The Securities and Exchange Commission (SEC) says it is working to create a subrule that makes the distribution of gifts at annual general meetings (AGM) illegal.
In a draft published on its website, the commission explained that the aim of the subrule is to reduce the cost of organising AGMs and ensure that investors get more value for their investments.
The sundry amendments are: 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.
The proposed rules also seek to make meetings with a select group of shareholders prior to an annual general meeting/extraordinary general meeting illegal.
“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,” Efe Ebelo, SEC’s head of corporate communications, said.
“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.
Companies that violate these provisions, the SEC warned, “shall be liable to a penalty of not less than N10m”.
The proposed amendment will also lead to the creation of a rule that public companies should disclose some corporate governance information on their websites including governance structure, composition and structure of the board, shareholding and dividend analysis.