1.

Meetings and Resolution

2. Shares
3. Directors
4. Protection of Minorities
5. Winding up of Companies
6. Registration of Business Name
7. Incorporated Trustees

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1.0 MEETINGS AND RESOLUTIONS
The members of the Company in General meeting are the other organ of the
Company apart from the Board of Directors. The members are an organ of the
Company when they function at the general meeting of the Company. There are
three types of General meetings of the company. These are the statutory
meeting, the Annual General meeting (AGM) and the Extra Ordinary General
Meeting. (EGM).

1.01 THE STATUTORY MEETING

The Statutory Meeting is provided for in Section 211 of the Companies and
Allied Matters Act (CAMA). This type of meeting is mandatory only for the
public company. It must be held within six months of the incorporation of the
company.

Failure to hold the meeting within the six months of incorporation or failure to
deliver the statutory report to the CAC is a ground for compulsory winding up
of the Company as provided in Section 408 (b) of CAMA. The Company and
any of it officers who is part of the default in holding the meeting as prescribe
by law shall be liable to a fine of N50 per each day of default (S. 212 of
CAMA).

1.02 ANNUAL GENERAL MEETING (AGM)

Every Company must hold an Annual General Meeting (AGM) in addition to

any other meetings it may hold. There should not be more than 15 months
between one AGM and the next. The first AGM must however be held within
18 months of incorporation, thereafter the next AGM will be held within 15
months of each other.

The Corporate Affairs Commission (CAC) has power to upon application

extend the period within which an AGM could be held by 3 months. The CAC

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 cannot however extend the period by which the first AGM may be held.
(Section 213 of CAMA).

All the businesses transacted at the Annual General Meeting are deemed as
special business. Other business such as declaring dividends, presentation of
financial statements, reports of directors and auditors, election of directors in
place of those retiring, the appointment and fixing the remuneration of the
auditors and the appointment of the members of audit committee are all
ordinary business.

1.03 EXTRA ORDINARY GENERAL MEETING (EGM)

Extra Ordinary General Meetings as the name implies are general meetings
called to deal with emergency or urgent matters that cannot wait for the next
AGM. The EGM may be convened by the directors; however, members of the
company may also convene one. This is called requisition of meeting.

One or more of the members holding at least one tenth of the paid up share
capital of the company, in the case of a Limited liability company or one tenth
of the company’s voting rights in the case of a company Limited by Guarantee
(which has no share Capital) may requisition an EGM.

2.0 NOTICE OF MEETINGS

A Company usually has several shareholders who are resident in different
places.
In order to convene a company meeting therefore, the shareholders need to be
notified of the meeting together with the agenda thereof to enable them prepare
for the meeting.
2.01 LENGTH OF NOTICE OF MEETINGS
When notice of meeting is to be issued, time must be given to enable the notice
reach the persons intended and to enable them prepare and attend the meeting.
Under the CAMA, section 217 provides that the length of notice for all types of

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 general meetings of the company shall be 21 days from the date the notice was
sent out, i.e. the 21 days include the date the notice was sent out.

A general meeting may however be called by a shorter notice if in the case of an

Annual General Meeting (AGM) all the members entitled to attend and vote at
the meeting agree In the case of any other general meeting if a majority of the
members holding at least 95% of the nominal value of the shares carrying a
right to attend and vote at the meeting agrees.

Any notice that does not meet the requirements of length of notice is invalid as
no meeting could validly hold without complying with the statutory length of
period prescribed by the CAMA.

2.02 ENTITLEMENT TO NOTICE OF MEETING.

It is mandatory to serve a Notice of Company General meeting on the
following:
i. Every member of the company.
ii. Every person on whom the ownership of a share devolves by reason of
his being a legal representative, receiver or a trustee in Bankruptcy of
a member of the Company.
iii. Every director of the Company
iv. Every Current Auditor of the Company
v. The Company Secretary.

2.03 SERVICE OF NOTICE

Notice of meeting may be given to those entitled either personally or by post to

the address supplied by the person to the company for sending notices to him.
Notice sent by post must contain the correct address and correct postage stamp.

The notice so posted is deemed to be delivered after 7 days of the postage. In

the case of deceased or bankrupt persons, notice of meeting shall continue to be

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 sent to their usual address before their death or bankruptcy until their legal
representatives supply a new address if any to the company.

Where several persons hold shares jointly, notice sent to the holder first named
in the company’s register of members shall be deemed to be notice to all the
other joint holders. Section 220(1)-(4) of CAMA.

2.04 FAILURE TO GIVE NOTICE

Failure to give notice of meeting as required to any one person entitled to

receive such notice shall invalidate the entire meeting if held. It does not matter
that the person concerned had informed the chairman that he may not attend the
meeting.

The burden to send out notices is statutory and must be carried out. It is left for
the recipient to decide whether or not to attend the meeting. However, where the
failure to send notice is an accidental omission, the meeting shall not be invalid
or where the notice was sent but failed to arrive by no fault of the company i.e.
if the notice was sent by post to the correct address with the correct postage
stamp.

2.05 CONTENTS OF NOTICE OF MEETING

The notice of a meeting is expected to specify the place, date and time of the
meeting, and the general nature of the business to be transacted and sufficient
detail to enable those to whom it is given to decide whether to attend or not, and
where the meeting is to consider a special resolution, it shall set out the terms of
the resolution. The company’s statutory meeting and all AGMs shall be held in
Nigeria

2.06 NATURE OF BUSINESS THAT CAN BE TRANSACTED IN A

GENERAL MEETING

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 There are two types of Businesses that may be transacted at the General
meeting. They are the Ordinary business and the special business.

Ordinary business includes:

(a) Declaration of Dividend

(b) Presentation of financial statements and report of the directors and Auditors.

(c) Election of Directors to replace those retiring

(d) Appointment and fixing of the remuneration of the Auditors

(e) Appointment of the members of the audit committee.

