CORPORATE LAW PRACTICE: CORPORATE GOVERNANCE (DIRECTOR) PART 1

WORD OF ADVICE: Do not try to cram CAMA, Do not be intimidated by the dude that can quote CAMA, strive to understand CAMA. Nobody was born with CAMA in his head; they all read and understood it.

        WHO IS A DIRECTOR?

The first question I ask myself is who is a director under CAMA?

SECTION 244(1) says DIRECTORS are persons DULY APPOINTED by the COMPANY to manage the business of the company.

But note that SECTION 244(2) further provides that where the COMPANY describes a person dealing with it has a DIRECTOR whether executive or otherwise, there shall be a rebuttable presumption that he has been DULY APPOINTED.

            Furthermore, CAMA went ahead and to provide for penalty for holding out yourself as a director when not duly appointed;

1.      If it is only the PERSON that hold himself out as a director who has not being duly appointed, he shall be guilty of an offence, and on conviction shall be liable to IMPRISONMENT for 2 YEARS or to a fine of #100 for each day he so acts or to a fine of #1000 each day he holds himself out. SECTION 244(3)

2.      If it is the COMPANY that that holds him out as a director. It shall be liable to a fine of #1000 each day it holds him out. SECTION 244(4)

N.B: Both sections provides that ANY MEMBER may restrain him from so acting unless or until his DULY APPOINTED

Strolling inside CAMA to SECTION 250, it provides for liability of persons when not duly appointed;

1.      Where a person not duly appointed as a director acts as such on behalf of the company, his act shall not bind the company and he shall be personally liable for his action

2.      If it is the company that holds him out as director, the company shall be bound by his acts.

From the above you will see that the word DULY APPOINTED is very important in respect of a director. The next question will be what will amount to duly appointed?

Before we talk about the Appointment procedure, something vital must be discussed.

If you enter the room of SECTION 246(1) it provides that every company registered shall have at least 2 directors. For a company existing before CAMA, shall before the expiration of 6 months from the commencement of CAMA have at least 2 directors.

Assuming a company number of directors’ fall below 2, what will happen?

1.     

 When a company number of directors falls below 2, the company shall within 1 month of that falling appoint new director, after the expiration of 1 month shall not carry on business unless it appoint new directors. SECTION 246(2)

2.           

 However, when the company carries on business for more than 60 days and it directors are below 2. A director or member of a company who knows about it shall be liable for all liabilities and debts incurred by the company during that period when the company so carried on business. SECTION 246(3).

APPOINTMENT OF FIRST DIRECTORS (SECTION 247)

This shall be determined in WRITING by the SUBSCRIBERS of the MEMORANDUM OF ASSOCIATION or a Majority of them or the directors may be NAMED IN THE ARTICLES

PROCEDURE: The procedure after such appointment is that the consent of the director so appointed is obtained and FORM CAC 7 is completed and filed with CAC.

SUBSEQUENT DIRECTORS

The members at the ANNUAL GENERAL MEETING shall have power to re-elect or reject directors and appoint new ones. SECTION 248(1)

PROCEDURE: Before a person can be eligible to be appointed as subsequent director, he must, unless he is a retiring director, be either RECOMMENDED by the Board of Directors (or majority of them) ; or be NOMINATED by a member of the company in accordance with section 259(4);

1.      The person to be appointed is either recommended by the Board or VALIDLY nominated by a member in accordance with section 259(4)

2.      The person to be appointed consents to be elected or appointed as director

3.      Secretary sends out 21days notice of AGM   (check if it is ordinary or special business)

4.      At the annual general meeting, the resolution to appoint that person as director is proposed and passed

5.      The company secretary completes FORM CAC 7A and files with the CAC together with a copy of the ordinary resolution, duly signed, within 14days from the day the resolution was passed

6.      The register of directors and secretaries and the Particulars of Directors in Trade Catalogues are updated.

APPOINTMENT BY PERSONAL REPRESENTATIVES SECTION 248(2)

Where all directors and shareholders dies, then ANY of the PERSONAL REPRESENTATIVES shall apply to the COURT for an order to convene a meeting of all the PERSONAL REPRESENTATIVES of the shareholders entitled to attend and vote at a GENERAL MEETING to appoint new directors to manage the company.

