In Nigeria, the directors of a company are regulated by The Companies and Allied Matters Act (CAMA). Section 244(1) of CAMA 2020 defines a director as a person duly appointed by the company to direct and manage the business of the company. There are Life Directors, Shadow Directors, Executive and Non- Executive Directors, Managing Directors, Alternative Director, Representative or Nominee Directors.
APPOINTMENT OF DIRECTORS
Directors of a company are appointed by two ways namely;
- Appointment of first directors- the first directors of a company are appointed by the subscribers to the Memorandum of the company or named in the Articles of Association. Upon appointment as the first directors, they are required to complete and sign relevant forms comprising the particulars of directors and shareholders.
- Appointment of subsequent directors- subsequent directors are appointed by the members/shareholders of the company. According to Section 248(1) CAMA the power to remove and appoint subsequent directors of a company in Nigeria is vested on the members of the company. That is shareholders of the company at an annual general meeting. However, if there is a vacancy, arising from the death, retirement, resignation or removal of a director in between two annual general meetings, the directors may appoint a new director to fill the vacancy. However, such appointment is still subject to the approval by the members of the company at the next annual general meeting.
UNDER WHAT CIRCUMSTANCE CAN A DIRECTOR REMOVED?
A director of a company may be changed or removed upon the following grounds:
- Removal as a result of misconduct
- Voluntary Resignation
- Where a director Becomes bankrupt
- Disqualification by a court order
- If the director suffers from mental disorder
- If the director fails to take up a share qualification required by the articles.
PROCEDURE FOR REMOVING A COMPANY DIRECTOR
Section 262 CAMA provides for the removal of a director in cases where;
i. The Article of Association of the company is silent on the mode of removal, or
ii. The absence of a provision in that regard on a service contract in the case of Executive Directors.
A company may remove any of its directors at any time from office by an ordinary resolution notwithstanding what is contained in its articles of association or contract agreement between it and the director. However, the due process of removing a director must be complied with else the removal will be deemed invalid. To remove a director of a company, the following procedure must be strictly followed:
- Special notice to be given to the company prior to the passage of the ordinary resolution: a special notice of the intention to move a resolution for the removal of a director must be given to the company at least 28 days before the meeting where such resolution is to be passed for the removal of the director.
- Notice of the approved resolution to be given to the director sought to be removed: after the company has received a notice of an intention to remove a director, the company shall send a 21 days special notice to the director concerned.
- Provide notice of the proposed resolution to members
- Representation by the director sought to be removed: upon the receipt of the notice of the proposed resolution of his removal from the directors, the director may make a representation in writing and request that the resolution be sent to members. The director may also require that the representation be read out at the meeting.
- A meeting is convened: on the day of the meeting convened, the director has the right to attend the meeting, defend himself or speak on the resolution.
- Passage of the resolution: an ordinary resolution may then be passed removing the director if his defense is not satisfactory. A new director maybe appointed at the meeting to replace the removed director.
- Company files a notice of change of director with the Corporate Affairs Commission.
- Entries: the fact of such removal is to be entered in the register of directors and secretaries, and the register amended where necessary.
The above provision on removal of directors is important and must be complied with in passing the ordinary resolution in removing the director. If the resolution is in contravention of the law, the purported removal shall be declared void by a competent court of law and set aside. This position of law was succinctly enunciated by the Supreme Court in the case of Longe v. First Bank of Nigeria. The court had held that a director of a company shall not be removed from his position accept as provided for in section 262 of CAMA 1990. The case of Emmanuel J. Iwuchukwu V. Dave Engineering Company Limited is another important case on the subject matter. This position of law is however still maintained by the amended CAMA 2020.
Apart from the foregoing procedure on the removal of a director, there are other ways by which a director can be removed. These are:
- Removal under the director’s service contract of executive directors with the company: where there is director’s service contract and the service contract confers on such a person an executive director without being duly appointed as director by the General Meeting, he ceases to be a director of the company upon the termination of the service contract.
- Statutory removal: a regulatory body can remove a director if the statute enables the body. For instance, Section 35 of BOFIA empowers the CBN to remove and replace a director of a bank.
- Removal by minority protection:
- Board of directors can remove a director as a managing director but such person remains a director until the legal due process is complied with.
WHAT REMEDY IS A DIRECTOR WHO IS WRONGFULLY DISSMISSED ENTITLED TO?
In Nigeria, a director of a company who is unlawfully removed or changed, may seek any or more of the following reliefs from a competent court. These reliefs can be sought independently and or cumulatively.
- Declarations that the removal was wrongful hence void.
- Seek for an order of court re-instating him back to his position as a director.
- Pray for an order of compensation for breach of service contract.
- Seek compensation for loss of office- section 262(6) CAMA
- Seek for damages for unlawful removal
- The company can approve a non-contractual compensation to the director wrongly removed- section 271 CAMA.
REQUIREMENTS FOR FILLING OF NOTICE OF CHANGE OF DIRECTOR WITH CORPORATE AFFAIRS COMMISSION
As stated earlier, a company is mandated to file a notice of change or removal of directors with the Corporate Affairs Commission. Below are the documentary requirements for effecting such changes.
a. Such company must have its annual returns filed and up to date. Annual returns are updates required by law for businesses entities registered with the Commission to file with the Commission to show that they still exist and operate as a going concern. For companies, it is to be filed 18 months after incorporation and on a yearly basis subsequently. While for registered business names, it is to be filed every six months.
b. Provide special resolution approving removal and or appointment of directors
c. Provide letter of resignation of the director (in cases where Director voluntarily resigns)
d. Evidence of payment of statutory fees to the Commission.
A major advantage of companies (whether private or public) is that its operations (including removal or change of directors) are to a large extent governed by Statutes and are not subject to the whims of a selected few.
A director is protected especially in cases where his / her removal was done contrary to the requirements provided by law. On the other hand however, with the aid of technology, a company can remove its directors with ease provided such company acts in compliance with the law.
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