ABSTRACT

This study conducts a comprehensive appraisal of the rights conferred upon shareholders under the Organization for the Harmonization of Business Law in Africa (OHADA) Uniform Act. OHADA, established to harmonize commercial laws across member states in Africa, holds significant implications for corporate governance and shareholder rights. The research critically examines the provisions within the OHADA Uniform Act that delineate the rights, protections, and responsibilities of shareholders in the context of corporate entities. Through a legal analysis and examination of relevant case law, the study seeks to illuminate the intricacies of shareholder rights under OHADA and assess the effectiveness of the legal framework in safeguarding shareholders’ interests.

Keywords: OHADA, Uniform Act, Shareholder Rights, Corporate Governance, Commercial Laws, Corporate Entities, Legal Framework, Harmonization, African Business Law, Corporate Rights.

1.6 SCOPE OF STUDY

1.6.1   Thematic Scope

In terms of substance, this work is based on the rights of shareholders in public limited companies. It focuses on shareholders because they are the beneficiaries of directors’ duties towards the company. In other words, they are the owners of  the company.  

1.6.2   Geographical Scope

Geographically, this research is confined to the OHADA Zone comprising of 16 member states namely: Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Comoros, Congo, Côte d’Ivoire, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Mali, Niger, Senegal and Togo. Although it is confined to the OHADA Zone, inspiration is drawn from other jurisdictions to help strengthen conclusions arrived at.

1.6.3   Spatial scope

With regard to time frame, the work covers the period 1998-2022. This is because the OHADA Uniform Act on Commercial Companies was adopted in 1998.

1.8 THEORETICAL FRAMEWORK

   This study is grounded on certain theories that provides the basis for good governance in companies in general and Public Corporations in particular under OHADA.

1.8.1   The Principal-Agency Theory

The principal-agency theory contends that whenever a person is appointed (the agent) by another (the principal), to act on the principal’s behalf, there is more often than not, a detectable or covert measure of acting on self-interest on the part of the agent, rather than in the interest of the principal.[24] The protagonists of this theory further posit that the principal needs to consequently design ways and means through which to counteract, minimize or even eliminate the tendency of self-dealing on the part of the agent.

Kiser a proponent of this theory quoted Adam Smith (1776) thus:

The directors of such companies, however being the managers rather of the other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own …. Negligence and profusion, therefore, must always prevail more or less, in the management of such a company. [25]

The theory is used in this work to justify shareholder’s control over their companies. This is so because of the agency problem that emanates from the agency theory. Managers/directors pursue their personal interest rather that the interest of the company. So, controlling management by the shareholders is a mechanism to ensure effective corporate governance and the to solve the agency cost problem.

1.8.2   The Stewardship Theory

This theory is alternative to the agency theory in term of managerial motivation. It argues that shareholders’ interests are maximised by stockholder incumbency of the roles of the board chair and CEO.[26]The theory focuses on the proportion of insiders on board of Directors  to analyse link with firm performance. According to Dalton and Kesner,[27] about 8 percent USA firms have CEOs who are board chair too. This duality proportion is very much in the USA compared to other countries like Japan and highly criticised. The executive members are far from being opportunistic shirker. Their aim to do work effectively and efficiently, and to be great steward of the assets they are controlling within corporation. This means they are loyal and put company’s interest above their interest.

The theory maintains that there is no hidden dispute or trouble of top management’s motivation. Stewardship theory is to the effect that the managers, left on their own, will indeed act as responsible stewards of the assets they control.[28] In theory, the model of man (agent) is grounded on a steward. Their behaviour is pro-organizational and collectivistic. The theory emphasizes that the board and management are one, collective stewardship team.[29]

The stewardship theory is relevant in this research in that the managers and directors of public corporations owe a fiduciary duty to the corporation. They have to act in the best interest of the corporation in putting her interest before theirs. Exercising shareholder’s rights is therefore the best approach to ensure transparency and hold managers responsible.