Any business that is not ordinary business is automatically special business.

s.214 CAMA

Notice of meetings is very important. It determines the decision of members on

whether or not to attend meetings. Where members do not attend meetings and
it becomes in practicable for this or other reasons, for the meeting to hold, the
court may order the meeting to be convened even if by only one person. S.
223(2) of CAMA.

2.07 QUORUM

No business shall be transacted at any general meeting unless a quorum of

members is present at the time when the meeting proceeds to business and
throughout the meeting. Unless otherwise provided in the articles, the quorum
for the meeting of a company shall be one third of the total number of members
of the company or 25 members (whichever is less) present in person or by
proxy. Where the number of members is not a multiple of three, then the
number nearest to one third, and where the number of members is six or less,
the quorum, shall be two members.

2.08 PROXY

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 Any person entitled to attend the company meeting, may attend either in person
or by proxy. A proxy is any person appointed by the person entitled to attend
the meeting as his representative to attend and vote at the meeting on his behalf.
The proxy has right at the meeting as the person he represents.

The proxy may be a member of the company or not. The important thing is that
the person appointed should have a document showing or evidencing that has
the authority of the person he is representing. The document is also called a
proxy.

2.09 VOTING

Voting is by show of hands i.e. one man, one vote, unless a poll is demanded
before or as the chairman announces the result of the voting by show of hands.

Voting by show of hands does not take care of the wishes of those who have the
highest financial stake in the company. However, when voting by a poll is
made, the voting is by the number of shares a person holds. The articles of
association determine how the votes in poll are arrived at.

2.10 MINUTES OF MEETING

The Company Secretary must ensure that a record of the proceedings at the
general and all other meetings of the company are kept. This record is called
minutes of meeting. Unless the contrary is proved, the minutes of the meeting
shall be prima facie evidence of what took place at the meeting. The minutes
may be in loose leaves, bound books, retrievable electronic form etc. S. 550 of
CAMA.

3.00 COMPANY RESOLUTIONS

Decisions of a company are normally reached in the Company Meetings. The

decision of the meeting is called resolutions. Resolutions are important to
company meetings. They are the means by which the will of the company is

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expressed. There are several types of resolutions depending on the type of
company and the type of business being transacted. There four types of
resolutions to wit: i. Ordinary Resolution, ii. Special Resolutions and Written
Resolutions.

i. ORDINARY RESOLUTIONS

A resolution is ordinary if it is required by the CAMA to be passed by a simple

majority of votes i.e. by the highest votes cast at the meeting. Ordinary
resolution is usually taken when the ordinary business of the Company is being
transacted. These include:

(a) Declaration of dividends,

(b) Presentation of financial statements,

(c) Report of Auditors on the companies accounts,

(d) Directors reports,

(e) The election of directors in place of those retiring,

(f) The appointment and fixing of remuneration of the Auditors,

(g) The appointment 9of members of the audit committee. (S. 214)

ii. SPECIAL RESOLUTION.

Special Resolution requires at least three fourths of the total votes cast, i.e. 75%
of the total votes cast must be in favour of the resolution S. 232 (2) of CAMA.
Special resolutions are usually taken in special businesses of the Company.

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Where the three fourths majority cannot be reached, the resolution is defeated.
All businesses transacted at Annual General Meetings are deemed to be special
businesses except the following:

(a) Declaration of dividends,

(b) Presentation of financial statements and the report of directors and auditors,

(c) The election of directors in place of those retiring,

(d) The appoint and fixing of remuneration of the auditors, the appointment of

members of the Audit Committee.

iii. WRITTEN RESOLUTIONS.

In the case of a private company, the CAMA allows it to pass written
Resolutions which dispenses with the requirement of law that all resolutions
of the General meeting shall be passed at a properly convened general
meeting. A written resolution is one in which the resolution is drafted on
paper and signed by all the members of the private company who are
entitled to attend and vote had the resolution been taken to a general
meeting S. 234 of CAMA.

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2.00 SHARES

Section 567 of the companies and Allied Matters Act, (CAMA) 2004 defines a
share as: “The interests in a company’s share capital of a member who is
entitled to share in the capital or income of such company…”

When a company is incorporated one of the requirements it satisfies for the

incorporation is the statement of its authorized share capital i.e. the amount it
states in its incorporation documents as the total money it intends to raise from
prospective shareholders. This money is used in financing the company’s
business. Once the company is incorporated the amount it states in its
incorporation documents as its proposed capital becomes approved and is then
on it’s authorized share capital. It cannot raise more than that amount from
prospective shareholders unless it secures approval to increase it.

2.01 TYPES OF SHARES

Section 118 and 119 of CAMA 2004 allows a company to create classes of
shares. It may therefore issue shares to the public in classes. These classes of
shares are also known as types of shares. The classes of shares companies have
in practice been known to issue are as follows.

i. ORDINARY SHARES

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These are the usual or normal shares issued by companies. They are called
ordinary because they have no special rights attached to them. There is also no
restriction on the extent to which they could share in the profits of the company.
Once profits are set aside for distribution as dividends to shareholders, the
preference shareholders are paid their fixed amount. The balance is distributed
to the ordinary shareholders, if the balance is much, they get a large share. If the
dividend is less they get a small share. The preference shareholders cannot ask
for more than their agreed percentage of the profits even if the company makes
more profit than expected.

ii. PREFERENCE SHARES

This class of shareholders are entitled to be paid first whenever a dividend is

declared. Dividends are profits set aside by the company for distribution to its
shareholders. When dividends are declared, the preference shares are paid their
agreed percentage first before any other shareholder is paid. Preference shares
are advantageous where the profitability of a company is not certain.

