REGULATION OF THE MARKET FOR CORPORATE CONTROL IN NIGERIA

Abstract

The multiplicity of both economic and social effects of theproblems associated with the shareholder model ofcorporate governance led to the adoption of internal andexternal control mechanisms of corporate control. Theassumption has been that an effective check on the activitiesof corporate managers could result in improved efficiencyand effectiveness of management and, ultimately, to themaximization of profits for the shareholders. Consequently,internal mechanisms were adopted, tried but overtime foundincapable of keeping the management in track with theoverall expectations of the shareholders. The inadequacy ofinternal control mechanisms necessitated the exploration ofother management control options external to thecorporation, giving rise to stock markets and the marketfor corporate control (MCC). An effective MCC, findingswould show, has the capacity to sanction bad managementwith a takeover threat. A survey on the Nigerian companylaw however showed that there are certain factors thatweaken the effectiveness MCC. For instance, there aredefinitional issues surrounding the regulation of mergersand takeovers, the two most frequently used mechanismsfor the acquisition of control rights. Also, the market forcontrol rights is usually subjected to a somewhat hermeticanti-competition check during merger reviews. Thenoticeable loophole in the provisions allocating acceptancedecision to shareholders during a hostile takeover is anotherfactor affecting the active working of Nigeria?s MCC. Ineffect, there is substantial management interferenceduring a takeover bid, a situation in the Nigerian law whichrenders the discipline that usually comes with a takeoverthreat of little or no effect. The study thus, among other things, argued that there is need to incorporate a “nofrustration” rule in the Investment and Securities Act and itsRegulations during an imminent takeover. The aim of thispaper is therefore to evaluate the regulation of the Marketfor Corporate Control in Nigeria. The specific objectives areto ascertain the nature of the market for corporate control;to identify the legal framework regulating the Market forCorporate Control in Nigeria; to ascertain theeffectiveness the extant framework is in the regulation ofMarket for Corporate Control in Nigeria and to exploreoptions for improving the effectiveness of the existing legalframework for the overall development of Nigeria?s MCC.In achieving the objectives set out in the study, theauthors adopted the doctrinal methodology with analyticalapproach, using primary and secondary sources of data, andthereafter made recommendations for relevant law andadministrative reforms that echo international expectations.