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| Adepegba |
2.1. WHO IS A DIRECTOR OF A COMPANY
Sec 244(1) of the Nigeria’s CAMA
describes the Directors of a Company Registered under the Act as Persons duly
appointed by the company to:
Direct and Manage the Business of the
Company
Note: A company registered under the
Act, will have its Directors appointed in line with the Articles of the
Company, and in strict compliance with the provisions of CAMA.
This differs slightly from what obtains
in Government Parastatals and Businesses where the Directors are appointed by
the Government in accordance with the Acts of Parliament that set them up, but
without prejudice to the provisions of CAMA.
(2) Says there shall be a reputable
presumption that all persons who are described by the Company as Directors,
whether as Executives or otherwise, have been duly appointed
2.2 MEMBERSHIP
Those who cannot be Directors in
companies registered under the Act, are curiously described in SEC 257 of the
Act, and by interpretation anyone that does not fall under any of these
disqualification can be made a Director.
(a) An infant i.e a person under the age
of 18years.
(b) A lunatic or a person of unsound
mind.
(c) A person disqualified under
sections;
253 i.e Insolvent
254 i.e Fraudulent, and
258 i.e Vacation of seat on the Board –
for reason of shareholding, bankruptcy, prohibition, lunacy or by resignation.
(a) A corporation other than its
representative appointed to the Board for a given term (see
Sec 258 Vacation of office,
Sec 259 Rotation of Directors.
Sec 263 Removal of Directors.
3.0 POWERS AND DUTIES OF DIRECTORS
For ease of understanding – we shall
look at the Duties of Directors at Common Law and Directors duties under
Nigeria’s CAMA, and draw conclusions.
3.2 DIRECTORS DUTIES AT COMMON LAW
The following represents the general
summation of the Duties of Directors under the Common Law. I want to believe
most, if not all members of the Board and Management know that the Nigerian
Laws were derived from the Common Law, just as the case is with many other
Jurisdictions in the world.
They are as follows:
() DIRECTORS HAVE A DUTY NOT TO MAKE
SECRET PROFITS.
This position is corroborated by the
case of Parker (Public Office of National Bank V Mickenna & Ors – where
James L.J stated inter alia.
“I do not think it is necessary, but it
appears to me very important that we should concur in laying down again and
again the general principle that in this court no agent in the course of his
agency – and in the matter of his agency can be allowed to make any profit
without the knowledge and consent of his principal, and that rule is an
Inflexible rule and must be applied inexorably by this court, which is not
entitled in my Judgement to receive evidence or suggestion or argument whether
the principal did or did not suffer any injury in fact the reason of the
dealing of the agent, for the safety of mankind requires that no agent shall be
able to put his principal to the danger of such an inquiry as that”
Note: SEC 283(2) stipulated that
Directors may be regarded as Agents of the company.
()
1. (1874 – 80) ALL ER.443.
DIRECTORS HAVE A DUTY TO TAKE REASONABLE
CARE.
Directors must be cautious in all their
dealings – knowing fully well, that issues may arise on their decisions, and
conduct – even if and after they have vacated their seats as Directors.
() DUTY TO ACT IN THE BEST INTEREST OF
THE COMPANY AND
() THE DIRECTORS STAND IN A FIDUCIARY
RELATIONSHIP TO THE COMPANY. We shall dwell more on this under the provision of
our own CAMA.
4.0 DIRECTORS DUTIES UNDER THE COMPANIES
AND ALLIED ACT (CAMA)
The Act under reference, CAMA under its
Sec 279 (1) codifies the Common Law Rules and provides the following as the
Laws guiding the conduct and Duties of Directors of Companies in Nigeria.
I shall endeavor to take us through the
salient parts of the Law to refreshen our memories on this provision which form
the major thrust of our presentation today.
4.1 Sec 279(1) of CAMA
(1) A director of a company stands in a
fiduciary relationship towards the company and shall observe it with utmost
good faith towards the company in any transaction with it or on its behalf.
(2) A director shall also owe fiduciary
relationship with the company in the following circumstances.
(a) Where a director is acting as agent
of a particular shareholder.
(b) Where even though he is not an agent
of any shareholder, such a shareholder or other person is dealing with the
company’s securities.
Let us pause and deal with this
fiduciary relationship issue, before we go to other provisions of CAMA on
Duties of Directors.
Under the English and Nigerian Laws,
courts have upheld that Directors stand in fiduciary relation to the company
and its shareholders. In Bowen V Imperial Theatres Incorporated 2 it was held
that the acts of directors are scanned in the light of the Principles which
define the relationship, existing between trustee and ‘cestui que trust’. Accordingly,
corporate directors and officers are not allowed to use their position of Trust
and confidence to further their private interests.
These provisions of the Law are about
acting in good faith not reaching out to enrich oneself or allow personal interests
to becloud the assignment at hand. The law demands same from that Director that
is acting as an agent for a shareholder.
While I do not wish to preach to the
converted on this matter, I will like to emphasise that it is for the
importance of this subject matter that the issue of Fiduciary Relationship is
given so much prominence in our Laws.
4.2 DIRECTORS AND BEST INTEREST OF THE
COMPANY
Sec 279(31) states that “a director
shall act at all times in what he believes to be the best interests of the
Company as a whole so as to preserve the assets, further its business and
promote the purposes for which it was formed, and in such manner as a faithful,
diligent, careful and ordinarily skilful director would act in the
circumstances”.
This provision is straightforward and
unambiguous.
- Skilfulness, - diligence, and being on
top of the game are requirements for a Director to successfully superintend
over the well being of the company.