There are also cumulative preference shares. If a company is unable to declare

a dividend in a given year, the agreed percentage is carried over to the next
year. The agreed percentage accumulates until they are all paid in arrears. Until
this is done, no ordinary shareholder gets anything.

Preference shares may also be non-cumulative. In this case, once dividends are
not declared in a given year, the arrears are forfeited i.e. they are not carried
over to the next or any other year.

iii. DEFERRED SHARES

These shares are also called founders shares. These are shares specifically
allocated to the founders of the company or its main financiers. They are
usually settled after the ordinary shares have been settled. The only problem is
that instead of the ordinary shareholders taking the balance of what is left of the

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 distributable profits after the preference shares have been settled, the ordinary
shares are limited to an agreed percentage of the balance of what is left, instead
of all of it. After the ordinary shareholder take the agreed percentage, what is
left goes to the founder’s shareholders.

2.02 ISSUE OF SHARES

The memorandum of Association of a company usually carries a share capital

clause which states the authorized share capital of the company which is a
minimum of N10,000 for a private company and a minimum of N500,000 for a
public company (section 27(2) (CAMA). This share capital is divided into
smaller units for purpose of issuance to prospective shareholders. For example
a company with a share capital of N500,000 may divide this into 500,000 units
of N1.00 each, when it sells the 500,000 units at N1, it will realize its share
capital of N500,000.

A company issues shares when it makes them available for purchase by

prospective buyers. The shares may be issued in the classes earlier discussed.
Shares may also be issued at a premium, at discount(at less than the book value)
or at par value ( at the book value).

2.04 ALLOTMENT OF SHARES

Allotment is the issuance/sale of shares by a company to realize its share

capital. Section 125(c) of CAMA provides that the company may allot its
shares to an applicant if it accepts the application and actually allocates shares
to the applicant. It is at the company’s discretion to decide how many shares it
allots to an applicant. It may allot less than applied for, but not more than
applied for, otherwise the applicant is at liberty to decide whether or not to
accept the surplus offer by the company. Once allotment has been completed,
the company shall within one month thereafter make a return (notification) to
the corporate Affairs Commission (CAC) on the allotment made. (Section 129

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 of CAMA) The return as to allotment is the delivery to the CAC of details of the
allotments made. This include the names, addresses of allotees, number of
shares allotted to each allotee, the amount paid by each allotee e.t.c

2.05 PAYMENT FOR SHARES

Section 135 of CAMA allows the company to accept payment for shares in

three forms

a) Payment in cash

b) Payment in Kind

c) Payment in both cash and kind

If payment is made in kind, the company must independently value the property
to find its true value before it credits the owner with shares in exchange for the
property. Section 137(1) of CAMA

Where shares are not paid for at all or partly paid for, the subscriber is liable to
pay for the unpaid shares at a later date. The demand by the directors for the
unpaid shares to be paid for is called ‘call on shares’. The subscriber is under
obligation to pay for the share allotted to him which he did not pay for at the
time of allotment. The shareholder is entitled to 14 days notice to pay up
(section 133(1) of

2.06 FORFEITURE OF SHARES

When a call is made and the shareholder fails to pay for the unpaid shares, the
Directors shall give him further notice to pay the amount due with interest by a
given date, failing which he forfeits the unpaid shares. The Directors by a
resolution shall be at liberty to sell off the shares to recover the money. Section
140 of CAMA.

2.07 SHARE CERTIFICATE

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 Every company that allots shares, shall within 2 months thereafter prepare the
share certificates for dispatch to the allotees section. S.146(1) of CAMA. The
share certificate must carry the company’s seal, the number of shares and the
amount paid on them.

A share certificate is prima facie evidence of ownership of the number of shares

thereon stated by the person thereon named. (s. 147(1)) of CAMA. A share
certificate is property that may be sold or transferred (section 115 of CAMA).

A shareholder whose name is entered in the company’s Register of members is

called a Member of the company and is entitled to attend and vote at general
meetings. Section 83 of CAMA.

3.00 MEMBERSHIP OF A COMPANY

Every company must have a minimum of two members at any time. A member
of a company is any person who is part of subscribers of the memorandum of
Association of a company is deemed to be members and he shall be included in
the register of members of the company. Every other person who agrees in
writing to become a member and whose name is entered in the Register of
members of the company. A person agrees in writing to be a member of a
company if he acquires shares in the company by allotment, transfer, or
transmission etc.

3.01 WHO MAY BECOME A MEMBER

The right and capacity to become a member of a company is open to any legal
person, whether a natural person or an artificial person. However the capacity of
infants, personal representatives of deceased shareholders, corporations and
Aliens are regulated as follows:

i. Infants:

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 A person under the age of 18 is not qualified to join in the formation of a
company in his own right. He may only join if there are two adults also joining
in the formation of the company along with him. In this case, the capacity of
the two adults cures the incapacity of the infant. An infant who joins in the
formation of a company shall however not be counted for the purpose of
determining the minimum number of members of a company.

ii. Personal Representatives:

When a shareholder dies, the holders of the letters of administration of his estate
(properties) of the deceased person, if he died without a will are the ones
entitled to the shares held by him. If however he left the shares to someone in a
will he made while alive, the person is entitled to those shares. If a deceased
person left a will, in that case letters of administration are not applicable.
However the benefiting persons do not automatically become members of the
company. They must notify the company that they or their nominee should be
registered in the Register of members of the company as the new holders of the
shares inherited from the deceased shareholder. (section 155 (3) of CAMA).

iii. Corporations:

A company upon incorporation becomes a legal person. It may therefore

acquire shares in another company. However, a company under liquidation is
not capable of acquiring shares in another company.

iv. Aliens:

Aliens include foreign companies. They may acquire shares in Nigerian

companies. Aliens must however secure the permits needed for them to enter
Nigeria lawfully to carry out their business. These permits include, Business
permit, Residency permit e.t.c.

