A Critical Appraisal of the Rights of Shareholders in Public Limited Companies in Cameroon

CHAPTER ONE

GENERAL INTRODUCTION

INTRODUCTION

The exercise of the rights of shareholders in a corporation is an aspect of corporate governance. Classical literature has it that corporate governance is concerned with resolving the principal-agent problem between shareholders and managers, where the key issue is how to monitor and align the interests of managers with those of the shareholders.[1] This definition points therefore to one of the central problems encountered mostly in publicly held in public limited companies  with dispersed ownership.[2]

The narrow and broad definitions of the scope of corporate governance can be visualized as pertaining to two extremes of a spectrum.[3] One end of the spectrum is taken by the shareholder primacy theory advocates, who purport that a corporation should be run for the benefit of shareholders.9 The other end is taken by those who believe that a corporation should be run for the interests of stakeholders, including the community at large.

Recognising the rights of shareholders  is a facet of company law that has evolved in recent years into a new branch of law, which together, strive to promote stability in companies by averting the possibilities of mismanagement.[4]

The centrality and importance of shareholder rights, regulation of executive compensation and protection of stakeholders in corporate governance discussions, are undeniable.[5] First, shareholder rights have been at the center of attention for a long time. Based on the classical agency concept, due to the dispersion of ownership, there is a separation between the owners, the principals from the agency perspective, and those who are in control of the firm, or the agents. As a result of this separation of ownership and control, which in turn has produced the risk of agents pursuing their own interests, as opposed to those of the shareholders, protecting the rights of the latter has gained increased importance.[6]

In Cameroon, the OHADA Uniform Act on Commercial Companies and Economic Interest Group (hereafter referred to as OHADA Uniform Act) is the source of the rights of shareholders

The OHADA Uniform Act on Commercial Companies and Economic Interest Groups 2014[7] describes a company thus:

A commercial company shall be formed by two or more persons who agree, by contract, to assign assets in cash or in kind to an activity for the purpose of sharing profits or benefiting from savings that may accrue therefrom. The members of the company shall bear the losses in accordance with the conditions laid down by this Uniform Act. A commercial company shall be formed in the common interest of the members.[8]

It follows from the above provision that a company is formed by persons who are entitled to savings and sharing of profits. These persons are shareholders because they contribute the assets needed for the company to operate. They are therefore entitled to certain rights such as distribution of profits. This is a well-recognized right in the Articles of Association. Article 13 of the OHADA Uniform Act makes it a requirement for the identity of persons enjoying special benefits and the nature of such benefits to be included in the articles of association.[9] Also, according to this article, provisions relating to the distribution of profits, the constitution of reserves and the distribution of the bonus after liquidation must be mentioned in the articles of association.[10]

In the OHADA Uniform Act, shareholders by virtue of their contributions are entitled to shares. Article 37 is important. It provides that each partner shall contribute to the capital of the company. It also provides that in return for their contribution, the shareholders shall receive shares issued by the company.[11] In return for a members contribution, the company issues shares.[12] Such shares shall represent the members’ rights and shall be referred to as shares in joint-stock companies, and stocks in the other companies.

Article 53 of the Uniform Act provides in details the rights and obligations attached to shares to wit: a right to a share of the company’s profits whenever they are distributed; a right to the company’s net assets when shared following the dissolution of the company or where the company’s share capital is reduced; where necessary, the obligation to share in the company’s losses under the conditions laid down for each form of company; the right to participate in and vote on the collective decisions of the members, except as otherwise provided by this Uniform Act for certain classes of shares.

1.2   STATEMENT OF THE PROBLEM

It is true that OHADA recognizes the rights of shareholders in a Public Limited Company which amongst others involves the right in the management of the company.[13] Nevertheless, it is not without problems.

One of the key characteristics of corporations is the separation of ownership and control. Although shareholders may “own” the corporation, they do not have the right to manage the business.[14]The authority to manage the business is vested in the Board of Directors. This is a problem to shareholders and is reflected in article 121 of the OHADA Uniform Act. It gives company executives’ unlimited powers in relation to the capacity of a company.  It provides that members of the management organs of the company have full powers to commit the company with respect to third parties without having to show proof of a special instrument granting such powers.  Limitation of their legal powers by the articles of association has no effect on third parties.[15] Claire Dickenson argues in a groundbreaking article that the reasons for this article might have been influenced by the desire to make the law simple and flexible.[16] It is the researcher’s view that such a system makes managers more powerful and might not be sustainable, especially in an era where shareholders are becoming more active in corporate affairs.

Also, the drafters of the OHADA Uniform Act assigned several tasks to the company auditors in order to improve transparency and good corporate governance in public limited companies within the OHADA region, but the heavy scandals surrounding large corporations in Cameroon like CAMAIRE CO. threatened the heavy reliance on company auditors in securing transparency and accountability in corporate affairs.[17]

• RESEARCH QUESTIONS
  • Main Research Question
  • How effective are the rights of shareholders in public limited companies in Cameroon

This research seeks to answer the following questions

• What are the right of shareholders to information in a public limited company in Cameroon?
• How effective are shareholders  rights of management in public limited companies in Cameroon?
• What economic rights do shareholders have in a public limited company?
• How can the litigation rights of shareholders in a public limited company be analysed?
• Make policy recommendations can be made to redress the problems identified?

1.4  OBJECTIVE OF THE STUDY

1.4.1   General Objective

The purpose of this research to examine the effectiveness of the rights of shareholders in a public limited companies in Cameroon

1.4.2   Specific Objective

Specifically, this research seeks to:

• Examine the right of shareholders to information in a public limited company in Cameroon;
• Discuss the effectiveness of shareholders  rights of management in public limited companies in Cameroon;
• Examine the economic rights do shareholders have in a public limited company;
• Analyse the litigation rights of shareholders in a public limited company be analysed?
• Make policy recommendations can be made to redress the problems identified