Corporate Case

1. 269(1) of the CAMA 2020 defines a director of a company registered under the Act as:

 “Director of a company registered under this Act is a person duly appointed by

the company to direct and manage the business of the company.”

Note the definition states that such a director must be duly appointed. The methods of appointing a person to the office of director within the meaning of the Act is laid out in sections 272-274 and are as follows:

S.272: 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.

273. (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.

274. (1) 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.

It is clear that due appointment is in three ways:

1. First directors: by the subscribers of the memorandum and articles of association writing and naming them as directors in the articles of association.
2. By members at the annual general meeting of the company.
3. The Board of directors may appoint new directors to fill any casual vacancy arising on the board.

Anyone who is not appointed a director in any of the ways mentioned above is not a director of the company within the meaning of the Act.

LONGE v. FBN PLC (2010) LPELR-1793(SC)

“The emergence of directors in a company is governed by Sections 247, 248 and 249 of C.A.M.A. which provide: “247. Subject to Section 246 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 maybe named in the article. 248. (1) The members at the annual general meeting shall have power to 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 shall be able to 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, shall be able to do so. 249. (1) The board of directors shall have power to 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 forthwith cease to be a director. (3) The directors may increase the number of directors as long as it does not exceed the maximum allowed by the articles, but the general meeting shall have power to 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.”

See also

OLOYEDE & ORS v. ROBERTS & ANOR (2015) LPELR-41001(CA)

“Section 244 (r) defines ‘directors’ as persons duly appointed by the company to direct and manage the business of the company’. On the number of directors, Section 246 states: 1. “Every company registered on or after the Commencement of this Act shall have at least two directors and every company registered before that date shall before the expiration of six months from the commencement of this Act have at least two directors. ………On subsequent appointment of directors, Section 248 provides: 1. “The members at the annual general meeting shall have power to 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 shall be able to apply to the Court for an order to convene a meeting to appoint new directors to manage the company, and if they fail to convene a meeting, the creditors, lf any shall be able to do so.” On casual vacancy, Section 249 states: 1. “The board of directors shall have power to appoint new directors to fill any 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 forthwith cease to be a director. 3. The directors may increase the number of directors so long as it does not exceed the maximum allowed by the articles, but the general meeting shall have power to 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.” The combined effect of the above enumerated provisions leaves no one in doubt as to the mode and manner by which an appointment of a director of a company can be made.”

Consequently, it also follows that a person who is not a director within the meaning of CAMA (appointed by any of the ways mentioned above), is only a director by nomenclature and not by law. The powers and rights vested in a director by law will not accrue to such an individual.

However, where third parties are concerned the case is different. If a company holds out an employee or individual out as a director or puts the individual in the position of a director, the company may under certain circumstances by liable for the acts of the person so held out.

269. (2) There is a rebuttable presumption in favour of any person dealing with the company that all persons who are described by the company as directors, whether as executive or otherwise, is duly appointed.

NWANKWO v. KAY-KAY CONSTRUCTION LTD (2014) LPELR-24336(CA)

“It is clear from exhibits B and F that, even though his name is not in the form C07 (particulars of directors) of the respondent filed at the Corporate Affairs Commission, Engineer Emeka Okeke occupied the office of Managing Director of the respondent, acted as such and was held out by the respondent as its Managing Director during the transaction leading to this suit. He is clearly, in fact (de facto) and law (de jure) the Managing Director of the respondent as exhibits B and F show. In law he is a director of the respondent by virtue of S. 650 of the Companies and Allied Matters Act 1990 which defines the director of a company registered under the Act like the respondent as including “any person occupying the position of director by whatever name called.” It is clear from this provision that what determines if a person is a director is not whether his or her name is listed in the particulars of directors (Form C07) in the Corporate Affairs Commission. If he occupies that position by any name called, he is a director of the company.

However, it must be pointed out that some Judicial decisions, as seen above, tend to suggest that if a company has been accordingly an employee the rights, responsibility, position and privileges of a director, the company may be estopped from denying him/her as being a director. Some things the court will consider in deciding will be:

1. Does the individual have any letter appointing him as a director duly executed by members of the board?
2. Does the said individual attend meetings of the board of directors?
3. Does the person receive notices of meetings of the board of directors?

We humbly submit that unless the question highlighted above can be answered in affirmative, the individual cannot exercise the powers or enjoy the privileges afforded to a director by the CAMA. Note that whether any form has been filed in the Corporate Affairs Commission or not is irrelevant. If it is found that the company has placed the person in the position of a director, he will be considered a director within the meaning of the law.

DYS TROCCA VALESSIA LTD & ORS v. SANYAOLU & ORS (2016) LPELR-40423(CA)

“Section 249 (1) of the CAMA provides that; “The board of directors shall have power to appoint new directors to fill any casual vacancy arising out of death, resignation, retirement or removal.” Thus where there is or there are casual vacancy or vacancies in the Board of Directors arising from resignation of directors, the board of directors is empowered to appoint new director or directors to fill such vacancy or vacancies. The appointment is to be done by the “Board of Directors.” The word ‘Board” refers to “a group of persons having managerial, supervisory or advisory powers.”while ‘Board of Directors” is defined as “the governing body of a corporation…” See Black’s Law Dictionary 8th Ed. P. 184. Thus what is contemplated by Section 249(1) of the CAMA is a situation where there are at least two directors to form a board. There cannot be a Board of Directors made up of one director. In Orojo’s Company Law and Practice in Nigeria vol. 1 page 301, it is stated that; “It is only when directors act as a board that they are organs of or agents for their company, and entitled to exercise the powers vested in them by the Act or the articles.”

In the instant case, the individual flouted company policy. The individual seeks to hide under the protection given to directors by virtue of S.305 (3) and 308 of CAMA.

s.305 (3) A director shall act at all times in what he believes to be the best interests of the company as a whole so as to preserve its assets, further its business, and promote the purposes for which it was formed, and in such manner as a faithful, diligent, careful and ordinarily skilful director would act in the circumstances and, in doing so, shall have regard to the impact of the company’s operations on the environment in the community where it carries on business operations.

308. (1) Every director of a company 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 reasonably prudent director would exercise in comparable circumstances.

(2) Failure to take reasonable care in accordance with the provisions of this section, is a ground for an action for negligence and breach of duty.

These sections are with respect to actions and duties of duly appointed directors. This is clear from the fact that it is a part of the section headed “DIRECTORS” in the Act. Even assuming without conceding that the individual is a director within the meaning of the Act, an action taken in violation of company policy cannot be described as being in the best interest of the company. The point being made is that even a validly appointed director cannot flout company policy and claim it was done in the best interest of the company. S-305 and 308 are clear on this point.

SUMMARY

1. A director within the meaning of the Act must be duly appointed.
2. Without due process being followed in the appointment, the individual cannot qualify to invoke the provisions of the Act with regards to Directors.
3. A company that holds out an individual as a director may be liable to third parties for the actions of the person, whether duly appointed or not.