3.02 HOW TO BECOME A MEMBER

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A person may become a member by acquiring shares in a company in the
following ways:

i. By subscription:

At the point of incorporating the company, it is required that the company have
at least two shareholders who will sign the memorandum of Association and
undertake to take at least 25% of the share capital among themselves (section
27(2)(b) CAMA.. These are the subscribers to the memorandum of the
company. Section 79(1) of CAMA requires that as soon as the company is
incorporated (i.e. registered) the subscribers shall have their names entered into
the company’s register of members. The subscribers to the memorandum are
therefore the first shareholders and members of the company.

ii. By Allotment:

Allotment is the process of acquiring shares direct from the company whenever
it issues or offers its shares for sale. In this case, when a person applies and is
given certain number of shares, he is said to be allotted the shares. When he
pays for the shares and his name is entered in the Register of members of the
company he becomes a member. S. 125&127 CAMA.

iii. By Transfer.

Shares are properties whose ownership could be transferred from one person to
another. A person may therefore become a shareholder if a former owner
transfers his ownership of shares to him. This could be by sale or as a gift e.t.c.

iv. By Transmission:

When a previous owner of shares dies and his shares are inherited by his
personal representatives or heirs, this is called transmission of shares. Shares
may be inherited only by production of probate of a will of the deceased owner
or letters of administration of his estate granted by the High Court.

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3.03 RIGHTS AND LIABILITIES OF MEMBERS

The right of members is stated in section 81 as the right to be invited and to

attend any general meeting of the company and the right to speak and vote on
any resolutions at the meetings. These rights are subject to the member having
paid for all the shares he holds and if he has not paid for them for them, then
until the company has made calls he continues to enjoy the membership rights.
All a person needs to attend company meeting and vote is to hold and pay for at
least only one share. Where he holds more than one share but has paid for some,
he may still attend company meetings unless the company insists on payment
for all the shares.

3.04 LIABILITY OF MEMBERS

The liability of members depends on the type of company they are share holders

in.

i. Company Limited by Shares:

The liability of members of a company limited by shares is limited to the

amount if any, that may be outstanding on the shares they hold. If however they
have paid for all their shares, they have no further liability in the company.
Section 21(1) CAMA.

The company cannot force the members to take up more shares than they had
willingly indicated to take; even if the memorandum is altered to increase the
share capital of the company. (section 49, CAMA).

ii. Company Limited by Guarantee

The liability of members of a company Limited by guarantee is limited to the

amount each has agree to contribute to the assets of the company to meet its
outstanding liabilities in the event of winding up, that is if its assets are not
enough to settle its liabilities. Thus, the members become liable to bring their

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 agreed contribution if the company is winding up and the existing assets are not
enough to pay the company’s debts.

iii. Unlimited Company:

The liability of members of an unlimited company is unlimited. (section 21 (1)

This means the liability stretches to the extent of the liability of the company.

3.05 REGISTER OF MEMBERS

Every Company registered in Nigeria is required to keep a register of members

The register shall be kept at the company’s registered office. The Register
contains the names of shareholders, the number of shares held by them, the date
a person became a member and the date he ceased to be one. A person becomes
a member of the company only when his name is entered in the register of
members.

The term “shareholder” and “member” are sometimes used interchangeably;

however they are not the same. A person who acquires shares in a company is a
shareholder and is entitled to dividends on the shares he holds. However he is
not a member of the company until his name is entered in the register of
members. Only members may attend company meetings, speak and vote on
resolutions at company meetings. To enjoy these rights, a shareholder should
exercise his right to having his name entered on the company’s register of
members.

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4.00 DIRECTORS

A Director is a person duly appointed to direct and manage the business of a

company (section 244 of CAMA). Every company shall have a minimum of
two directors at any time. (section 246 of CAMA). The company may by its
articles of Association fix the maximum number of its directors (S.249 (3) of
CAMA).

The company has two major organs, the General meeting and the Board of
Directors.

3.01 TYPES OF DIRECTORS.

i. Non-Executive Directors;

These are Directors who do not hold any employment with the company as
directors i.e. their position as directors is not by virtue of their being employed
and paid salaries in the company. They only collect sitting allowances. They
only attend periodic meetings of the Board of Directors where company policies
are formulated for the Executive directors to implement.

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 ii. Executive Directors:

These are persons who are employed by the company as Directors under a
contract of employment. Executive directors are responsible for the day to day
running of the company, (Section 282 (4) of CAMA).

iii. Alternate Directors:

These types of directors are usually created by the Articles of Association of the
company. They are directors appointed by a serving director to seat on the
board in his place in case he has to be absent.

iv. Shadow Directors:

These are persons on whose directives and instructions the Board of Directors is
accustomed to act. This refers to those who control the decisions of the board
from behind the scenes. (Section 245 of CAMA).

v. Directors by estoppels.

Where a company holds someone out as its director and he so acts, the company
is bound by his acts and the defect in his appointment i.e. the fact that he was
never appointed in the first place will not be a defence for the company.

3.03 APPOINTMENT OF DIRECTOR.

1. First Directors

By section 247, a first director is a person named in the memorandum of the

company by the first subscribers (shareholders) of the company as director.
They may also be named in a clause in the articles of Association of the
company as directors at the point of incorporating the company.

2. Subsequent Directors

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Apart from those who were the first directors appointed at the incorporation of
the company, all others after them are subsequent directors. The may be
appointed in the following ways:

(a) By power under the articles.

(b) By order of a court.

(c) Life director.

A person may in the articles of Association be named as a life director of the

company. He may notwithstanding be removed either by amending the article
to delete the clause appointing him life director or he may be removed by an
ordinary resolution of the general meeting of the company subject to payment of
damages to him for breach of his tenure of office. S.262 (6) CAMA.

(d) Appointment to fill casual vacancy.