- In the United States, courts agree
that Directors must discharge their duties in good faith and with that degree
of diligence, care and skill which ordinary prudent persons or businessmen
would exercise under similar circumstances.
2.13 del cha 120 115 A918(1922)
3. 87 N.J 15,432 A.2d 814 (1981).
In Francis V United Jersey Bank 3 – the
court considered the primary issue whether a Corporate Director is personally
liable in negligence for the failure to prevent the misappropriation of trust
funds by other directors who were also officers and shareholders of the
company. The court held
“The initial question is whether Mrs.
Pritchard was negligent in not noticing and trying to prevent the
misappropriation of funds held by the corporation in an implied trust. A
further question is whether her negligence was the proximate cause of the
plaintiff’s losses. Both lower courts found that she was liable in negligence
for the losses caused by the wrong doing of Charles, Jr and William. We
affirm”.
The Court also held further that because
the Directors are bound to exercise ordinary care, they cannot set up as a defence
of lack of knowledge needed to exercise the requisite degree of course.
Accordingly, my distinguished Directors,
I will ask that you allow me to OPINE that if anyone feels that he has not had
significant business experience to qualify him to perform the duties of a
director, such a person should acquire the knowledge by education, or further
exposure, otherwise such should refuse to act. It is also submitted that a
director should be under a continuous obligation to get informed about the
activities of the company.
In Francis V. United Jersey Bank case
(supra) certain principles were also established which are germane to our
discussions today on the Directors duty of care. They are;
1. Directors may not shut their eyes to
corporate misconduct and then claim that because they did not see the
misconduct, then did not have a duty to look. A director sleeping while he
should be watching contributes nothing to the company he is charged to watch
over.
2. Directional management does not
require a detailed inspection of day to day activities, but rather a general
monitoring of Corporate Affairs and Policies.
In the light of the above, a director is
advised to attend Board meetings regularly and obtain all necessary information
required to take an informed and sound decisions. A director is presumed to be
a part of a decision or action taken and indeed liable on a corporate matter,
whether or not he is present at the said meeting where the decision/action was
taken – except if he writes a dissenting opinion on the matter within a
reasonable time after the decision/action was taken.
3. Directors must – in the case of this
reputable Broking Firm, ensure that business transactions, book keeping methods
also conform to Industry Laws, Rules and Guidelines and usage. See Lippit V
Ashley 4
On the strength of this, I submit that,
- Directors of your Company must be
abreast of the various guidelines formulated by the National Insurance
Commission on Broking business in Nigeria.
- Directors must keep abreast of PART
VII Secs 34 – 49 of the Insurance Act 2003 which deal effectively with
• Registration of Insurance Brokers
• Cancellation of Registration
• Requirement as to indemnity cover of
staff
• Suspension of Registration
• Insurance Brokers and Clients Accounts
• Payment of Premiums to Insurers
• Records of transactions
• Powers of the Commission to
investigate Brokers. Etc.
- Of course, - Sec 50(1) of the Law is a
‘must know’ for all directors, as this stipulate, that “Insurance Premium shall
be a condition precedent to a valid contract of Insurance, and there shall be
no cover in respect of an Insurance risk, unless the premium is paid in
advance, and there shall be cover in respect of an Insurance Risk unless the
premium is paid in advance”.
4.89 conn.451, 464, 94A, 995, 1000 (sup
ct 1915).
The Insurance Broker is in the thick and
middle of this – Directors must therefore ensure the ease of compliance with
this.
- Of interest to Directors of your
Company should also be ‘The Nigerian Council of Registered Insurance Brokers
Act 2003’, whose duty is to establish and maintain a central organization for
Insurance Brokers in Nigeria
4.3 DUTIES TOWARDS EMPLOYEES
Sec 279(41) states that the matters to
which the Director of a company is to have regard in the performance of his
functions include the interest of the company’s employees in general, as well
as the interests of its members”.
It is my considered opinion that
Directors have a big job in ensuring that company’s employees in general are
well taken care of.
The law recognizes the fact that the
Director must take due cognizance of the welfare and well being of the
employees to ensure that they are able to perform his own function without any
problems. The Director will rely on opinions, reports or statements by the
employees in the discharge of his duties, hence it behooves him to take a
proper care of employees of the company. Productivity depends largely on the
performance of the Employees.
Some documents describe employees as
‘Servants’ of the company – yes, and the Holy books also declare that a servant
or a labourer deserves his wages.
It is on the note of this Holy
prescription that I will admonish Directors to take a proper care of the
employees, as the Law has empowered them to do so
Directors must formulate concrete and
time tested policies culminating in the conditions of service for staff on;
4. Attraction of good hands to the
company
5. Promoting security of tenure – The
attrition rates for some Managing Directors etc. are alarming!
6. Training programs that will ensure
right exposure for the staff. Companies want to train staff only for the
immediate need, but I will like to submit that Trainings that will help on the
job performance and aid their careers should be provided for employees.
7. Promotion, not only as at when due
but as deserving – to encourage excellence.
8. Incentives for productivity, etc.
9. Well defined responsibilities of the
top Management of the company.
10. View good exit packages for life
after the company. One salient fact is that a staff who has spent a
considerable part of his life in a company will remain the Ambassador of that
company forever! If he lives well after retirement, people will say – hey he
was with XYZ Company – that company is good. If also he ends up under the
bridge – people will still refer to the company he worked for.!
Employees in general are the geese that
lay the golden eggs – hence they must be well taken care of.
Your Company is a world class Broking
Firm. Directors must ensure that the Company benchmark other world class
Broking firms, to ensure that the Human Capital available to it are World class
employees in all ramifications, so that they will help make this year and the
years ahead, YEARS OF SURPLUS/OR SURPLUSSES.
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