In the last post we discussed the majority rule, the rationale to the rule and some legal measures to protect corporate minorities. In this post we will be concluding the discussion by looking at the protection under Section 311 of CAMA and types of actions to enforce minority rights.
An interesting source of minority protection is the provision of relief against oppressive and unfairly prejudicial conduct. This is provided for under Section 311 of CAMA. That section is to the effect that certain persons can bring an action for relief(s) where the affairs of the company are being conducted in an oppressive or unfairly prejudicial or unfairly discriminatory manner against members’ interest or in disregard of public interest. The following have been suggested as oppressive acts which may be unfairly prejudicial;
A. Where the directors vote themselves excessive emoluments thus denying the members of any or reasonable dividend;
B. Where the Board refuses to register personal representatives of deceased members thus disenfranchising them and forcing the sale of the shares to themselves at low prices;
C. Where shares are issued to directors on generous terms;
D. Where the directors refuse to recommend payment of non-cumulative preference dividend on the shares of the minority;
E. Where a substantial shareholder was unjustly excluded from management;
F. Where the majority shareholders were given an advantage which the minority where unjustly denied of.
According to Section 310 of the CAMA, persons who can bring an action under this head are members of the company, a director or officer of the company, a creditor, the Corporate Affairs Commission (“CAC”) or any person, who in the opinion of the court is a proper person to make the application for relief. Will this last category of persons include a company who is in competition with the ‘erring’ company? That will be left for the court to decide and in so doing it would most probably be guided by the circumstances of the case. But note that in Nigeria, it is only the CAC who can petition on the ground that the affairs of the company are being conducted against the members in a manner which is in disregard to public interest.A member need not necessarily be affected by the oppressive or prejudicial conduct before (s)he brings a petition. Under the old law this was a requirement and it did work hardship in many cases.This is probably because upon a successful petition the court can make far reaching orders which include that the company be wound up or that the CAC investigates the company or that a contract entered into by the company be cancelled.
Types of Action to Enforce Minority Rights
There are three types of action that could be brought to enforce minority rights against/or in the case of infringement. They are personal, representative or derivative action. The type of action utilised by the minority will largely depend on the infringement complained of.
1. Personal Action: Personal action is used where the member’s individual right is infringed upon. For example to enforce Section 300c of CAMA and rights such as entitlement to dividend when declared, entitlement to notice of meeting, right to vote, etc. Where a member brings a personal action he is not entitled to damages rather the court will make declaratory/or injunctive reliefs. The court can however award him cost whether his action succeeds or not.
2. Representative Action: Representative action is used when members in general or the rights of a class of members have been infringed. Representative Action can be used to enforce the rights under Sections 300 or 311 of CAMA. Members who bring representative action are also not entitled to damages but declaratory and/or injunctive reliefs.
3. Derivative Action: In derivative action, the claimant(s) derive its right to sue from the company thus he does not sue for himself but on behalf of the company. It is suitable for infringements affecting the management of the company. Damages can be a remedy in this action but such damages would go to the company and not the members, whose benefit in this kind of action may come as improved fortunes for the company and the personal satisfaction that they have checkmated the wrongs and excesses of the majority. Derivative action is very much suitable to enforce the protection under Sections 300 (b), (e) and (f) and under 311 of CAMA.
It should be noted that the minority will not be allowed to hold the majority to ransom for no just course. So where the directors or the majority act bona fide in the interest of the company as a whole, it matters not that a minority is adversely affected by the act, the court should be inclined not to interfere.
Corporate democracy today is not just the rule of the majority. Rather it is a balanced aggregation of varying interests and positions in a company. The alter egoof the company must be mindful of their actions in doing so because there is a robust framework for aggrieved minority to seek redress through the courts. However, having said that, in deserving cases the court will not allow a small group of members in the company to hold the majority to ransom. Hence, the more need for a balancing of interests.
 Akanki E. O., “Reformulating the Law Against Oppression in Companies” (1990/1991) 13-15 JPPL 28.
 Re London Society of Electronics Ltd (1986) Ch. 211.
 Alexander v. Automatic Telephone Co. Ltd (1900) 2 Ch. 56.
 Section 311(2)(c) of CAMA
 See Section 201 of the Companies Decree 1968; Ogunade v. Mobile Films (West Africa) Ltd (1976) 2 F.R.C.R. 101.
 See Section 312 of CAMA.
 Section 301 (3) of the CAMA.