Where a director dies, resigns, retires or is removed before the expiry of his
term of office, the Board of Directors may fill that vacancy. Such persons will
be in office only until the next General meeting when they may be re-elected or
removed.

(e) Election of Directors

Unless the company’s articles of Association otherwise provide, all the directors
of a company shall retire at the first Annual General Meeting of the company.
At subsequent Annual General Meetings, one third of the Directors shall retire
in the order of seniority. At these meetings, as the directors retire, those who
present themselves or are nominated are voted in as directors to replace these
retiring unless they are re-elected.

3.04 DISQUALIFICATION FROM APPOINTMENT

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The following persons are disqualified from being appointed as directors under
the law.

(a) Infants i.e. persons under 18 years as at the date of the appointment.

(b) A lunatic or person of unsound mind

(c) Insolvent persons (s. 253)CAMA

(d) Persons convicted of fraud S. 254.CAMA

(e) A corporate body, except if it chooses a nominee to represent it. (s.257

CAMA).

3.05 VACATION OF OFFICE.

A person already appointed as director shall vacate or lose the office if the
following circumstances occur:

i. He fails, within two months of his appointment to acquire the required

number of shares specified for directors in the Articles of Association of the
Company

ii. He becomes bankrupt or reaches an arrangement or compromise with his

creditors.

iii. He is convicted of fraud and thereby restrained by court order from taking
part in the management of any company.

iv. He becomes of unsound mind

v. He resigns from office in writing to the company.

A person may not have been under the category of persons disqualified from
being appointed a director under S. 257 CAMA. However, after being appointed
a director and before the expiry of his tenure of office, he becomes caught up

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with one or more of those elements that disqualifies a person from becoming a
director.

In such a case he will be forced by law to resign or be removed from office by

court order if he refuses to leave. It should however be noted that in the case of
a lunatic or an insolvent person, they can only be removed from office if it was
a court of law that held that they are lunatic or insolvent. Only a court order on
the issue is a final conclusion that a person is insolvent or a lunatic.

3.06 ROTATION OF DIRECTORS

Section 259 of CAMA provides for rotation of directors as earlier noted in 3.2
above. The position in section 259 applies only if a company’s articles of
Association are silent on the order of rotation (or retirement) of Directors.

1. At the first Annual General Meeting all the Directors retire for fresh elections
to take place. Retiring directors are eligible to re-election.

2. At every subsequent Annual General Meeting, one third of the Directors shall
retire. If the number is not a multiple of three i.e. 3,6,9,12,15,18, e.t.c. The
number nearest to one third shall retire. The directors shall retire based on
seniority in date of first appointment.

A retiring director who offers himself for re-election is deemed to be re-elected

automatically unless:

(a) Another person is elected to replace him, or

(b) It was expressly resolved at the meeting not to fill the vacancy created by his
retirement, or

(c) A resolution for his re-election is put to vote but lost.

3.07 NOMINATION AND VOTING OF DIRECTORS

1. Retiring directors are eligible to offer themselves for re-election

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2. persons other than retiring directors shall be nominated by the Board of
Directors; or such persons may in the alternative be nominated by any member
of the company in writing to the company by depositing the notice of
nomination with the nominee’s consent in writing with the company at least
between 21 days to 3 days to the date of the Annual General Meeting where the
election will take place. The person proposed must himself accept the
nomination in writing.

Unless the articles otherwise provide, the appointment of directors is by

ordinary

resolution. In a public company, each director is appointed by a separate

resolution. In a private company however, the director may all be appointed by
a single resolution.

3.08 AGE OF DIRECTORS

The minimum age for appointment of a director is 18 years there is no

maximum. However for a public company to appoint a person of 70 years or
above, special

Notice of 28 days must be given to the company. The company must in turn
state in its notice of the General meeting concerned that it is proposed to present
a person of 70 years or above for appointment as director. The person himself
shall disclose this fact to the members at the general meeting.

3.09 FIDUCIARY DUTIES OF DIRECTORS ( LOYALTY AND GOOD

FAITH.)

i. The directors must observe utmost good faith towards the company in any
transaction with or for the company S. 279 (1).

ii. They must act at all times in what they honestly believe to be in the best

interest of the company. S. 279 (3) and (4).

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 iv. They must exercise company powers for the purpose specified and not
for personal benefit. S. 279(5).
v. They must not compromise their discretion to vote in a particular way
in any Board resolution S. 279 (6)
vi. They must not delegate their powers in circumstances that amount to
abdication of duties S. 279(7).

3.08. DIRECTORS DUTIES OF CARE AND SKILL

Every director shall exercise that degree of care, diligence and skill which a
reasonably prudent director would exercise in comparable circumstances. The
three yardstick for this duty are as follows:

(a) a director need not exhibit in the performance of his duty a greater degree of

skill than should be expected of a person of his knowledge and experience.

(b) A director is not bound to give continuous attention to the affairs of the

company. It is enough if he attends periodic board meetings. The position is

however different if one is an Executive director on salary with the company.

(c) The directors are not guilty of breach of the duty of care and skill if having

regard to the exigency of business they delegate their duties to the Managing

Director or a Committee of the Board provided there is basis for trusting such

officials of the board. Care should however be taken not to delegate duties as

may amount to abdication of duties.

3.10 CONFLICT OF INTERESTS

A director shall not place himself in a position where his personal interests will
clash with that of the company. Section 280(1) of CAMA. Conflict of interests
may arise in the following situations :

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1. where the director is utilizing the company’s property for his personal benefit
outside approved limits S.280(20 (a)

2. Where he utilizes his position to make secret profits out of the company’s
opportunities. section 280(3).

3. where he misuses company information coming to him by virtue of being a

director. These duties must be observed even after leaving office. S. 280(5)

3.11 LIABILITY OF DIRECTORS

a. The directors are liable to account for any secret profits made, unless same
had first been disclosed and approved or over looked by the General meeting s.
280(6).

