SEC Proposes N10m Fine for Firms Distributing Gifts at AGM

By Modupe Gbadeyanka

In order to deepen the capital market in Nigeria, the apex regulator, the Securities and Exchange Commission (SEC) is proposing a fine of N10 million for companies distributing gift items at their Annual General Meetings (AGMs).

In a notice to the market, SEC explained that it was doing this because it observed publicly quoted firms spending a lot of money on corporate gifts, when such funds should have been channelled to payment of dividends to shareholders or operations of the organisations.

The agency said in order to make things better, it was proposing amendments to the its Rules And Regulations of Part N Rule 602 titled Miscellaneous Rules.

“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,” SEC said.

Business Post reports that under the above section, SEC wants to create a Sub-rule 4, which will have, “Public companies shall not distribute gifts to shareholders, observers and any other persons at Annual General Meetings/Extra-ordinary General Meetings.”

In addition, the regulator intends to create another sub-rule, 5, which will contain, “Public companies shall not convene any meeting with select group(s) of shareholders prior to an Annual General Meeting/Extra-ordinary General Meeting.”

It explained that the sub-rule 5 is being proposed because it “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.”

SEC warned that, “Any company that violates the provisions of (4) and (5) above shall be liable to a penalty of not less than N10,000,000 (Ten million naira only).”