PROTECTION OF THIRD PARTY RIGHTS AND MINORITY INTEREST UNDER NIGERIAN CORPORATE LAW

Abstract

This paper examined how third party rights and minority shareholders can be protected under Nigerian corporate law. The common law rule of Foss v. Harbottle which has been incorporated into our laws clearly made the company the proper plaintiff to seek redress in any breach of duty owed the company or an infringement of company’s right and ipso facto removes third parties and minority shareholders from maintaining actions on behalf of the company. It is therefore not for individual shareholders to sue and the courts will not generally entertain a suit brought by individual shareholders, for they will not interfere in the internal management of the company. There is also the problem associated with the Ultra vires doctrine and its harsh realities on third parties who may have transacted with unscrupulous directors outside the company’s objects. It is obvious that the strict application of these two rules is detrimental to the minority interest and third parties. Whilst exceptions have been provided in the law to ameliorate the problems occasioned by these principles, they seem not far reaching enough. Although this rule has some advantages which includes the prevention of multiplicity of suits and the fact that in many cases the irregularity complained of may be one that can be ratified in general meeting, it has imposed enormous hardship on members and third parties who may have dealings with the company, particularly where such dealings were carried out by unscrupulous directors who might be in control of company affairs.