REMOVAL AND CHANGE OF DIRECTORS IN A PRIVATE LIMITED LIABILITY COMPANY
A Director is appointed by the Company to manage and direct its business affairs. The roles of Directors as officers of a Company are important roles to be played in running a company. The principle of the Nigerian Law is that a Company though an artificial body has a separate and legal entity from the members of the company. A company is recognized by the Nigerian law as an abstract body that cannot run its own affairs by itself, and as such every company registered is required to have a minimum of two (2) Directors to control its affairs.
Directors of a company are appointed usually in accordance with the provisions of the Companies and Allied Matters Act (CAMA) and in compliance with the Article of Association of a Company. They are recognized as the executives and managers of the company and they are collectively referred to as the Board of Directors. The Corporate Affairs Commission (CAC) administers the provisions of CAMA and supervise the compliance of every company with the provisions of the law.
The CAMA stipulates the legal requirements to be appointed as a Director of a Company as follows:
- The minimum age for appointing a Director is above the age of 18 years
- Must not be insolvent or bankrupt
- Must not be fraudulent
- A director cannot be a person of unsound mind.
In our previous write up, we gave an overview of the procedure for an appointment and removal of directors in Nigeria
Removal Directors in Nigeria
A Director can also be an employee of the Company but he can only be removed as a Director in accordance with the Articles of Association of the Company and the provisions of the Companies and Allied Matters Act. Section 262 of the Companies and Allied Matters Act states the procedure to be adopted in removing a Director.
In accordance with section 262 of CAMA, below are the procedures to be taken in removing a director in Nigeria:
- A Director of a company may by ordinary resolution be removed before his tenure notwithstanding the provisions of the company’s article of association or agreement between the director and the company.
- Special notice shall be required of any resolution to remove a director and upon receipt of such notice, the company shall forward a copy of the notice to the Director concerned and the Director is entitled to be heard on the resolution at the meeting.
- Also, where notice of removal or change is given, the Director concerned can make a representation concerning the circumstance of his removal in writing to the company and request the notification to members of the company of the representation
- The company upon receipt of the representation can in the notice of resolution given to its member’s state the fact upon which the representation is made OR send a copy of the representation to every member of the company to whom notice of the meeting is sent.
- On the meeting day, the representation is read out and the director is allowed to be heard orally unless, in the application of an aggrieved director, it appears that his right is being abused.
- Where it is resolved to remove the director, an ordinary resolution will be passed for his removal.
- A vacancy created by the removal of a director can be filled at the meeting in which he is removed and if not, the vacancy can be filled as a casual vacancy.
- The law does not deprive a person removed under it from compensation or damages payable to him in respect of the termination of his appointment or breach of his contract of employment.
- The secretary of the company is required to fill the Form CAC 7 (Particulars of Directors) that contains the particulars of directors after the removal at the CAC within 14 days of the passage of the resolution, attaching the said resolution.
Note that where a Director is not removed in accordance with the procedure laid out in section 262 of CAMA, the removal will be invalid, void and liable to be set aside by the court.
Change of Directors in Nigeria
The procedures for the change of Directors are enunciated below;
- Before a new director can be appointed, it must first be approved in the Annual General Meeting and the Board of Directors of the Company stating the need and reason for the appointment of new directors. The members have the right and power to appoint new directors.
- The company is then required to submit a copy of the resolution taken in the board meeting or general meeting of the shareholders, along with CAC 7 (particulars of Directors) within 30 days from effect of the resolution to the CAC.
- Finally, the company is to make entry in the register of directors in accordance with section 275 of the CAMA, which is usually kept at the company’s registered address.
In conclusion, a Company director is an officer or agent of a company appointed by members in the general meeting. Removal of a director is to be done in compliance with the provisions of the Law. A company need not wait until the expiration of the terms of the Director, as a company may by ordinary resolution remove a director before the expiration of his period of office.
It should be noted that, where a Director is removed in line with the steps outlined above, he can be replaced either by appointing another director by ordinary resolution of the members or by the directors filling a casual vacancy at the board of directors meeting.
By Corporate & Commercial Law Department of the Resolution Law Firm, Nigeria