Democratic Corporate Governance and the Rights of Minority Shareholders: Perspectives from Nigeria and South Africa

Abstract

Companies are formed for either profit or non-profit objectives. The mode of decision-making for the good governance of the company and the related stakeholders’ rights are largely prescribed by the company’s constitution and applicable statutory provisions. However, due to human behavioural complexities, consensus in company decision-making is sometimes elusive. Where there is disagreement, the general rule is that the will of the majority of the shareholders represents the will of the
company. Accordingly, the court will not interfere in the internal management of the company to set aside an adverse decision or an irregularity done by the majority, a position laid down by the landmark Rule in Foss v Harbottle. By this common law rule, a shareholder cannot seek redress on the company’s behalf for any wrong done to the company, if the majority has not decided to do so. Despite the exceptions, this rule throws up legal issues bordering on democratic corporate governance, natural justice and the efficacy of personal rights of minority shareholders. This paper examines these issues in the light of obvious rights-restrictive implications of the rule, particularly from the perspective of the Nigerian and South African jurisdictions. The paper examines the approach of the courts in deciding issues bordering on corporate governance and the protection of minority interests in companies. Therefore, there is greater emphasis on case law authorities on the subject. The paper posits that judicial interpretation of the law on the issues requires a more pragmatic and liberal approach in order to ensure that good justice is done in cases where the minority alleges oppression by the majority in corporate governance matters.