REGULATION OF THE MARKET FOR CORPORATE CONTROL IN NIGERIA

Abstract

The multiplicity of both economic and social effects of the problems associated with the shareholder model of corporate governance led to the adoption of internal and external control mechanisms of corporate control. The assumption has been that an effective check on the activities of corporate managers could result in improved efficiency and effectiveness of management and, ultimately, to the maximization of profits for the shareholders. Consequently, internal mechanisms were adopted, tried but overtime found incapable of keeping the management in track with the overall expectations of the shareholders. The inadequacy of internal control mechanisms necessitated the exploration of other management control options external to the corporation, giving rise to stock markets and the market for corporate control (MCC). An effective MCC, findings would show, has the capacity to sanction bad management with a takeover threat. A survey on the Nigerian company law however showed that there are certain factors that weaken the effectiveness MCC. For instance, there are definitional issues surrounding the regulation of mergers and takeovers, the two most frequently used mechanisms for the acquisition of control rights. Also, the market for control rights is usually subjected to a somewhat hermetic anti-competition check during merger reviews. The noticeable loophole in the provisions allocating acceptance decision to shareholders during a hostile takeover is another factor affecting the active working of Nigeria‟s MCC. In effect, there is substantial management interference during a takeover bid, a situation in the Nigerian law which renders the discipline that usually comes with a takeover threat of little or no effect. The study thus, among other things, argued that there is need to incorporate a “no frustration” rule in the Investment and Securities Act and its Regulations during an imminent takeover. The aim of this paper is therefore to evaluate the regulation of the Market for Corporate Control in Nigeria. The specific objectives are to ascertain the nature of the market for corporate control; to identify the legal framework regulating the Market for Corporate Control in Nigeria; to ascertain the effectiveness the extant framework is in the regulation of Market for Corporate Control in Nigeria and to explore options for improving the effectiveness of the existing legal framework for the overall development of Nigeria‟s MCC. In achieving the objectives set out in the study, the authors adopted the doctrinal methodology with analytical approach, using primary and secondary sources of data, and thereafter made recommendations for relevant law and administrative reforms that echo international expectations.