(I): OFFICERS OF COMPANY – (DIRECTORS AND
SECRETARY)
DIRECTORS
The meaning of directors is
defined under section 244(1) of the
Companies and Allied Matters Act, Cap C20, LFN 2004 as persons duly
appointed by the company to direct and manage the business of the company.
The management of a company is
the prerogative of a small group of persons called directors, such director
manage the affairs of the company.
However, if a person not duly
appointed as a director acts in the capacity of a director, he is guilty of an
offence and punishable by imprisonment of fine, or both, and the company can
restrain him from continuing to act – section
244(3) of CAMA. In such instance, his act will not bind the company and he
will be personally liable – section 250
of CAMA. But, where it is the company that instructed him, his acts shall
bind the company – section 250 of CAMA, and
he and the company may be restrained unless he is duly appointed – section 244(4) of CAMA.
In Bolton (Engineering) Co. Ltd v.
Graham & Sons (1957) 1 Q. B 159, Lord Denning stated that:
“A
company may in many ways be likened to a human body. It has a brain and nerve
centre which controls what it does. It also had hands which hold the tools and
act in accordance with directions from the centre. Some of the people in the
company are mere servants and agents who are nothing more than hands to do the
work and cannot be said to represent the mind or will. Others are directors and
managers who represent the directing mind and will of the company, and control
what it does…”
A director includes any person
occupying the position of a director by whatever name called. In Re
Forest of Dean Coal Mining Company (1878) 10 Ch. 450, Jessel M. R
stated thus:
“Directors
have sometimes been called trustees, or commercial trustees, and sometimes they
have been called managing partners. It does not matter what you call them so
long as you understand what their true position is, which is that they are
really commercial men managing a trading concern for the benefit of themselves
and all other shareholders in it.”
The courts have held that by
virtue of section 244, directors are persons appointed or elected according to
law, authorized to manage and direct the affairs of a corporation or company – Longe
v. First Bank of Nigeria Plc (2006) 3 NWLR (Pt. 967) 228 at 270; Baffa v. Odili
(2001) 15 NWLR (Pt. 737) 709 at 737; Olufosoye v. Fakorede (1993) 1 NWLR (Pt.
272) 947.
TYPES OF DIRECTORS
1.
Shadow
directors – This is defined under section
245(1) of CAMA as any person on whose instructions and directions the
directors are accustomed to act. What this implies is that a
shadow director is never appointed by anybody. His existence is by the
operation of the law and only for the purpose of making him liable in the
circumstances provided by CAMA. He is not entitled to the benefits, rights and
responsibilities of directors generally. In Secretary of State for Trade and
Industry v. Deverell (2000) 2 BCLC 133, Morritt L. J stated that the
purpose of defining directors to include shadow directors is to identify those,
other than professional advisers, with a real influence on corporate affairs.
2.
Executive
or Special directors – This is a person who has a contract of employment
with the company. He is an employee of the company whose status has been raised
to that of a director but who continues essentially as such employee, e.g. a
sales director. His appointment, tenure, power, rights, duties and discipline
are regulated by the Articles of Association as well as his contract of service
with the company. However, he may be elevated to full directorial status – Longe
v. First Bank of Nigeria Plc. (supra) at 261-262. Thus, he is both a
member of the company and a director, that is an employee and a member of staff
– Cyclists
Touring Club v. Hopkinson (1910) 1 Ch. 179.
3.
Alternate
directors – This is a person appointed by a director to act in his place
during his absence. This was emphasized in Baffa v. Odili (supra) at 747, where
the distinction between a ‘director’ and an ‘alternate director’ was stated that an alternate director is
appointed by a substantive director where it is provided in the Articles of
Association of the company, and the alternate director sits in for his
substantive director when the substantive director cannot attend the meeting.
4.
Managing
directors – This is a person who is appointed by the directors of the
company and can also be removed by the Board – section
64(b) of CAMA.
He ceases to hold office if for any reason he ceases to hold office as a
Director – Yalaju-Amaye v. Associated Registered Engineering Contractors
Ltd. [1978] 1 LRN 146; [1978] All NLR 124; (1978) 11 NSCC 220.
5.
Assignee
directors – This is a person who unlike an
alternate director is appointed to a permanent delegation of powers and duties.
6.
Interloper/Intermeddler
director – This is a person who is not duly
appointed but acts or holds himself out as director of the company – section 245(3) & (4); Dipcharima v. Alli (1974) 1 All NLR 420.