(b) The liability of directors in the company is unlimited if the memorandum or

Articles of Association states, so S. 288(1)

(c) A director who fraudulently fails to apply money received as loan on behalf
of the company for a specific purpose, or money or other consideration as
advance to the company for a contract or project, for the specified purpose or
contract shall be liable personally for the money S. 290.

3.12. SALARY OF DIRECTORS S. 267

Directors are not entitled to any salaries unless the article of Association so
provide, in which case the salary is fixed by the General meeting from time to
time. The directors are however entitled to refund for expenses properly
incurred in the course of the company’s business.

3.13. MEETING OF DIRECTORS

After incorporation, the first meeting of the Directors shall be within 6 months
of incorporation. Decisions at Board meetings shall be by simple majority votes
and in case of a tie in votes cast, the chairman shall have a second vote or

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casting vote. The Board shall elect its chairman and fix his tenure. S. 263(4)
CAMA.

Unless the articles otherwise provide, the quorum for meetings shall be 2
directors where the directors are not more than 6. If the number is more than 6,
then quorum is one third or the nearest whole number to one third. S.
264(1).CAMA. The board may delegate some or all of its powers to be
exercised by the a committee of the board from time to time or appoint one or
more of the directors to the office of managing Director and delegate all or
some of its powers to him from time to time. S. 64 and S. 264.CAMA

All directors are entitled as of right to notice of meetings. S.219 & 266(1).
Meetings are called at the instance of any director. S. 263(3) The managing
director is appointed and is removable by the Board.

3.14. REGISTER OF DIRECTORS

The company Shall Keep a register of directors and Secretaries at its registered
office s. 292(4)

3.15 REMOVAL FROM OFFICE

The memorandum or articles of association of a company may empower any

person to appoint or remove any director or other officer of the company.
Where this is the case, then the director may be removed from office pursuant to
section 41 (3).

The other way is by complying with the procedure in section 262. This
procedure will be employed where the company itself wishes to remove its
director or when any other person wishes to procure a company resolution to
remove a company director. S. 262.

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In the case of a life director, though he is appointed for life he may be removed
under section 262 by an ordinary resolution of the company’s general meeting
subject to payment of damages. S262(6) CAMA.

However, he may also be removed by amending the company’s articles of

association to delete the clause which appointed him a life director. This
procedure is however very difficult as it requires three-fourths majority of total
votes cast at the meeting. After a successful amendment, the life director stands
removed. In this case there is no damage to be paid to him under section 262 (6)
of CAMA since the basis for his claim has been removed i.e. the clause under
which he could have claimed breach of his appointment has been removed
through the amendment that was made deleting the clause in the articles that
appointed him. He can no longer sue under the new articles since they no longer
contain the clause for life directorship.

A Company may by ordinary resolution of the General meeting remove a

director from office not withstanding anything in its articles or any agreement
with him. Section 262 (1) of CAMA.

This however does not deprive the director so removed from claiming damages
for breach of his contract of service where there was a contract between him and
the company for a fixed period. Section 262 (6) of CAMA.

A director may be removed in the following manner:

(a) If there is a procedure specified in the articles or letter of appointment of the

Director, especially the Executive Directors, the procedure should be followed
i.e. section 41(3) of CAMA if it proves to be shorter or faster.

(b) If there is no other shorter procedure for removal of directors especially the
non-executive directors, the only other procedure is as follows:

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(i) The persons proposing the removal of a director will issue a special notice to
the company containing the proposal for the removal stating reasons. The notice
must give at least 28 days before the proposed date of the general meeting
where the removal is proposed to take place. Section 236 & 262 (2) of CAMA.

(ii) The Company Secretary then sends the notice to the director(s) to be
removed requesting his response if any.

(iii) If the response of the director concerned did not come in too late, the
response will be sent out along with the Notice of meeting of the company at
least 21 days to the date of the meeting.

(iv) At the meeting, the director concerned is entitled to make oral

representation, and have his written response circulated at the meeting if it was
not earlier sent out with the Notice of meeting.

(v) The resolution to remove the director is then put to vote.

A simple resolution i.e. a simple majority of votes cast is required to remove a

director. Section 162 (1) – (3) of CAMA. The Corporate Affairs Commission is
thereafter notified within 14 days of the resolution to remove the director.

3.15 PUBLICATION OF REMOVAL

Once a director has been removed, it is important to notify the Corporate Affairs
Commission within 14 days. The company shall also proceed to remove his
name from its letterhead papers, receipts, documents in circulation etc.

Failure to take the above steps might make the company liable for the removed
directors’ acts. The company will be deemed to hold him out as a director by
not taking steps to publicise his removal in all its documents that are in
circulator and with the Corporate Affairs Commission. Section 69(b), 250 and
260 of CAMA.

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4.00 COMPANY SECRETARIES

Section 293 provides that every company shall have a company secretary.
Section 567 of CAMA defines officers of the company to include persons of the
rank of Director, manager or secretary. The secretary is therefore an officer of
the company in his own right, with specific duties although additional duties
may be assigned to him by the Board of Directors or the General meeting. The
Secretary is therefore a Senior of Management Staff of the Company.

A person may be a director and Secretary at the same time but acts required to
be done by a director and secretary of a company must be done by two different
persons.

4.01 QUALIFICATION OF THE SECRETARY

A secretary shall be appointed by the directors. The qualification for

appointment of the Secretary depends on whether it is a private or public
Company.

In a private Company, the Board of directors may appoint any person who
appears to them to have the requisite knowledge and experience to perform the
functions of the office of Company Secretary. No Specific qualification is
prescribed in this respect. The directors therefore may exercise their discretion.

In a public company, however, the CAMA has prescribed the qualification for
appointment of the Secretary as follows:

(a) He must be a member of the Institute of Chartered Secretaries and

Administrators (ICSA); or.

