REMOVAL AND CHANGE OF DIRECTORS IN NIGERIA
STEPS FOR AN APPOINTMENT OF DIRECTORS IN NIGERIA
Directors are persons duly appointed by the company and saddled with the responsibilities of the company’s day-to-day management and are appointed to operate the business for the benefit of the shareholders of the company. This write-up seeks to highlight the steps for the appointment of a director in Nigeria under the companies and Allied Matters Act LFN 2004 (the Act) and the procedure for the removal and change of a director of a company in Nigeria.
APPOINTMENT OF DIRECTORS
Under the Act, there are two instances of appointment of directors, which are:
- Appointment of First Directors of a company during the incorporation of the company; and
- Appointment of Subsequent Directors of a company.
APPOINTMENT OF FIRST DIRECTORS
In accordance to section 247 of the Act, the First Directors of a company are appointed by the subscribers to the Memorandum and Articles of association of the company. The subscribers do it through the MEMART by appointing the individuals as the First Directors of the company by naming them in the MEMART of the company.
The directors are also required to complete and sign the CAC Form 1.1, which comprises of the particulars of the directors and shareholders.
APPOINTMENT OF SUBSEQUENT DIRECTORS
With provisions under the Act, specifically with section 248 (1), the power to remove and appoint subsequent directors of a company in Nigeria is vested in the members of the company. i.e. shareholders of the company at an annual general meeting.
However, according to section 249 (1), where there is a Casual Vacancy, i.e. in the Death, Retirement, Resignation or Removal of a director (in-between two annual general meetings), the directors may appoint a new director(s) to fill in such vacancy. But such appointment is subject to the approval by the members of the company at the next annual general meeting and if not approved such director shall cease to hold office as a director in accordance with the sections 249(2).
CHANGE OF DIRECTOR OF A COMPANY
Directors of a company are important individuals in that company, of which without them, the smooth and effective management of such a company is at stake. However, there are numerous situations where shareholders of a company may decide they no longer require the services of a director in their company and as such take steps leading to the removal of such director that may be concerned.
Below is the procedure on how shareholders of a company can legally and effectively change or remove a director done by a simple resolution at a general meeting in accordance with section 262 of the Act.
PROCEDURE TO REMOVE A DIRECTOR
- Shareholders wishing to remove a director are to issue a special notice (28 days before the general meeting) of the resolution seeking to remove the concerned director, and or to appoint some other director in the stead of the director so to be removed i.e. if the shareholders wish to change and replace the director concerned with another.
- The company secretary upon receipt of the special notice is to send a copy of the notice to the director concerned who in turn may make representation in writing to the company if he so chooses.
- The directors through the company secretary are to issue a notice of a general meeting at least 21 days before the date of the meeting to all members of the company. This notice will be accompanied by the representation if any made by the director concerned.
- At the meeting, the company must give audience to the director concerned and read his representation if any to members in the meeting so as to cover up any flaw or default on the part of the company if they have not successfully delivered this representation to any member of the company present in the meeting.
- The company is then to pass an ordinary resolution removing the director, which is passed by a simple majority of votes cast in the general meeting.
- Upon successful removal of the director, the company is to notify the Corporate Affair Commission of this removal by filing Form CAC 7A, which must be done within 14 days of the removal, failure of which may attract a late filing fee.
In conclusion, it is noteworthy that the provisions of the removal of directors in any company in Nigeria is very crucial and must be complied with strictly. This means all the processes and guidelines provided by law with regards to the removal of a director is to be complied with because if such removal is in contravention of the law, the purported removal may be null and void and set aside as decided in the case of Emmanuel J. Iwuchukwu v. Dave Engineering Company Ltd. In this particular case, the removal of the director of this company was done and effected through a letter. The court held that the normal and regulated procedure provided by law on the removal of directors in a company was not complied with and as such, the court deemed the removal of the director invalid and ineffective.
Therefore, every company seeking to remove or replace a director must comply with the provisions of the Companies and Allied Matters Act.
By the Corporate & Commercial Law Team t at the Resolution Law Firm, Nigeria
Email: [email protected]