Long before and up till now the position of a company director in Nigeria has always been regulated by a legal framework, which is embodied in a legislation called the Company and Allied Matters Act. The company legislation as a matter of fact and tradition accords special attention to a company directors by regulating their manner of appointment, functions, powers and duties in order to achieve a greater level of efficiency and effectiveness.
It is a must and a major prerequisite that a company incorporated with the corporate affairs commission CAC (the regulatory agency) must have at least two directors as specified by law.
MEANING AND TYPES OF DIRECTORS
Directors are persons appointed (except shadow Directors) by the company to direct and manage the business of the company. We have the life Director, Executive director, Non Executive Director, Managing Director, Chairman of board of Directors, Alternative Director, Shadow Director, and the Representative/Nominee Director. Some Directors may double as Chairman and CEO while some are called Presidents.
STATUTORY DUTIES OF A DIRECTOR
Legally, directors are trustees of their companies, therefore the primary duty of a director is that of fiduciary duty and the exercise of due care, skill and diligence in the discharge of these duties, failure of this would be a reasonable ground for an action in negligence and breach of fiduciary duty, This category of duties emerged from the common Law (old English laws) and equitable doctrines (law that mitigate the harshness of the common laws of England) which comprises of the director’s duty of utmost good faith in his dealings with the company, the duty not to place himself in a position where there is conflict of interest between his duties and his personal interest thus he must disclose to the company, secrete profits and dealings, he must also attend board of directors and shareholder’s meetings in case of a large corporation, a director owes a duty not to fetter discretion to vote a particular way. One third of the directors are required by CAMA to retire and submit themselves for re-election at every company’s Annual general meeting. All these duties are now called statutory duties.
LIABILITIES ATTACHED TO THE BREACH OF DUTIES OF TH DIRECTOR
Directors may incur civil and criminal liabilities for their act or omission -where they fail to carry out any of the statutory duties mentioned above, however where they have a defense it must be on a reasonable ground.
For instance where a director ought to have seen a likelihood eventuality of liquidation and did not report or act, he may be required to contribute. On health and safety directions, he may be found wanting and therefore liable when his duty as a director to exercise duty of care and skill towards employees as well as to the company in that regard are breached.
In a contract involving the company, the director is obliged to disclose any of his interest, it is an offence to default on this regard and even attracts a fine stipulated in CAMA. However the general meeting may use it as a ground to remove the erring director. The consequence of a breach of duty relating to secrete profit, abuse of corporate access, information and opportunities are wide and of strict application. It is immaterial that the company benefited from such profit; in fact more emphatically it should never be raised as a defense. The affected director must be held to account for such secrete profit and unnecessary benefits and may be sued by the company to recover such secrete profit and benefits.
RIGHTS AND PRIVILEDGES
Unless the constitution of the company or director contract of service expressly provides for certain remuneration of directors, a company director is not entitled to remuneration by way of payment for service rendered to the company. However, CAMA provides that remuneration of directors shall from, time to time, be determined by company in a general meeting. The law further provides that directors are entitled to be paid sitting allowances and other honorarium including travelling, hotel and other expenses properly incurred in attending meetings or in connection with the company’s business.
The directors enjoy dual status (as alter ego and servants of the company) their service contracts would always provide remuneration which is payable even where the articles of association is silent about it.
The office of the Director Is a provision of statute and well entrenched in company laws as such that it provides for a method of appointment and removal, which must be strictly adhered to.
As a general rule it is up to the director to imbibe the following principles:
- To promote the success of the company for the benefit of its members
- To exercise independent judgment
- To exercise reasonable care skill and diligence
- To avoid conflict of interest
- To declare an interest in proposed transaction
- To act within the scope of his or her power
- And to avoid conflicting benefits from third parties.
Written by Funke Ashiru, a Senior Associate at Resolution Law Firm, Nigeria
Email: [email protected]