(b) A legal practitioner; or

(c) A member of an accounting professional body established by law in Nigeria

like ICAN or ANAN.

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(d) A company of chartered accountants, legal practitioners or chartered
secretaries and administrators.

4.02 DUTIES OF THE SECRETARY

The duties of the Secretary are statutorily prescribes under the CAMA and they
include:

(a) He attends the meetings of the company, the Board of Directors, and their
Committees to render all needed Secretarial Services and also advice on
compliance with the relevant laws, rules and regulations.

(b) Keeps the registers and other records required by the CAMA to be kept by
the Company.

(c) Renders proper returns to the Corporate Affairs Commission of activities of

the Company as required by law.

(d) Carries out any other administrative and secretarial duties as may be directed
by the directors or the Company.

e. Apart from the above, the secretary keeps the company’s books e.g. register
of members, register of charges, books of account, minute books etc.

f. The secretary is not authorized to perform any function or exercise any power
reserved for the Board Except by their authorization, Section 298 (2) of CAMA.

g. The secretary does not owe fiduciary duties to the company, but where he is
acting as its agent he shall owe fiduciary duties to it, and as such shall be liable
to the company where he makes secret profits or lets his duties conflict with his
personal interests, or uses confidential information he obtained from the
company for his own benefit.

REMOVAL OF A SECRETARY

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The Directors may be removed a sectretary. The process for the removal is as
follows

i. Where it is intended to remove the secretary of a public company, the board

of directors shall give him notice—

(a) stating that it is intended to remove him;

(b) setting out the grounds on which it is intended to remove him;

(c) giving him a period not less than seven working days within which to make
his defence; and

(d) giving him an option to resign his office within a period of seven working
days.

e. Where the secretary does not within the given period resign his office or
make a defence, the board may remove him from office and shall make a report
to the next general meeting

f. where the secretary, without resigning his office, makes a defence and the
board does not consider it sufficient, if the ground—

(a) on which it is intended to remove him is that of fraud or serious misconduct,

the board may remove him from office and shall report to the next general
meeting; but

(b) is other than of fraud or serious misconduct, the board shall not remove him
without the approval of the general meeting, but may suspend him and shall
report to the next general meeting.

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5.00 PROTECTION OF MINORITIES
Upon incorporation, the company becomes a legal person of its own with a
personality separate from that of its members. The personality of the company
is however run by its human organs, namely the members in general meeting
and the board of directors. Only these two organs can act or authorize an act to
be done for the company. S. 63 (1) of CAMA.

Where a wrong is done to the company, only the company can sue to redress the
wrong being that the company upon incorporation is a legal person capable of
suing and being sued S. 37 & 38 of CAMA. The decision to sue to redress a
wrong against the company is a management decision for the Board of directors
to decide on, being the company organ responsible for management of the
company. S. 63 (3) of CAMA. Where the Board fails to discharge this
responsibility, the members in a general meeting may institute legal proceedings
in the name of the company. S. 63 (5) (b) of CAMA. The is the rule in FOSS v.
Harbottle.

33 | P a g e
However, the courts had started introducing some measure of relief under their
equitable and inherent powers to reduce the hardship of the rule in Foss V.
Harbottle. These exceptions have now been codified in the CAMA. They are as
follows:

1. MEMBERS DIRECT ACTION. SECTION 300 OF CAMA.

Members of the company have the right to go to court to ask for an injunction or
a declaration against the company in the following situations:

(a) where the company enters into any transaction which is illegal or ultra vires.

(b) Where the company purports to do by ordinary resolution what by the

CAMA or the Articles is required to be done by special resolution.

(c) Any act of the Company which affects the individual right of the members
in the Company.

(d) Where a fraud is committed against the company or the minority share
holders and the directors fail to redress the wrong.

(e) Where a company meeting cannot be called in time to be of practical use in

redressing a wrong done to the company or the minority shareholders.

(f) Where the directors are likely to have benefited or have benefited from their
negligence or breach of duty. Section 300 (a)-(f)

2. DERIVATIVE ACTION S. 303.

A member may apply to the court for an order permitting him to commence a
court action in the name of the company or on its behalf or to intervene in an
action where the company is already a party for the purpose of taking over the
prosecution or defence of the case depending on which side the company is.
Section 303(1) of CAMA.

The grounds for obtaining this kind of relief are as follows:

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 (a) The wrong doers are the directors who are in control of the company and
will not take any action.
(b) The applicant has given reasonable notice to the directors of his intention
to apply for derivative action if the directors do not take the necessary
action to redress the wrong.
(c) The applicant acts in good faith.
(d) It appears to be in the company’s interest that the action be taken.
Section 303 (2) (a)-(d) of CAMA.

In Derivative actions, the company bears the cost since the action in its name or
on its behalf unlike in members direct action where the action is taken
commenced in the applicant’s name and not on behalf of the company.
Section 204 (2) (c) & (d) of CAMA.

2. RELIEF FROM UNFAIRLY PREJUDICIAL AND OPPRESSIVE

CONDUCT. S. 310 & 311, CAMA

A member may bring an action in court to seek relief where the he alleges that
the affairs of the company are being run in a manner that is unfairly prejudicial
and oppressive to his interest as a minority in the company. The set of reliefs
that could be granted are outlined in section 312(2) of CAMA and includes an
order for the winding up of the company, an order setting aside the act
constituting the oppression or unfair prejudice e.t.c.

3. INVESTIGATION BY THE CAC

The Corporate Affairs Commission may on the petition of a member direct an

investigation into the Affairs of a company to determine whether the affairs of
the company are being properly run. S. 314-330

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 4. WINDING UP ON THE JUST AND EQUITABLE GROUND S.
408(E) OF CAMA

A member may apply to the court for the winding up of the company on the
grounds that it is just and equitable to do so. The grounds for this action are not
stated. They are therefore open and will be granted based on the merits of each
case.

