is posted. These imply that such notice and reports must be sent at least 28 days before the meeting.
Companies are also expected to publish on their websites notice of meeting, circulars, annual reports, scheme document and other information memorandum that will be considered at a general meeting immediately after receiving approval of the NSE.
The new rules also encourage pre-general meeting interactive sessions between directors and all stakeholders to iron out issues that are likely to arouse high levels of interest and controversy at the general meetings.
Besides, all directors, company secretary and where applicable supervisors of a company shall attend all its general meetings.
However, in the event that managers and any other employees of a company are in attendance at a general meeting, they shall be treated as non-voting delegates unless they are holders of fully-paid shares or attending the meeting as proxies with specific voting instructions.
The draft copy of the new rules obtained by The Nation was signed by head, legal and regulation, Nigerian Stock Exchange (NSE), Tinuade Awe. The draft rules are however still subject to approval of the final copy by the Securities and Exchange Commission (SEC).