However, if they fail to convene this meeting, the CREDITORS, if any shall be able to do so.

APPOINTMENT DUE TO CASUAL VACANCY

The BOARD OF DIRECTORS shall have power to appoint new directors to fill any casual vacancy arising out of death, resignation, retirement, removal. SECTION 249(1)

N.B: for retirement [read section 259(3)] and removal [section 262(4)] on vacancy arising from the duo.

However, SECTION 249(2), Further provides that where the casual vacancy is filled by the director, the person may be approved by the general meeting at the next Annual General Meeting. And if not approved, he shall cease to be a director.

N.B: If Approved, then Form CAC 7A and the resolution approving his appointment if filed at CAC within 14 days. And the register of directors and secretaries and the particulars of directors in trade catalogues are updated.

IMPORTANCE OF THIS APPOINTMENT: The power to fill casual vacancies is very important because subsequent directors can only be appointed at AGM, not EGM and AGM is only once every year. Thus, if a casual vacancy arises not long after the previous AGM, the directors can fill it pending the next AGM.

APPOINTMENT BY OUTSIDER

By virtue of SECTION 41(3) it provides that the ARTICLE may empower any person to appoint one or more directors and such power shall be enforceable by that person notwithstanding that he is not a member or officer of the company.

CASE: WOODLAND V LOGAN: The Court held that; A power conferred by the Articles on an outsider to appoint a director is apparently ENFORCEABLE

MODE OF VOTING ON APPOINTMENT OF DIRECTORS

N.B: A motion for the appointment of two or more persons as directors of a company by a single resolution must not be made at a general meeting of a company (other than Private Company) unless resolution that it will be made has first been agreed to by the meeting without any vote being given against it and a resolution moved in contravention of this provision shall be void whether or not it was objected to at the time. SECTION 261(1)(2)

INTERPRETATION: For a private company, two or more directors can be appointed by a single resolution. But, for a public company, each director must be appointed by a separate resolution. However, if the company wants to appoint two or more directors by a single resolution, it MUST first pass a unanimous resolution authorizing the use of a single resolution for that purpose.

POSER: MR MUSA DERIN IS 75 YEARS OLD AND HAS APPROACHED YOU TO ADVICE HIM ON HOW HE CAN BE A DIRECTOR OF A PUBLIC COMPANY?

RELEVANT SECTION: S.252 and S.256

By virtue of SECTION 252, any person who is appointed or to his knowledge proposed to be appointed Director of a public company and is 70 years or more must disclose this fact to the members at the GENERAL MEETING and failure to disclose the age attracts a fine of #500

Consequently, for his appointment a SPECIAL NOTICE shall be required of any resolution appointing or approving the appointment, and the notice given to the company and by the company to its members shall state his age. SECTION 256.

FURTHERMORE, ON DULY APPOINTED; certain people are disqualified from being a director;

1.      An Infant i.e Person below the age of 18 years

2.      A lunatic or person of Unsound mind

3.      A Company other than his representative

4.      A person disqualified under Section 253(Insolvent Person), 254(Fraudulent Person) 258 (Vacation of office)…..SECTION 257

a.      Share qualification if the articles so requires share qualification before a director can be appointed.

CLOSING REMARK: The acts of a director (manager or Secretary) shall be valid notwithstanding any defects that may afterwards be discovered in appointment or qualification. IWUCHUKWU v NWIZU. SECTION 260.                                                         
                                                              
                                                        TO BE CONTINUED!!!!!!!
READ HARD
PRAY HARD
REST HARD
EAT HARD..............ONLY THE LIVING CAN PASS THE BAR EXAM.