CORPORATE LAW PRACTICE WEEK 11 CORPORATE GOVERNANCE (2): OFFICERS OF THE COMPANY-(DIRECTORS AND SECRETARY).
WEEK 11
CORPORATE GOVERNANCE (2): OFFICERS OF THE COMPANY-(DIRECTORS AND SECRETARY).
:: WHO ARE DIRECTORS? They are persons appointed by the company to direct and manage the business of the company-S 244 CAMA. Not servants per se but alter ego-Yalaju Amaye v AREC Ltd.
:: TYPES OF DIRECTORS: we have;
– Shadow Director; not formally appointed but the BOD is accustomed to obey his instructions and directions. Removal implied upon BOD’s disobedience.
– Executive Director; responsible for day-to-day running… they are on service contract? Non-ED does not have administrative role.
– Managing Director; A director appointed by the Board delegating its duties to it-Yalaju Amaye v AREC Ltd
– Alternate Director; a person appointed by a director to sit on the board in his place. A representative/nominee director is appointed by a company-director.
– Life Director: is not subject to retirement by rotation but may be removed under Section 262 and vacation of office under Section 258.
– Chairman of the BOD: is also the chairman of the co and presides over BOD and GMs (another person presides where he is up to 5 minutes late (for GM it is one hour). Appointed by BOD.
:: DUTIES OF DIRECTORS: the first meeting of the board must be held within 6 months of incorporation-Section 263[1]. Resolution in writing signed by all directors can may suffice.
Quorum generally is as prescribed by articles OR two (or at least 1/3rd of total number if they are more than 6 directors)-S 264[2].
Section 282 provides that every director of a company shall exercise his powers and discharge the duties of his office honestly, in good faith[3] and in the best interest of the company[4] and shall exercise that degree of care, diligence and skill[5] which a responsible, prudent director would exercise in comparable circumstances.
Therefore, by connotation, the directors are trustees and agents of the company saddled with the duty of care and other fiduciary duties-Section 283.
:: APPOINTMENT OF DIRECTORS:
First directors may be appointed in writing by the subscribers of the MEMO or named in the Articles of Association (Section 247). Subsequent directors are appointed by members in general meeting[6] (or other person authorised by articles). Where all shareholders die all their personal representatives (or creditors where PR fail) would apply to court for an order to convene a meeting of all personal representatives of the shareholders.
RESTRICTIONS
An infant, lunatic, insolvent, fraudulent, corporation… is disqualified from appointment as a director. A person above 70 years should not be appointed director of a public company except by special notice of his proposed appointment disclosing the age-Section 257
VACATION OF OFFICE: Director should vacate his office where he cannot meet share qualification, become bankrupt, Section 254 things, becomes unsound or resigns his office by notice in writing Section 258.
:: ELECTION OF DIRECTORS: by ordinary resolution in GM except articles provide otherwise.
But bod can appoint someone to fill casual vacancy[7] pending next AGM to ratify.
Remuneration is not compulsory but Remuneration of directors can be determined from time to time by the general meeting or may be fixed by the articles and such is a debt… amount alterable only by special resolution. Also, although remuneration not mandatory, directors should be refunded for expenses properly incurred.
:: RETIREMENT/ROTATION OF DIRECTORS: At the first annual general meeting, all directors (except life directors) shall retire from office and in subsequent AGMs, 1/3 shall retire based on first in first out principle-259.
A retired director is considered re-elected unless there is a resolution expressly rejecting him and another director is elected in his place[8] OR another was nominated or recommended for appointment in his place.
A new director must be nominated (recommended) by the directors or a member qualified to vote at the meeting of his appointment. In the latter case, he is to leave a signed notice of his intention in this regard at the registered or head office of the company within 3-21 days before the General Meeting. The proposed director will also submit the notice of his willingness to be elected.
:: REMOVAL OF DIRECTORS: Generally, Longe v FBN. Iwuchukwu v Nwizu a company (through general meeting or requisition) may by ordinary resolution, remove a director at any time notwithstanding anything in the articles or an agreement to the contrary-Section 262 CAMA. Provided due process is complied with.
Removal by Company: First; the person seeking his removal should issue special notice of the resolution to the company at least 28 days before the date of the meeting. The secretary upon receipt would transmit to director and intimate in notice of meeting (with directors representation accompanied where any). At the meeting director should be heard and then an ordinary resolution is passed removing director. CAC is notified within 14 days by filling Form CAC 7 (particulars of directors and change therein).
The vacancy created at the meeting can be filled at the same meeting if prior notice was given of such.
Director is entitled to: – Compensation for wrongful removal, – Declaration of nullity, – Order of reinstatement, – Compensation for breach of contract and loss of office.
Removal by Members: Requisition: shareholders of at least 1/10th paid–up capital (or voting right) send special notices of 28 days to the directors asking to remove one of them and for a meeting in that regard to be summoned by them (BOD); directors must respond within 21 days.
