LEGAL IDEAS FORUM

A Primer on the Appointment and Removal of Director in Corporate Governance Under the Companies and allied matters Act, 2020


Salihu Abubakar Abdulmudallib (The Caliphate)

Introduction
The companies and Allied Matters Act, and the Code of Corporate Governance in Nigeria require that there should be a governing bodies for the corporations. These governing bodies are the ones saddled with the responsibility of managing the business of the company such that the respective powers of the board and the members in general meeting are to be prescribed in the Articles of the Company.
It is however worthy to note that a director in a company is usually appointed by and removeable by the members in general meeting, or by court of competent jurisdiction. Therefore, a director of a company who is duly appointed save as otherwise provided in the article of association shall manage the business of the company. The cornerstone of this write-up seeks to highlight the steps for the appointment of directors and the procedure for their removal as far as corporate governance is concerned under the Companies and Allied Matters Act, and the dictums of court.

The Modalities of Appointment of Directors of a Company.


There is every need to understand that in terms of appointment of directors in a company, there is what are call ”appointment of first director”, ”appointment of subsequent director” and “the casual vacancy appointment”, hence, how these directors are appointed? All these will be elucidated in line with the provisions of the Companies and Allied Matters Act.


However, before we delve in to a critical discourse, it is important to bear in mind the provision of Section 271 of the Act, which requires that ‘every company, not being a small company, shall have at least two directors. Subject to subsection (1), of section 271 any company whose number of directors falls below two shall, within one month of its so falling, appoint new directors and shall not carry on business after the expiration of one month, unless such new directors are appointed. This is to say; a director or member of a company, not being a small company, who knows that a company carries on business after the number of directors has fallen below two for more than 60 days is liable for all liabilities and debts incurred by the company during that period when the company so carried on business.

Appointment of First Director
The appointment of first director of a company is provided under the provision of Section 272 of the CAMA, thus;
Subject to section 271 of this Act, the number of directors and the names of the first directors 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.


The appointment of first directors of the company is usually through the MEMART, by appointing individuals as the first directors of the company and naming them in the MEMART of the company. However, the appointed directors are required to complete and sign the CAC form that encapsulates the particulars of the directors and the members in general meeting.

Appointment of Subsequent Director
The power to appoint subsequent directors of company in Nigeria is vested in the members in general Meeting. However, the provision of Section 273 provides, thus;
“(1) the members at the annual general meeting may re-elect or reject directors and appoint new ones.
(2) In the event of all the directors and shareholders dying, any of the personal representatives 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, and if they fail to convene a meeting, the creditors, if any, may do so.”


The above provision however has to be by ordinary resolution pursuant to Section 256 of the Act. Notwithstanding the provision of subsection (1), the directors may increase the number of directors if it does not exceed the maximum number allowed by the Article of the Company, but the general meeting may increase or decrease the number of directors generally and may determine in what rotation the directors shall retire, provided that such reduction shall not invalidate any act of the removed director.


Casual Vacancy Appointment of Director
Pursuant to the provision of Section 274 (1) of the CAMA, where there is a casual vacancy arising out of death, retirement, removal or resignation of a director of a company (in between two annual general meetings), the directors may appoint a new director to fill in such vacancy, but such appointment is subject to confirmation and approval by the members of that company at the next or later annual general meeting. In the event the members didn’t approve the appointment, such appointed director shall cease to hold office as a director of that company in accordance with provisions of the Act. Section 274 provides, thus;


“The Board of directors may appoint new directors to fill any casual vacancy arising out of death, resignation, retirement or removal.
(2) Where a casual vacancy is filled by the directors, the person may be approved by the general meeting at the next annual general meeting, and if not so approved, he shall immediately cease to be a director.
(3) The directors may increase the number of directors if it does not exceed the maximum allowed by the articles, but the general meeting may increase or reduce the number of directors generally, and may determine in what rotation the directors shall retire, provided that such reduction shall not invalidate any prior act of the removed director.”

Moreover, it is a fact of common knowledge that the appointment of directors and their removal is vested in the members in general meeting. However, the directors are conferred with power to appoint a new director casually and temporarily, subject to ratification by the members in a general meeting, otherwise, such appointment will not stand. It is important to understand that where a person is not duly appointed as director, but who acted as such for and on behalf of the company, his act does not bind the company and he is personally liable for such action save and except where the company hold him out as director.