DUTIES OF DIRECTORS
Directors have
a general duty to manage the company to display utmost good faith in accordance
with the provisions of the law and the constitution of the company – section 279(1) of CAMA. Thus, directors
are liable to the company for loss caused by their illegal or ultra vires acts – Wallersteiner v. Moir (1974) 1
WLR 991.
The
relationship between a company and director is that of agent and principal.
Thus, directors as agents owe two major duties to the company viz: fiduciary duty; and duty of skill.
FIDUCIARY DUTY
Directors
occupy a fiduciary position in the exercise of their management powers. Section 279(2) of CAMA states that a
director shall owe fiduciary relationship with the company where he is acting
as agent of a particular shareholder; and where even though he is not, such a
shareholder or other person is dealing with the company’s securities. Thus, it
means that they also owe a fiduciary duty to shareholders also.
A director of a
company stands in a fiduciary relationship towards the company and shall
observe utmost good faith towards the company in any transaction with it or on
its behalf – Okeowo v. Milgore (1979) 11 SC 133, Per Eso JSC.
There are
however several aspects of fiduciary duties owed which are:
a)
Duty
to exercise power for the benefit of the company – He
must display utmost good faith in exercising such powers which must be intra vires – Hogg v. Cramphom Ltd. (1967) Ch.
254. It is not enough that the transaction is honest. If it is not in
the best of the company, it shall not be binding on the company – section 279(3) of CAMA.
b)
Duty
not to fetter freedom to exercise discretion – He
shall not restrict their right to exercise their duties and powers freely and
fully. Thus, it will be a breach of this duty for directors to contract with
one another or third parties as to how they shall vote at future board meetings
– section 279(6) of CAMA. In Clark
v. Workman (1920) 1 Ir. R. 107, it was held that the directors of a
company must act strictly as trustees in carrying through transfers of shares,
unfettered by any undertaking or promise to any intending purchaser.
c)
Duty
not to allow his personal interest to conflict with that of the company – He
must not place himself in a position where there is conflict of interest
between him and the company – Mavitex Ltd. v. Bufield (1988) BCLC 104;
unless the company consents. He must duly account to the company for any gifts
or commission received from outsiders who he has had dealings with. He shall
also be accountable to the company for any secret profits made by him – section 280 of CAMA; Boston Deep Sea Fishing Co. v.
Ansell (1888) 39 CH. D. 339.
DUTY OF CARE AND SKILL
Under the duty
of care and skill, section 282 of CAMA has
replaced the Common Law rule of duty of care and skill that enables a director
to be idle or to decide to attend all meetings or not as long as he can
delegate his duties.
Section 282(1) provides that
every director shall exercise the powers and discharge the duties of his office
honestly, in good faith and in the best interests of the company, and shall
exercise that degree of care, diligence and skill which a reasonable prudent
director would exercise in comparable circumstances. Section 282(3) went further to state that each director shall be individually
responsible for the actions of the board in which he participated, and the
absence from board’s deliberations, unless justified, shall not relieve a
director of such responsibility.
In
effect, the new law under CAMA is to the effect that the standard of care
required from a director is an objective one, that is, it is a fixed standard
depending on the skill and knowledge a reasonable, prudent director of his
class would exercise if faced with similar circumstances.
REMEDIES FOR BREACH OF DUTY
A
breach of any of the above stated duties by a director may lead to an order of
one or more of the following reliefs which is mainly available under the
principles of common law and equity –
1.
Injunction or
declaration; or
2.
Damages or
compensation (referred to in the provisions of CAMA as cost); or
3.
Restoration of the
company’s property where traceable; or
4.
Rescission of the
contract occasioning the breach; or
5.
Account for profit; or
6.
Summary dismissal.
ENFORCEMENT OF DUTIES OF DIRECTORS
The
responsibility of enforcing the duties of directors is in the hands of the
company because the directors are the alter
ego of the company saddled with the responsibility of management of the
company.
The usual way
to enforce such duties is for the directors to be removed from office under
section 262(1) of CAMA. It also provides for the following remedies –
1.
Petition for winding
up of the company on the company on the ground that it is just and equitable to
do so – section 408(e) of CAMA.
2.
Relief on the ground
that the affairs of the company are being conducted in an illegal and
oppressive manner – section 311 of CAMA.
