REVISITING THE STATUTORY SCHEME FOR DERIVATIVE ACTIONS UNDER THE NIGERIAN COMPANY LAW

Abstract

Derivative action permits a minority shareholder, to institute proceedings on behalf of the Company in an attempt to redress a wrong perpetrated by the majority shareholders on the Company. Derivative action is therefore a departure from the Foss v Harbottle rule. As such, individual shareholders, by virtue of being members of the company, must be given a right, not only to participate in the proceedings of the company, but also to voice their concerns regarding the management of the company. This paper therefore examines derivative action in Nigeria under the Companies and Allied Matters Act.1 It highlights the procedures laid down by CAMA for bringing derivative action in Nigeria and recommends that the requirement of notice on the directors should be excused in cases where the majority of the directors are the alleged wrongdoers since it is unreasonable to expect that a man will vote to bring a suit against himself. In such a case, a demand notice is unnecessary.