If directors do not respond, a simple majority of requisitionists will hold a meeting for removal within 3 months (after the 21 days of sending the notice… after sending at least 28 days notice to the company accompanied with proposed resolution and notice of the requisitioned EGM. Director can respond.
If the requisite quorum is not present within one hour of this meeting, the meeting will be dissolved (not adjourned) and the expenses of the meeting be deducted from the pay of the directors.
If the quorum is formed, the written representation/defence of the director is read or circulated to which the affected director answers questions.
Simple majority can then remove the director and elect replacement. Such should be notified to the CAC within 14 days[9].
Removal by regulatory Authority: Section 33 and 35 BOFIA allows CBN
:: COMPANY SECRETARY: compulsory for all companies? (S 293). Services the board and takes care of day to day running. Can also be a director but acts required to be done by a director and secretary must be done by separate persons. E.g. signing of certain documents. Oke-Owo v Migliore. He should have requisite experience to discharge functions of a secretary.
Additionally, secretaries of public companies must; be a member of the Institute of Chartered Secretaries and Administration OR a Legal Practitioner OR a member of the CAN OR 3 years (within last 5 years) secretary of Public Company, Company or firm of secretaries, legal practitioner or Accountants. Then be accredited with CAC
:: APPOINTMENT OF SECRETARY: by the BODirectors and may be removed by BOD.
:: DUTIES: Attending Board, Member and Committee meetings and rendering secretarial duties, advising on compliance and applicable rules thereon. Like logistics, agenda, counting show of hands. He maintains registers and other statutory books/records. Keeping the CAC informed/intimated (of court orders, change in particulars of directors, charges, resolutions, annual returns, return of allotment, alterations, statutory reports, returns on auditors, receivership, winding up, etc. note the period to file each. He/she also carries out such other administrative or secretarial duties necessary. 298 CAMA.
:: DUAL STATUS: A person can be both director and secretary in the same company, but cannot sign documents in both capacities or do a thing required to be done both by a company secretary and a director Section 294 CAMA.
- Status of Company Secretary: is a principal administrative officer whose due duties should not be interfered with. Barnett Hoares’s case.
:: REMOVAL OF SECRETARY: he should be given notice (informing him of such, the ground and giving him not less than 7 working days within which to make his defence or resign)-296. Failing which board may remove him and make a report to the next GM. But if he makes a defence, the board considers if it is sufficient. If not, he can be removed if the misconduct complaint of is gross. Where it is not fraudulent or serious, then he can only be suspended and then removed with approval of the GM. Notify CAC within 14 days as in form CAC2.1
[1] To usually deal with sighting incorporation documents and CofI, election of Chairman, MD, Secretary[1]/Legal Adviser, Bankers of the Company and Signatories of the Co, Auditors, allotting Shares and approve previous allotment of shares, adopting Common Seal, fixing period of future meetings.
[2] Quorum should be maintained throughout the meeting unless articles allow otherwise. If there is no quorum within 1 hour it shall be adjourned for one week at the same place and time and on the adjourned date any two or more persons may form quorum and may take decisions to bind the company. If only one member is present, he may seek direction of the court to take a decision.
[3] This would include the 1. duty not to make secret profits: or gain unnecessary benefits or bribery. The only way to be exculpated is that such gains should be disclosed to the board who approves it and enters same in the minutes book of directors (it isliek such must be made before making the secret profit not after)-Section 280 CAMA. Otherwise, company can sue him to recover the benefit-Regal (Hasting) Ltd v Gulliver.2. Duty not to fetter his discretion to vote in a particular way except with consent of the company, etc.
[4] This would include 3. Duty not to allow personal interest conflict with duties and responsibilities to the company-Section 280 CAMA. Where this is the case, Section 277 allows him exculpation if he discloses the nature of his interest in at a meeting of the directors of the company. else punishment of N100. Although GM may use it as a ground to remove erring director. 2. Duty not to exploit corporate Assets and Information: also on officers both during and after employment. 3. When he has multiple directorship, he should ensure his dedication is still unflinching as such multiple directorship does not exculpate him-Section 281 Lord Denning in Scottish CWS Ltd v Meyer.
[5] At common law, the standard was subjective (that reasonably expected from a person of his knowledge and experience)-Re City Equitable Fire Insurance Co per Romer J. However, CAMA makes it objective Section 282 CAMA above imposes that which a responsible and diligent director in like circumstances would apply-Delta Steel Nigeria Ltd v American Computer Tech Inc. this is because of the far reaching effect their acts could have on the co. Director can delegate his duties but shouldn’t be an abdication.
[6] A private co may do so in a single resolution but a public co must appoint one director at a time or unanimously appoint at once.
[7] This vacancy arises from death, resignation, retirement or removal of a director
[8] This replacement’s tenure is merged with the removed’s.
[9] The various resolutions used should be annexed to the cac 7a.
