The success and growth of a Company depends largely on the quality and dedication of its directors who are its alter ego. Though directors see to the day to day running of the Company, the members and shareholders of a Company are its legal owners. This is because the law envisages that the directors run the Company's business for the benefit of its members and shareholders.
Therefore where directors pursue their personal interests to the detriment of that of the members and shareholders; defraud the Company or use the Company as a vehicle to perpetuate fraud; carry out fraudulent activities against the objectives and policies of the Company; refuse to call a board meeting or annual general meeting in order to prevent their removal, the members and shareholders will be at a very desperate and disadvantaged position. This is why the members and directors of the Company reserve the right to remove the directors to prevent them from running the Company aground.
What is the position of Nigerian law on removal of Directors by the Board of Directors?
Section 249 of the Companies and Allied Matters Act ("CAMA") provides that the Board of Directors have the powers to appoint new directors to fill any vacancy arising out of death, resignation, retirement or removal of directors of the Company.
Section 262 (1) of the CAMA, provides that a Company upon a special notice may by an ordinary resolution remove a director before the expiration of his period of office, notwithstanding anything in its articles or any agreement between the Company and the director.
In practice, any 2 Directors can sign the resolution for removal and appointment of new Directors and Particulars for Change of Directors ("Form CAC7A") to be filed at the Corporate Affairs Commission ("CAC").
What is the position of Nigerian law for a Director or Shareholder to remove Directors of a Company?
If the Board of Directors fails to convene a board meeting or an annual general Meeting for the purpose of discussing the Company's business and removal of directors, under Section 215 of CAMA, any Director or Shareholder of the Company holding not less than one tenth of the paid up capital ("the Requisitionists") may give notice for the Company's Board of Directors to hold an extraordinary meeting for the purpose of discussing the Company's business and removal of the directors notwithstanding anything in the Company's articles of association.
The Requisitionists shall deposit a notice for the extraordinary meeting ("the Requisitionists' Notice") at the registered office of the Company. The Requisitionists' notice shall state the objects of the meeting which in this case shall include removal of directors. The directors are by the notice compelled to convene an extraordinary meeting to remove the directors and make resolutions on the objects stated in the Requisitionists' notice.
What is the position of Nigerian Law where the Board of Directors fails to convene an Extraordinary meeting to remove Company's Directors?
Under Section 215 (4) of CAMA, if the directors do not convene an extraordinary meeting at the registered address of the Company to remove the directors within 21 days of deposit of the Requisitionists' notice, the Requisitionists or any one or more of them representing more than one half of the voting rights of all of them may convene the meeting not later than 3 months from the date in which the notice was deposited at the registered office of the Company. The meeting of the Requisitionists shall be conducted as nearly as possible as a Board of Directors meeting to make resolutions on the objects of the meeting.
What is the procedure for the Requisitionists to remove the Company's Directors at the Extraordinary Meeting?
Under Section 262 of CAMA, the notice for the removal of the directors shall be delivered to the directors to be removed to enable them make a written or oral representations at the meeting. The Chairman of the meeting may propose casting of votes by poll (by number of shares) to either retain or remove the directors.
Upon removal of the directors, the Requisitionists shall in the meeting appoint new directors or appoint persons to temporarily fill the casual vacancy created by the removal of the directors until such a time when the Company shall appoint its directors. This will enable the new directors appointed at the meeting or persons appointed to fill the casual vacancy created by the removal of the directors to sign the resolution for removal of the directors and Form CAC7A for filing at CAC as well as manage the Company.
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