Minority shareholders rights in the pharmaceutical sector

A multinational pharmaceutical company operating in Nigeria asked shareholders to vote on a proposal which would have resulted in their stake of the Nigerian branch of the company increasing to 75%, from 46%. This raised major concerns with regard to minority shareholder rights in the pharmaceutical sector, as the multinational concerned would have been allowed to vote its own shares on the deal. In most developed markets, regulation strictly prohibits related parties from voting their shares in a transaction such as this; however, the Nigerian Stock Exchange (NSE) has no rules which prohibit related parties from voting. In its home market, this European parent company, as the related party, would not be allowed to vote and the scheme would have needed 75% approval from other, non-related shareholders for the scheme to pass. This best practice ensures that minority shareholders’ interests are protected and they do not get steamrollered by the majority shareholder.

This engagement, led by Coronation Fund Managers, has been very successful as the multinational company involved pulled their offer to re-examine the situation. In addition, the engagement has encouraged the Nigerian Stock Exchange to review their rules regarding related party voting in such deals.