Appointment of Director for Life
A person may be appointed as a director for life in accordance with the provision of Section 281 of the CAMA provided that such person can be removed as enshrined in Section 288 of the Act.

The above notwithstanding, the following persons are disqualified to be appointed as directors in accordance with section 283 of the CAMA, viz:
-an infant, that is, a person under the age of 18 years;
-a lunatic or person of unsound mind;
-a person suspended or removed under section 288 of this Act;
-a person disqualified under sections 279, 280, 284 of this Act; and
-a corporation other than its representative appointed to the board for a given term.

Removal of Directors of a Company
It is very instructive to assert that directors of a company are people of high significance of which without whom the smooth and effective management of a company is at stake. Nonetheless, there are various circumstances where the members of general meeting may voice out and decide that they are no longer interested of the services of certain directors in their company and therefore pass a resolution for the removal of that director(s) in question. However, I will analyze below the modes and manner to which the shareholders may validly remove a director through a simple resolution at a general meeting in accordance with the provision of the CAMA.


Section 288 of the CAMA provides:
A company may by ordinary resolution remove a director before the expiration of his period of office, notwithstanding anything in its articles or in any agreement between the company and him.

This section however ought to be read in line with the provision of section 250 of the Act, which is to the effect that all resolutions shall be passed at a general meeting and are not effective unless so passed. But in the case of a private company, a written resolution signed by all the members entitled to attend and vote are as valid and effective as if passed in a general meeting. By virtue of section 292 of the Act, every director is entitled to receive notice of the directors’ meetings, unless he is disqualified by any reason under the Act from continuing with the office of director.


There shall be given 14 days’ notice in writing to all directors entitled to receive notice unless provided in the articles. Failure to give notice in accordance with subsection (2) invalidates the meeting. Unless the articles provide otherwise, it is not necessary to give notice of a meeting of directors to any director absent from Nigeria, but if he has given an address in Nigeria, the notice shall be sent to such an address.

Procedure of Removal
At the meeting, the director concerned must be notified and be given fair hearing and representation if any, read to members in the meeting, so as to cover up any flaw or default on the part of the company where they have not successfully delivered the representation to any member of the company present in the meeting. The company will then pass an ordinary resolution by a simple majority of votes cast in the general meeting to remove the director. Upon successful removal, the company is to notify the Corporate Affairs Commission within 14 days of such removal.

Conclusion;
To sum it up, it is noteworthy that the provisions of the Companies and Allied Matters Act, for the appointment and removal of director(s) are very crucial and must be complied with strictly. This is to say all the processes, guidelines and regulations provided by law must be adhered to in respect of such purported appointment or removal of director(s). Where such purported appointment or removal contravenes the provisions of the law, the consequences is that it may be null and void and set aside – this received judicial blessings in the case of BENARD LONGE V FIRST BANK; EMMANUEL J. IWUCHUKWU V. DAVE ENGINEERING CO, LTD


About the Author;
Abdulmudallib, Salihu Abubakar (the Caliphate) is an ardent pupil of law at the prestigious Faculty of Law Bayero University, Kano. Until then he holds various positions on his quest to service for humanity plus self development and he is dedicated and committed to his goal. He was a an erstwhile student of law at College of Legal Studies Bauchi State where he served as General Secretary of Law Students’ Association of Nigeria – Legal Chapter, Independent Corrupt Practices and Related offences Commission as well as Special Adviser on religious Matters to the Legislative Parliament of the Students’ Union Government, A D Rufa’I College.


Abdulmudallib was a deputy protocol officer at the Liberty Chambers BUK, a member and incumbent General Secretary of the Bayero University Law Clinic and also a parliamentary Secretary at the Students’ Representative Assembly; Law Students’ Association of Nigeria-BUK Chapter. He is interested in Corporate and Commercial law, Litigation, ADR, and Energy Law amongst others. He can be reached: – [email protected] +2348036111911 https://www.linkedin.com/in/salihu-abubakar-abdulmudallib-88aa25184

References:
-Virtual Lecture by Diekolola Daniel @ Dieko School of Law
-Law Lecture Materials
-Companies and Allied Matters Act, (CAMA, 2020)
-Nigeria Code of Corporate Governance, 2018
-Contemporary Company law in Nigeria – Yusufu Pogwan Yatu, Esq
.

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