March 05, 2007/BusinessDay
A leading stock broking firm and a group of share-holders numbering about 341 have taken Cadbury Nigerian plc to court over what they described as flagrant negligence and disregard to duty by the board and management of the company.
This development will turn out a landmark case that will keep board members and management of public companies on their toes in the institution and observance of corporate governance principles, as well as set precedence in the history of the Nigerian capital market.
In the suit filed February 28, 2007 in a federal high court in Lagos, the plaintiffs are alleging that the defendants made up of Cadbury and 16 of it officers, which includes Uduimo Justus Itsueli, chairman, Bunmi Oni, the former managing director, Ayodele Akadiri, the erstwhile director of finance, and the auditing firm of Akintola Williams Deloitte, and Pricewaterhousecoopers, failed or breached their duties and for which the plaintiffs suffered huge loss as a result thereof.
Specifically, they accuse the defendants of presenting incorrect, deceitful, and deliberate overstatement of financial position in the companyÃƒÆ’Ã†â€™Ãƒâ€ Ã¢â‚¬â„¢ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¾ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢s annual reports and accounts for the financial year ended December 31, 2005. They aver that the defendants were aware that the said annual reports and accounts was a deliberate overstatement of the companyÃƒÆ’Ã†â€™Ãƒâ€ Ã¢â‚¬â„¢ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¾ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢s financial position over a number of years to the tune of between N13 and N15 billion.
In the plaintiffsÃƒÆ’Ã†â€™Ãƒâ€ Ã¢â‚¬â„¢ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¾ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢ particulars of negligence, they allege that the defendants \"failed to act bona fide in the interest of the company/shareholders; they did not act for proper purposes; they did not use every corporate opportunity, knowledge and information for the benefit of the company; they allowed a situation in which their personal and other interests conflict with their duty as directors; that they did not perform the duty owed to the plaintiffs by the defendants; that this duty has been breached; and that the plaintiffs have suffered a huge loss as a result thereof.
The investors claim they have lost over 94.0 percent in capital gains as the price of the stock fell from N54.15 per share as at December 12, 2006 to N27.90 per share as at January 9, 2007, following the disclosure of the issue of financial misfeasance in the company.
Based on the foregoing, the plaintiffs are making a 10-point demand, seeking against the defendants jointly and severally for, among other things, a \"declaration that the Annual Reports and Accounts of the Company for the year ending December 31, 2005 as prepared by Cadbury is incorrect, deceitful, and deliberate overstatement of the financial position intended to deceive the investors as to the true position of their investments\".
They also plead that the court set aside the said annual report and accounts as it does not reflect the true financial position of the company; that the defendants release the correct annual report and accounts of the company; that the court direct the defendants to publish the report of Messrs PriceWaterHouseCoopers, the independent auditors that investigated the alleged overstatement of the financial position of the company. They further demands that the defendants return all the monies paid as taxes on the basis of the overstated financial position of the company as it was based on erroneous reports.
They are also claiming special damages in the sum of N5.0 million being the solicitorsÃƒÆ’Ã†â€™Ãƒâ€ Ã¢â‚¬â„¢ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¾ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢ fees/charges paid by the plaintiffs.
BusinessDay last week exclusively reported of the move by some shareholders to sue Cadbury for publishing falsified figures in their 2005 annual reports and accounts. The move had been put on hold following the intervention of some notable individuals who promised to mediate on the matter. But the eventual filing of the case indicates an apparent failure of the mediation efforts.
Some capital market lawyers who spoke to Business Day say they are looking forward to seeing the outcome of the matter in the courts, being that this is the first time such a case is coming up in the country.
Bernard Okwor, an Enugu based lawyer said: \"This is an interesting development and those us who hold some stakes in the capital market would love to see the outcome. It is a practical demonstration of the level of expectation that shareholders and investors have on the corporate leadership. It is not just a verbal expression of corporate governance but we have to see it work.\"
A capital market lawyer who on prefers of anonymity said, \"this matter will set the precedence on which future and similar matters would be settled. I tell you that this is a major fallout of the rapid growth of the capital market which we have been witnessing and it is good for the market, it is good for the investing public. In the English law, the matter is covered under the misfeasance law; and we do not have that yet in the country. Lets hope it will alert the authorities on such legislation.\"
According to a shareholder, \"our market is growing and the shareholders are becoming increasingly aware of their rights. And from now going forward, we will continue to demand for these rights as it affects the capital market.\"