Minority investors own a small percentage of a corporation.

A minority stake is a considerable amount of ownership that does not give the possessor control of the company.

Before bringing on a minority investor, business owners examine a variety of operational, financial, and legal concerns.

While this is crucial, the government and commercial institutions must also provide minority investors with their rights.

“Minority shareholders should be protected from abusive actions by, or in the interest of, controlling shareholders acting either directly or indirectly; and should have effective means of redress.” –  OECD Principle III.A.2

Nigeria increased minority investor protections by requiring financial transactions to be subject to external assessment and approval by shareholders, according to the World Bank Subnational Studies.

However, this reform was only implemented in Kano and Lagos State.

Securities Regulations

In some of the world’s rapidly expanding economies, securities regulators in most jurisdictions have powers to protect minority shareholders.

In certain circumstances, minority investor protections are the same as those granted to all investors.

The Securities and Exchange Commission (SEC), which is governed by the Federal Ministry of Finance, is the regulating body for the Nigerian capital market.

The Investments and Securities Act of 2007 (ISA), as well as the Securities and Exchange Commission’s (SEC) Rules and Regulations, govern the sale and offering of foreign securities to the Nigerian public (SEC Rules).

Nigeria, unlike other prosperous economies, is unable to strike a balance between regulating the financial sector and permitting financial market innovation. 

Governments and private organizations should have a solid compliance structure in place that protects minority investors, particularly in international markets, without impeding innovation and entrepreneurship.

This would regulate the operation and fairness of financial markets as well as the behavior of individuals who engage in financial transactions.

Company Laws

The country’s unfavorable business law is one of the issues that minority investors encounter. This is due to the fact that corporate personality is a characteristic that separates a company from its employees or stockholders.

Decision making in companies is frequently imbalanced because the majority of ideas are adopted. 

It is not uncommon to see majority owners operating a company in an illegal or oppressive manner. 

Acting with total disregard for Nigerian rules governing business operations, robbing minority investors of their rights.

Investors can sue such corporations, and injunctions are applicable in both individual and collective lawsuits.

An applicant in a derivative action can ask the court for permission to commence an action in the name or on behalf of a company, or to intervene in an action in which the company is a party, for the purpose of prosecuting, defending, or terminating the action on behalf of the company.

Although it is common for the majority to make the majority of a company’s decisions—majority vote, AFEEDi believes that it is the function of the government to provide sufficient safeguards against the corruption and exploitation of others.