3.
Misconduct of
proceedings against a director. Where there has been misappropriation of funds
by the directors, an application may be made to court to compel him to repay.
APPOINTMENT OF DIRECTORS
Every company
registered on or after the commencement of CAMA shall have at least two
directors and every company registered before that date shall before the
expiration date of six months from the commencement of CAMA have at least two
directors – section 246(1) of CAMA.
Directors may
be appointed in the following ways –
1.
By subscribing to the
memorandum of association.
2.
By naming the first
directors in the article of association.
3.
By an ordinary
resolution of the members at a general meeting – section 247 of CAMA.
4.
By members at annual
general meeting re-electing in case of death of a director – section 248 of CAMA.
5.
By the board of
directors, in the event of a casual vacancy arising out of death, resignation,
retirement or removal – section 249(1)
of CAMA.
DISQUALIFICATION OF DIRECTORS
1.
Persons disqualified
under sections 253, 254 and 258 of CAMA;
2.
Infants, that is,
those under the age of 18 years;
3.
Persons of unsound
mind or lunatic; and
4.
A corporation other
than its representative appointed to the board for a given term.
ELECTION OF DIRECTORS OR QUORUM OF DIRECTORS
It is the
articles of association of the company that fixes a quorum generally. Unless
the articles provide to the contrary, the quorum of directors necessary for the
transaction of the company is 2 (two) in cases where there are not more than 6
(six) directors. But where there are more than 6 directors, the quorum shall be
one-third of directors, and where the number of directors is not a multiple of
3 (three), then the quorum shall be one-third of the nearest number.
In all the
directors’ meetings, each director shall be entitled to one vote. Any question
arising at any meeting shall be decided by a majority of votes, and the
chairman shall have a second casting of votes in case there is a tie. However,
if the stipulated quorum is not met, the meeting held will be irregular and the
proceedings of the board will be invalid – sections
263 and 264 of CAMA.
Where the board
is unable to act due to lack of quorum, the general meeting may act in place of
a board meeting – section 265 of CAMA.
RETIREMENT OF DIRECTORS
This is not
expressly provided for in CAMA but it can be implied that a director who has
attained the age of 70 (seventy) will retire, unless the appointment is made or
approved by the general meeting after special notice have been given to the
company and its members – section 256 of
CAMA.
REMOVAL OF DIRECTORS
The procedure
for removal of directors can well be explained below which is provided under section 262 of CAMA. –
1.
Check to find out if direct and
simpler power of removal other than Section 262 is provided by the Articles or
contract and apply it if available.
2.
The person(s) wishing to remove the
director must issue(s) notice of the resolution to the company at least 28 days
before the date of the meeting – section
236 of CAMA.
3.
Upon receipt of the notice, the
Secretary to the company will:
(a) send
a copy of it to the director concerned;
(b) issue
notice of the meeting at least 21 days before the date of the meeting. The notice will be accompanied by any
representations made by the director and state the fact of the representations
having been made.
(c) At
the meeting:
i.
give audience to the director and
read to the members his representations if they were received too late or were
not sent to the members owing to the company’s default.
ii.
Pass ordinary resolution removing the
director.
(d) File
form of particulars of directors and of any changes therein, that is, Form CAC
7 to the CAC to reflect the removal within 14 days of remove.
(e)
Enter the fact of removal in the Register of Directors and where
necessary also amend the Register of Directors’ Shareholding – Yalaju-Amaye v. Associated Registered Engineering Contractors
Ltd. [1978] 1 LRN 146; [1978] All NLR 124; (1978) 11 NSCC 220.
REMEDIES FOR WRONGFUL
REMOVAL OF A DIRECTOR
Where a
director feels he has been removed wrongly, he may sue for –
1.
Declaration for
wrongful removal.
2.
An injunction
restricting the company from the continued removal and barring him from
entering the premises.
3.
Damages for breach of
contract.
4.
Compensation – section 262(6) of CAMA.
SECRETARY
By the joint
provisions of sections 293(1) and 294 of
CAMA, every company shall have a secretary and the same person cannot act
as both secretary and director.
The secretary
is a high-ranking officer of the company and usually part of the management.
However, anything required or authorized to be done by or of the secretary may,
if the office is vacant, be done by a deputy or assistant secretary, and if
there is no deputy or assistant secretary, be done by any officer authorised by
the directors of the company – section
293(2) of CAMA.