1.8.3   Shareholder Primacy Principle

Shareholder-primacy principle is provoked from the understanding of the main interest of companies which is based primarily on the economic literature, rather than legal literature.[30] The interest of the company is firm to the maximisation of  share value, despite the evolving forms of companies over years to reach its current form.[31] As stated explicitly in the Hampel report that the duties of corporate directors are owed to the company, that means generally to the shareholders as a whole, both the present ones and the future. Accordingly, the empirical question remains as to how the corporate interest is aligned with shareholder‟ interest to give the latter such primacy.[32]

This principle is used in this study to lay the foundation of the economic rights of shareholders. That is, shareholders are entitled to be issued shares and to receive dividends because the objective of a corporation is to make profit and the beneficiaries of profits made are shareholders.

1.9 JUSTIFICATION FOR THE STUDY

Companies in the OHADA Zone are characterized by poor corporate governance policies evident in the powers of company executives. The situation in Cameroon amd the OHADA Zone are no exceptions given the scandals recorded by some public limited companies like FEICOM and CAMAIR CO. It is against this background that the researcher examines the rights of shareholders in order to ascertain if they are active or passive in a Public Limited Company.

The justification for limiting the research to the OHADA Zone stems from the old adage that “charity begins at home.” It is therefore incumbent upon the researcher being a citizen of one of the member states of the OHADA Treaty to evaluate the law limiting the powers of company executives in public limited companies under the OHADA Uniform Act on Commercial Companies and Economic Interest Groups.

This research is also embarked on because it seeks to make policy recommendations which should contribute in solving the problems raised.

1.10 SIGNIFICANCE OF THE STUDY

The significance of this study is to improve on the functioning of company executives in the management and running affairs of the public limited companies.

The outcome of this research will be beneficial to states parties to the OHADA Treaty, owners of companies, legal scholars and law students. It will be beneficial to state parties to the OHADA treaty in that, it will give them a better understanding of the nature of the rights of shareholders in a public limited company.

The problems identified in this work will raise awareness and educate shareholders of public limited companies on their rights, their duties and benefits and how to control management so as to ensure accountability.

More so, this work will be available to legal scholars and thus could be used to develop further research on the topic. In this light, law students particularly those specialized in business law will grasp an understanding of the position of  OHADA  vis-à-vis the powers of company executives and the rights of shareholders inpublic limited companies under OHADA.

1.11   DEFINITION OF KEY TERMS

1. Shareholder

A share is the interest of a shareholder in the company measured by a sum of money, for the purpose of liability in the first place, and of interest in the second, but also consisting of a series of mutual covenants entered into by all the shareholders inter se in accordance with the articles of association of the company.[33] A holder or bearer of a share is a shareholder. As per Sealy and Worthington, a share is a fraction of the capital, denoting the holder’s proportionate financial stake in the company and defining his or her liability to contribute to equity funding. Each share is required to have a sum of money assigned to it as its nominal or face value.[34]

In the context of this work, a shareholder refers to a person having a beneficial interest in a company.

1. Company

A company is an entity formed by two or more persons who agree by deed to assign assets in cash or in kind to carry out an activity for the purpose of sharing profits and benefiting from savings thereof.[35]

A company can also be defined as a business organization that makes money by producing or selling goods and services. It is a legal entity representing an association of people, whether legal, natural or a mixture of both, with a specific objective .

In this work, a company refers to an entity that is aimed at profit making formed by persons who contribute assets and entitled to profits from their contributions.

1. Rights

A right is a moral or legal entitlement to have or do something. A Right is said to be an entitlement or justified claim to a certain kind of positive and (or) negative treatment from others, to assistance from others or non-interference from others.^[36] Rights are legal, social or ethical principles of freedom or entitlement; that is, rights are the fundamental normative rules about what is allowed of people or owed to people according to some Legal System, Social Convention or Ethical Theory.