SEC mulls N10m penalty for corporate gifts at AGMs/EGMs

Businesses and individuals who have been making a fortune as contractors producing corporate gifts for distribution at annual general meetings (AGMs)/extraordinary general meetings (EGMs) of public companies may need to change their business strategy or go under.

The contracts will soon cease to flow as the Securities and Exchange Commission (SEC) is in the process of stopping public companies from spending a significant amount of their earnings on corporate gifts at their AGMs/EGMs which greatly impacts on their profitability.

As such, shareholders whose sole aim of attending these meetings is to cart away corporate gifts will henceforth be disappointed.

“Public companies shall not distribute gifts to shareholders, observers and any other persons at Annual General Meetings/Extra-ordinary General Meetings,” according to sub-rule 4 of the proposed amendment to Part N Rule 602 (Miscellaneous Rules) contained in an exposed sundry amendment to the rules and regulations of the Commission seen by BusinessDay.

The capital market apex regulator said 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”.

As such, it said in sub-rule 5 of the proposed amendment that “public companies shall not convene any meeting with select group(s) of shareholders prior to an Annual General Meeting/Extra-ordinary General Meeting”.

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Any company that violates the provisions of (4) and (5) above, BusinessDay learnt, shall be liable to a penalty of not less than N10 million.

“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,” the SEC said.

Meanwhile, as part of the Corporate Governance Scorecard implementation strategy, companies are expected to disclose a Minimum Corporate Governance Report on their websites, according to the Commission.

“The information is expected to be structured to contain reasonable Corporate Governance information on the public companies,” it added.

Iheanyi Nwachukwu

Iheanyi Nwachukwu, is a creative content writer with almost two decades journalism experience writing on banking, finance, capital markets, and tax. The multiple awards winning journalist is Assistant Editor, BusinessDay. Iheanyi holds BSc Degree in Economics from Imo State University; Master of Science (MSc) Degree in Management from University of Lagos. Iheanyi has attended several work-related trainings including (i) Advanced Writing and Reporting Skills (Pan African University, Lagos); (ii) News Agency Journalism (Indian Institute of Mass Communication {IIMC}, New Delhi, India); and (iii) Capital Markets Development and Regulations (International Law Institute {ILI} of Georgetown University, Washington DC, USA). Other trainings Iheanyi attended include: Economic/Political Risk Analysis (By Thomson Reuters Foundation); International Financial Journalism (IFJ) (By PMA Media Training, UK); Effective Business Writing Skills (By Phillips Consulting); Reporting on Corporate Governance (By International Finance Corporation (IFC) & Thomson Reuters Foundation UK); etc. In addition, he has participated in high-level economy & markets events in Dubai, South Africa, Morocco, and other African countries like Zambia, Ghana and Gambia.