7.00 WINDING UP OF COMPANY

The existence of a company may be brought to an end as provided for under the
CAMA. Winding up is the process by which a company’s existence is
terminated i.e. liquidated and subsequently dissolved and its assets sold off for
the settlement of its creditors, members and employees. The life of the company
does not come to an end at the commencement of winding up proceedings. It is
only the beginning of the end for the company. Its life actually comes to an end
when the winding up processes are completed and the company is dissolved

There are three modes of winding up, winding up by court order (called
compulsory winding up, voluntary winding up and winding up subject to court
order.

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8.0 WINDING UP BY COURT ORDER (CALLED COMPULSORY
WINDING UP)

The Federal High Court situate in the area where the registered office of the
company shall be the place for the presentation of the winding up petition.
Section 408 of CAMA outlines the legal grounds for the presentation of a
petition for winding up as follows:

i. Where the company has by special resolution agreed that the company
be wound up by the court.
ii. Default is made in either holding the statutory meeting or in delivering
the statutory report to the CAC. Sections 211, 410 (2) and 411 (3) of
CAMA.
iii. The number of members of the company has reduced to a number
below 2 persons. Section 410 (2) (a) (i) of CAMA.
iv. The company is unable to pay its debts s.409 CAMA. Inability to pay
debt has been defined in S. 409 as follows:
Where a creditor to whom the company is indebted to a sum
exceeding N2,000, issues a written demand for his money and the
company is unable to pay the said sum within 21 days (3 weeks)
(b) Where a court judgment or order in favour of a creditor is returned
unsatisfied by the company
(c) Where the court assesses the contingent and prospective liabilities
of the company and is of the opinion that the company is unable to
pay its debts.

v. The court is of the opinion that it is just and equitable to wind up the
company. Default in holding or in delivering the statutory report of a
statutory meeting under S. 211 of CAMA is not an automatic ground for
winding up.

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8.02 WHO MAY PETITION FOR WINDING UP

The category of persons eligible to present a petition for the winding up of a

company is provided for in section 410 of CAMA as follows:

(a) The company itself through its Board of Directors or General Meeting.

(b) A creditor to the company whether or not his money is due i.e. prospective
or contingent creditor whose money will become due at a later date or upon the
happening of a given event.

(c) The official receiver. See section 419 (1) of CAMA.

(d) A contributory. See section 403 A trustee in bankruptcy to, or a personal

representative of a creditor or contributory

(e) The CAC under section 323 and 410 (2) (d) of CAMA with the approval the
Attorney General of the Federation.

(f) A receiver if authorized by the instrument under which he was appointed.

All of the above parties may present a petition for winding up jointly or
severally.

8.03 VOLUNTARY WINDING UP

Although a petition may be presented to the court to wind up a company, the

members, if in agreement may also voluntarily pass a resolution to wind up the
company. When a company is being wound up by the voluntary resolution of
the General meeting, it is referred to as voluntary winding up.

8.04 CONDITIONS FOR VOLUNTARY WINDING UP

A company may be voluntarily wound up in the following situations:

(a) When the period if any fixed for the duration of the company by the articles
expires, or the event, if any occurs, on the occurrence of which the articles

38 | P a g e
provide that the company is to be dissolved and the company passes an ordinary
resolution requiring the company to be wound up voluntarily.

(b) If the company resolves by special resolution that it be wound up

voluntarily.

On the passing of any of the above stated resolutions, the voluntary winding up
has commenced. Section 459 of CAMA. The resolution passed shall be
advertised in 2 daily newspapers and in the federal government gazette. Once
the winding up resolution has been passed, the question who between the
members and the creditors will control the winding up will arise.

There are two types of voluntary winding up Members Voluntary Winding Up

and Creditors Voluntary Winding Up

Members Voluntary Winding Up

Section 462 provides the test for deciding whether a voluntary winding up
proceeds as a members’ voluntary winding up or not. If within 5 weeks before
the passing of the resolution to wind up voluntarily, the directors make a
declaration in the prescribed form, called statutory declaration of solvency, the
winding up shall be a members voluntary winding up.

CREDITORS VOLUNTARY WINDING UP

Where it is proposed to wind up a company voluntarily and the directors are

unable to make a declaration of solvency 5 weeks to the proposed date for
considering the resolution, the winding up shall be a creditors voluntary
winding up. Where the directors had also conducted enquiry into the affairs of
the company and they are of the view that the company will be unable to settle
its liabilities within 12 months if the winding up resolution is passed, the
winding up shall proceed as creditors’ voluntary winding up.

8.04 WINDING UP SUBJECT TO COURT SUPERVISION

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A company may be wound up voluntarily by resolution of the members. It may
thereafter proceed as either members or creditors winding up. In the course of
the winding up however, disputes or differences may arise in the manner the
winding up is being conducted. Aggrieved members or creditors may apply to
the court to supervise the winding up process for them. When the court by order
agrees to supervise a voluntary winding up, it is called winding up subject to
court supervision S. 486 of CAMA.

If a company passes a resolution for voluntary winding up, the court may on a
petition order that the voluntary winding up shall continue but subject to such
supervision of the court and upon such terms and conditions as the court thinks
just section 486 of CAMA.

Winding up under court supervision shall be deemed to be a winding up under

court order i.e. It is proceeded with as if it is a Compulsory winding up and the
court shall exercise power over the winding up as if it were a winding up by the
court. A petition for winding up under court supervision is deemed in law to be
a petition for compulsory winding up by the court. It means therefore that the
winding up shall continue as if it were a winding up by the court. S. 487 of
CAMA.

The court is at liberty to allow any liquidator already appointed to continue. The
court may also remove the liquidator and appoint another in his place or instead
appoint an additional liquidator to work with the one already appointed by the

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