A Comparative Analysis of Shareholders’ Derivative Action under the United Kingdom and Nigerian Companies Acts

Abstract

The rights of minority shareholders have been a recurring and dominant theme in corporate law. This is because such rights do not only allow minority shareholders to protect their individual and corporate interests, but also serve as a veritable instrument through which they enforce directors’ fiduciary duties. This article examines shareholder derivative litigation under the United Kingdom (UK) and Nigerian laws. It argues that although derivative suits in both countries have common law origin, comparatively the UK laws have more flexible, liberalized and expansive rules that enhance and protect the rights and interests of the company and minority shareholders than the Nigerian laws. It further argues that the UK laws confer wider powers and standards on courts to regulate the procedure for derivative suits than the Nigerian legal regime. It recommends that the Nigerian law should be reformed along the lines of the UK regime, albeit with retention of various extant provisions that enhance the rights of minority shareholders. The article proceeds in four major sections. Section 1 examines the distinctive features and meaning of derivative action. Section 2 discusses the advantages and disadvantages of derivative suits. Section 3 makes a comparative analysis of derivative suits under the UK and Nigerian laws using the major legal principles and procedures in both jurisdictions. Section 4 concludes the article.