APPOINTMENT OF COMPANY SECRETARY
Under section 296 of CAMA, a secretary shall
be appointed by the directors. And the articles may provide for his term of
office and the conditions of his appointment subject to the Act.
QUALIFICATION OF COMPANY SECRETARY
Section 295 of CAMA deals with the
qualification of a company secretary.
When it is a
private company, the secretary of the company shall be
a person who appears to the company to have the requisite knowledge and
experience to discharge the functions of a secretary of a company.
When
it is a public company, he shall be –
a.
A member of the Institute of
Chartered Secretaries and Administrators; or
b.
A Legal Practitioner within the
meaning of the Legal Practitioners Act, 1975; or
c.
A Member of the Institute of
Chartered Accountants of Nigeria (ICAN); or
d.
Any person who has held the office of
a Secretary of a public company for at least 3 years of the 5 years immediately
preceding his appointment; or
e.
A body corporate or firm consisting
of qualified persons under paragraphs (a), (b), (c) or (d) above.
DUTIES OF
COMPANY SECRETARY
Section 298(1) of CAMA provides that the duties of a company secretary shall include the
following:
1.
Attending the meetings of the Board
of Directors of the company, its general meeting, whether AGM, statutory general
meeting or extra-ordinary meeting. He is
also charged with rendering all the necessary secretarial services in respect
of the meeting and advising on compliance by the meeting with the applicable
rules and regulations.
2.
The Board of Directors have Committees. When they are meeting, the Company Secretary
is the one statutorily empowered to service these meetings. The Company Secretary is the compliance
officer, the liasing officer between the company and the CAC.
3.
It is the Company Secretary’s duty to
keep all statutory books, registers of members, register of debenture holders et
cetera. It is his duty to maintain
the registers to ensure that they are properly kept.
4.
Carrying out such administrative and
other secretarial duties as directed by the directors of the company.
By the implied provision of section
66 of CAMA, the secretary may also be assigned other responsibilities as an
officer of the company either by the general meeting, the directors or the managing
directors. But under section 298(2) of
CAMA, the secretary shall not without the authority of the board exercise
any powers vested in the directors.
DUAL STATUS OF COMPANY
SECRETARY
In Barnett Hoares and Company v. South London
Tramways Company (1887) 18 QBD 818 at 817, the position of the status
of a Company Secretary was described thus:
“A
Secretary is a mere servant. His position is that he is to do what he is told
and no one can assume that he has any authority to represent anything at all…”
However,
in Panorama Development (Guildford)
Ltd. v. Fidelis Furnishing Fabrics Ltd. (1971) 2 QB 711, Lord Denning
stated thus:
“Times have changed. A Company Secretary is a much more important person
nowadays than he was in 1887. He is an
officer of the company with extensive duties and responsibilities…. He is no longer a mere clerk. He regularly
makes representations on behalf of the company and enters into contracts on its
behalf which come within the day to day running of the company. He is certainly
entitled to sign contracts connected with the administrative side and so forth…”
In Nigeria, the courts have generally followed the same approach. Thus,
in Okeowo
v. Migliore (1979) 11 SC 138; (1979) NSCC 210, Idigbe JSC observed that
in Nigerian law, a company secretary is
“a principal officer of the
company.”
Similarly, in Wimpey Ltd. v. Balogun (1987) 2 NWLR (Pt.
28) 232, where the question was whether service of a process on a clerk
secretary employee instead of the company secretary was valid, the Court of
Appeal held that the service was bad and that “a company secretary is indeed a high ranking officer in the company
set up and is indeed part of the management of the company”. The company
secretary has also been described as the “administrative officer of the
company” – Migliore v. Metal Construction (WA) Ltd. (1978) NCLR 274. And
as an officer of the company with important duties and responsibilities – Adebesin
v. May and Baker Nigeria Ltd. (1973) FRCR 232.
Thus, a company secretary is both a member of the company, and a high
ranking officer of the company.
REMOVAL OF COMPANY SECRETARY
Section 296(1) of CAMA provides for the removal of a secretary.
However,
the Board of Directors can no longer arbitrarily remove a Company Secretary
from office unless as provided under section
296(2) of CAMA.
THE PROCEDURE FOR THE REMOVAL OF COMPANY SECRETARIES
The
procedure for the removal of a company secretary is as follows:
1.
