A new legal and regulatory framework for derivative actions in Nigeria

Abstract

The enactment of the Companies and Allied Matters Act in August 2020(‘CAMA’), has birthed another legal framework for derivative actions in Nigeria. However, the mild reforms made in CAMA with respect to derivative actions appear to not be a substantial departure from what was obtainable under the Companies and Allied Matters Act 1990(‘Old CAMA’).This thesis therefore, argues for a reform of the statutory derivative action regime in Nigeria as contained in the Companies and Allied Matters Act 2020. The proposed reform is hinged on the removal of existing hurdles and obstacles to instituting derivative actions; and the enactment of an all inclusive framework, which it is argued, may only be made possible by the abrogation of the common law derivative action regime and its attendant limitations. In addition, it is suggested that there should be an overhaul of the procedure for commencement of derivative actions; and incidental matters such as cause of action and parties. Also, since the requirement of applying for leave has been known to constitute a major hindrance to the commencement of derivative actions, this thesis argues for its simplification and modification. Thus, it is maintained that an applicant in a derivative action should only be required to prove that his application shows that there is a serious question to be tried. Meanwhile, in line with the elaborate remedies available under the unfair prejudice remedy, it is argued that additional remedies like judicial disqualification and removal of directors should be included in the remedies available under derivative actions. Furthermore, in order to address the problem of funding occasioned by the inadequacy of the system of costs and indemnification, this thesis argues for the adoption of the Contingency Fee Arrangement in the Nigerian derivative actions framework. Finally, towards enhancing the enforcement of corporate governance beyond litigation, this thesis argues for a facilitative and regulatory - Private Public Partnership ‘PPP’ model approach to derivative actions. It is posited that ‘PPP’ model will not only encourage the settlement of derivative actions through contractual means but also explore regulatory and administrative solutions to breach of corporate rights.