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Company Directors In Nigeria

In a bid to have an organized supervision in a company, some members and non-members of a company are usually appointed to manage and oversee the administration of the company in form of Directors.  This article focuses on the concept of Company Directors in Nigeria and Certain procedures that business owners or entrepreneurs should be aware about.

Company Director in Nigeria

COMPANY DIRECTORS IN NIGERIA

A Director is a member of the board of people that manages and oversees the affairs of a business. A Director is entrusted with the responsibility of determining and implementing a company’s policy. A Director is the alter ego of a company, he is a corporate governor in charge of the affairs of a company.

Directors of a company registered under the Companies and Allied Matters Act are persons duly appointed by the company to direct and manage the business of the company. The minimum number of directors a company is required to have is 2 directors.

Director is defined under Nigerian Law to include any person occupying the position of director by whatever name called; and includes any person in accordance with whose directions or instructions the directors of the company are accustomed to act.

APPOINTMENT AND REMOVAL OF DIRECTORS UNDER CAMA

APPOINTMENT OF DIRECTORS

Directors may be appointed in the following ways:

  1. By subscribing to the Memorandum of Association of the company,
  2. By being named the first directors in the Article of Association of the company,
  3. By ordinary resolution of the members at a general meeting,
  4. By members at the Annual General Meeting re-electing another director in the case of death of a director for the tenure of the deceased director,
  5. By Board of Directors, in the event of a casual vacancy arising out of death, re-assignation, retirement or removal of a director pending the next Annual General Meeting, and
  6. Appointment by a third party pursuant to powers conferred in the company’s Memorandum of Association.

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The following persons cannot be appointed as directors of a company:

  1. an infant under 18 years of age,
  2. a lunatic or person of unsound mind,
  3. a person disqualified under sections 253, 254 and 258 of the Act (Please note that, when someone is barred from being a director for a period of time, he is totally disqualified for that period. Section 253 disqualifies insolvent persons; while section 254 bars persons guilty of fraud in relation to company: both categories attract a banned of 10 years), or
  4. a corporation other than its representative appointed to the board for a given term.

REMOVAL OF DIRECTORS

Removal of company directors in Nigeria is done in accordance with the law and is ordinarily a last resort for the company. A company may by ordinary resolution remove a director before the expiration of his period of office, notwithstanding anything in its articles or in any agreement between it and him.

The procedure for the removal of company directors in Nigeria is as follows:

  1. The member proposing the removal is expected by law to send a special notice (not less than 28 days before the meeting) to the company and the company is expected to notify its members of the intention to remove a director not less than 21 days before the meeting.
  2. A copy of the Notice for his removal is also sent to the director concerned or affected.
  3. The director is to make representations in writing as to his defence on the grounds on which he is sought to be removed or if he failed to, he is to be allowed to be heard orally at the meeting of the company (whether or not he is a member of the company) where he is to be removed. Where the representations are made in writing, the said director may request that such representations be made available to the members.
  4. The company shall inform the members (to whom notice of the meeting is sent) of the fact of such representation having been made and make same available to members provided that: it is not received too late and they do not exceed a reasonable length.
  5. Where the representations are not made available to members by reason of receiving it too late, the director can request for the written representation to be read. This does not derogate from his right to make oral representations.
  6. Copies of the representations need not be sent out and the representations need not be read out at the meeting if, on the application either of the company or any other person who claims to be aggrieved, the court is satisfied that the rights conferred by this section are being abused to secure needless publicity for defamatory matter and the court may order the company’s costs on an application under this section to be paid in whole or in part by the director, notwithstanding that he is not a party to the application.
  7. Where it is resolved to remove the director concerned, the meeting is to pass an ordinary Resolution for his removal.
  8. Thereafter, the company secretary is to fill and file Form CAC 7A, (Particulars of Directors) containing the particulars of the directors of the company after the removal at the Corporate Affairs Commission within 14 days of the passage of the Resolution, attached with the said Resolution.
  9. The company is to make the changes in its Register of Directors and Secretary as appropriate.

 Please note that a director cannot be suspended.

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DUTIES OF DIRECTORS UNDER CAMA

The question, what are the duties and responsibilities of company directors in accordance to Nigerian Law often pops up under corporate governance.

The duties of Directors are classified into two broad headings.

  1. Fiduciary Duties – owed to the company and shareholder and any person dealing with company securities; and,
  2. Duties of care and skill – measured according to the qualification and skill of the directors and the actions of a reasonable and prudent director in the shoes of the dire

The duties put together under both headings will include:

  1. Duty to promote the success of the company
  2. To run the company in a lawful and efficient manner by ensuring adherence to relevant companies’ law in Nigeria.
  3. To act honestly and take reasonable care and diligence in exercising their powers.
  4. To improve the company’s value creation by initiating ways and means of improving their products and the services they offer.
  5. To ensure the value created is shared in an equitable manner among the shareholders, employees and stakeholders of the company.
  6. To protect interest of the various shareholders. They also ensure that shareholders receive their dividend warrants when due, creditors are paid on time and employees are adequately remunerated for any collateral purposes or financial rewards.
  7. To engage in constant planning/reviewing of strategic plans of the company. The world is dynamic, and any organization that will survive the competitive business environment, must revisit its plans constantly to ensure they are current and aligned with the dictates of the time.
  8. Engagement and dismissal of staff. The directors are empowered to ‘hire and fire’ staff where necessary, this is to ensure that the best hands are retained
  9. Must not place himself in a position that creates conflict between his duties and interests and other duties
  10. Integrity of financial controls and reports in the company
  11. Ethical standards are maintained and that the company complies with the law of Nigeria.
  12. Every Director must exercise a degree of care, diligence and skill which a reasonably prudent Director would exercise in comparable circumstances.
  13. Duty not to accept secret benefits, bribe, gift or commission, in cash or kind, from any person in relation to transactions performed on behalf of the company in his capacity as a Director.
  14. Duty to avoid conflicts of duty and interest so as to not allow his/her personal interest interfere with the performance of his/her duties.

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There are a few popular questions usually asked in relation to Company Directors in Nigeria and we will try to take a look.

Can a company be a director of another company in Nigeria?

A company may be the Director of another company. This can be possible where the company appoints or nominates a representative to act on its behalf as director in the other company.

Procedure to change company directors in Nigeria?

A company need not wait until the expiration of the terms of the Director or during the Annual General meeting using the Rotation method. A company may by ordinary resolution remove a director before the expiration of his period of office. Where a Director is removed in line with provisions of the law, he can be replaced either by appointing another director by ordinary resolution of the members or by the directors filling a casual vacancy arising out of death, retirement or removal at the board of directors meeting.

The procedures for the change of Directors are below;

  1. 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.
  2. After approval at the meeting, the company is 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.
  3. After filing with the CAC,  the company is to make entry in the register of directors in accordance with the law.

Can a director be a company secretary in Nigeria?

Although Nigerian Law does not state expressly that the same person can be appointed as director and secretary in any of its sections it implicitly allows it. However, NOTE that where it states that a document is to be executed by both Director and Secretary, the person holding the position of both Director and Secretary cannot execute the document in both capacities, he either signs as a Director or secretary and not as both.

Removal of managing director in Nigeria

A managing Director may have his appointment as managing director terminated on a contract of employment  but he still remains a director. If the members or Board of Directors intend to remove him completely as a director, then they will go through the steps for removing a director explained above.

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