RESIDENT DIRECTOR NIGERIA
SHAREHOLDERS IN NIGERIAN COMPANY
There are several types or classes of Directors allowed under the Nigerian law, which include Executive Directors, Alternate Directors, Managing Directors, Shadow Directors, Life Directors and Nominee Directors among others. The focus of this write-up is to briefly examine and evaluate the proprietary and appointment of nominee directors in Nigerian. The article will also look into the legality of the appointment of nominee shareholders in Nigeria.
The formation of a company in Nigeria must strictly be in compliance with the requirements of the Companies and Allied Matters Act (CAMA), which is the principal Act for the incorporation of companies and other incidental matters. To register a company in Nigeria with the Corporate Affairs Commission (CAC), the company must provide a minimum of 2 directors and 2 shareholders.
The provision of the Law under Section 244 of CAMA defines Directors as “persons duly appointed by the company to direct and manage the business of the company”. It should be noted that only individuals can be appointed as members of the board of Directors of a company in Nigeria.
Appointment of Nominee Director
The power to appoint directors of a company is vested in the shareholders of the company at the annual general meeting. A nominee director, also referred to as a resident director or representative director is appointed to the board of the company to represent the interest of his appointee on the board. The rights and powers of the nominee director are determined by the shareholders.
The nominee director is a non-executive director and when appointed stands apart by virtue of being nominated by a shareholder or other stakeholder of a company to represent particular interests.
Nominee directors owe the same duties to the company as other directors do while representing the company through legal duty and expectation of loyalty of the interest of the appointee. The Nominee director stands in a fiduciary relationship towards the company and must observe the utmost good faith towards the company in any transaction with the company or on behalf of the company.
Consequently, any foreign-owned or local company may appoint a nominee director in Nigerian to act in full capacity as a director of the company. A nominee local director may be extremely helpful for an international company seeking to set up its operation on time and require a director to carry out immediate duties such as the opening of a bank account and among others.
The nominee director may not exercise any unilateral power in the company unless his or appointer sanctions it. Like any other director, a nominee director can be appointed as one of the first directors of the company during the incorporation or by the virtue of a company resolution duly filed with the CAC after incorporation. However, it is important that the nominee director is given a director agreement detailing his or her terms of service in the company. A nominee director can also be removed in accordance with the process provided by the CAMA.
Appointment of Shareholders
Under Nigerian law, every limited liability company must have a minimum of two shareholders when incorporated with the CAC. The members of a private limited liability company must not exceed 50.
A shareholder in a limited liability company is an owner of the company through shares and has vested rights in the interest of the company. The first shareholders are known as the subscribers of the company and they have their names listed in the Memorandum of the Company.
A shareholder of a company can be an individual or a corporate body. Shareholders, when appointed, have liabilities limited to the nominal value of their shares; this means that when the company goes into debts, the shareholders will be responsible to the extent of the value of the shares taken up in the company.
It is worthy to note that a shareholder can also be a director of a company; nothing precludes shareholders taking up the dual position of a director except the article of association of the company restricts it.
Although the holding of shares in nominee capacity is not expressly disallowed in a private company under the CAMA, such scheme is also not backed by any law in Nigeria. In fact, the law mandates the full disclosure of every person holding any shares in the company, and as such, a company is mandated to keep the register of shareholders in its office.
However, since the Nigerian law permits any foreign individual to hold shares in any Nigerian company, there may be no basis or need for any prospective shareholders in Nigerian company to appoint a nominee shareholder, although such personal agreement not expressly prohibited by law. However, where any person has been appointed in nominee capacity to hold shares in a company for another person or organization, such person shall be liable to contribute any unpaid share capital to the extent of shares subscribed in his or her name in case of the winding up of the company on the petition of creditors.
In conclusion, nominee directors can be appointed by the shareholders or stakeholders of a company. A nominee director is usually not expected to take up shares except it is permitted by the articles of the company.
Shareholders of a company can also take up a dual position of a directorship in a company even though the two roles are completely different and separate. To set up a new company in Nigeria, a minimum of two shareholders and two directors are required under the law.
By Corporate & Commercial Law Team of Resolution Law Firm, Nigeria. The Law Firm offers advisory on company formation, business set up and corporate structuring in Nigeria.