The Board of Directors must serve a
Notice on the company secretary stating:
a. that it
is intended to remove him from office;
b. the
ground for the proposed removal;
c. that he
may resign from office within 7 (seven) days; or
d. that he
may make a defence in writing which must be submitted within 7 days.
2.
If after the notice, the secretary neither
resigned from office nor made any defence, the Board of Directors may remove
him from office and report to the General Meeting at the next meeting.
3.
Where the company secretary makes a
defence, written or oral, which in the opinion of the Board of Directors is
unsatisfactory:
a.
If the ground on which the secretary is
to be removed from office is fraud or serious misconduct, the Board of
Directors may remove him from office and report the same to the company’s general
meeting.
b.
If the ground on which the company secretary
is to be removed is other than fraud or serious misconduct, the Board of
Directors shall not remove him but may suspend him from office pending the next
General Meeting of the company when the suspension will be reported and the
company will take a decision.
If
the next general meeting ratifies the suspension of the company secretary from
office, he shall be removed from office and the effective date of removal shall
be the date the Board of Directors suspended him from office.
It should be noted that the procedure for the removal of Company
Secretaries must be strictly complied with – Eronini v. Habo and Ors. (1957) 1 NSCC 17.
(SAMPLE)
RESOLUTION FOR THE REMOVAL OF
A DIRECTOR
SOULBEEZ & GRAM LIMITED
No. 3 Bwari Crescent, Bwari, Abuja
The Directors
Soulbeez & Gram Ltd
No. 3 Bwari Crescent,
Bwari, Abuja.
In accordance with sections 262 and 263 of Companies and Allied Matters
Act, Cap C20, LFN 2004, I hereby give special notice of my intention to
move the following ordinary resolution at a general meeting of the company, to
be held not earlier than 28 days from the date of this notice.
ORDINARY RESOLUTION
That
……………………………………….. (name of director) be and is hereby removed from office as a
director of the company.
Dated this …………….. day of
………………….
Yours faithfully,
___________________
(sign)
____________________
(name)
RESOLUTION FOR THE APPOINTMENT OF A DIRECTOR
SOULBEEZ & GRAM LIMITED
No. 3 Bwari Crescent, Bwari, Abuja
The Directors
Soulbeez & Gram Ltd
No. 3 Bwari Crescent,
Bwari, Abuja.
I hereby give notice pursuant to
sections 246, 247, 248 and 249 of the Companies and Allied Matters Act,
Cap C20, LFN 2004, I hereby give special notice of my intention to propose the
following ordinary resolution at a general meeting of the company, to be held
not earlier than 28 days from the date of this notice.
ORDINARY RESOLUTION
That ……………………………………….. (name of
proposed director) be and is hereby appointed as director of the company.
Dated this …………….. day of
………………….
Yours faithfully,
___________________
(sign)
____________________
(name)
RESOLUTION FOR THE REMOVAL OF
A SECRETARY
SOULBEEZ & GRAM LIMITED
No. 3 Bwari Crescent, Bwari, Abuja
The Directors
Soulbeez & Gram Ltd
No. 3 Bwari Crescent,
Bwari, Abuja.
In accordance with section 296 of Companies and Allied Matters Act,
Cap C20, LFN 2004, I hereby give special notice of my intention to move the
following ordinary resolution at a general meeting of the company, to be held
not earlier than 28 days from the date of this notice.
ORDINARY RESOLUTION
That
……………………………………….. (name of secretary) be and is hereby removed from office as
secretary of the company.
Dated this …………….. day of
………………….
Yours faithfully,
___________________
(sign)
____________________
(name)
RESOLUTION FOR THE APPOINTMENT
OF A SECRETARY
SOULBEEZ & GRAM LIMITED
No. 3 Bwari Crescent, Bwari, Abuja
The Directors
Soulbeez & Gram Ltd
No. 3 Bwari Crescent,
Bwari, Abuja.
In accordance with section 296 of Companies and Allied Matters Act,
Cap C20, LFN 2004, I hereby give special notice of my intention to move the
following ordinary resolution at a general meeting of the company, to be held
not earlier than 28 days from the date of this notice.
ORDINARY RESOLUTION
That
……………………………………….. (name of proposed secretary) be and is hereby appointed as
secretary of the company.
Dated this …………….. day of
………………….
Yours faithfully,
___________________
(sign)
____________________
(name)
