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Lip 502 Corrected Compiled Company Law Notes

The document outlines the legal definitions, rights, and liabilities associated with shares and debentures under the Companies and Allied Matters Act (CAMA) 2019. It details the nature of shares as personal property, the various classes of shares (ordinary, preference, and deferred), and the rights and obligations of shareholders. Additionally, it describes different types of debentures, their characteristics, and the processes involved in issuing them.

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0% found this document useful (0 votes)
9 views98 pages

Lip 502 Corrected Compiled Company Law Notes

The document outlines the legal definitions, rights, and liabilities associated with shares and debentures under the Companies and Allied Matters Act (CAMA) 2019. It details the nature of shares as personal property, the various classes of shares (ordinary, preference, and deferred), and the rights and obligations of shareholders. Additionally, it describes different types of debentures, their characteristics, and the processes involved in issuing them.

Uploaded by

hauwamusa607
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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COMPANY SECURITIES

i. SHARE
Section 868 CAMA defines a share to mean the interests in a company's share
capital of a member who is entitled to share in the capital or income of such
company; and except where a distinction between stock and shares is expressed
or implied, includes stock. Therefore, a share is a unit of a member’s interest in
a company which attaches to it rights and liabilities (CAMA 2019 S. 138;
BORLAND’S TRUSTEE V. STEEL BROS. & CO). Supreme CT held in
OKOYA V SANTILI that shares represent a unit of the bundles of rights and
liabilities which people hold in companies. Finally, a share is a chose in action,
personal property, which is transferable in the manner prescribed in the Articles
(s.139 & OKOYA V. SANTILI).

LEGAL NATURE OF A SHARE


 a chose in action (Personal property)
 An intangible personal right, which a person has in a company.
 Res in persona
 It confers a bundle of rights and liabilities

IN ALIENABLE RIGHTS THAT ATTACH TO SHARES IN A


COMPANY
1) Right to receive dividends when declared by the company
2) Right to vote at the Annual General Meeting whether in person or by
proxy
3) Right to attend meetings
4) Right to the balance sheet of the company
5) Right of access to the minute book
6) Right to demand a poll
7) Right to bonus
8) Right to have name in the register of members
9) Right to a copy of memorandum and articles of association
10) Right to notice of meetings
11) Right to petition for winding up
12) Right to bring derivative action
13) Right to instigate the investigation of the company

LIABILITIES OF SHARES
1) To pay for shares issued to him in the company
2) To forfeit his shares where calls are made for the shares and he is unable to
pay within the time limit

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3) Liable to contribute to the company upon winding up – to the extent of the
number of shares unpaid held by the individual in the company (for limited
liability companies)
4) Where the veil of the company is lifted and it is discovered that it is carrying
on business with less than the statutory minimum, the directors and members
are individually liable

NOTE: the rights and liabilities attaching to the shares of a company shall be
dependent on the terms of issue and the terms in the Articles of Association –
SECTION 138(a). HOWEVER, rights of shareholders are the same with rights
of members

DUTIES ATTACHED TO SHARES


1. Payment of unpaid amount on shares
 When call is made
 Time fixed for payment at the time of issue
2. Repayment of dividend received unlawfully

MODE OF PAYMENT FOR SHARES-S.160 CAMA


 Payment for shares may be in cash –S.161 CAMA
 Payment/consideration other than in cash subject to the articles: S.160;
However, the consideration must be valued by an independent valuer to
determine the value of the consideration s. 162 (plc). An employee of the
company, directors, officers, associate or agent cannot serve as valuers

TYPES/CLASSES OF SHARES
S143 CAMA allows different classes of shares
S144 CAMA allows varying rights to various classes of shareholders
Ordinary, preference shares, deferred/founder’s shares.

 A company may, where so authorised by its articles issue classes of


shares
s. 143(1)

 Shares shall not be treated as being of the same class unless they rank
equally for all purposes S. 143(2)

THE SHARES OF A COMPANY MAY BE CLASSIFIED INTO (Section


144)
1. Preference shares.

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2. Equity or Ordinary Shares
3. Founders or Deferred shares

1. PREFERENCE SHARES (s.168; 169)

This type of shares entitles the holder to a fixed preferential dividend, this
means that the dividend payable by the company to the holder of such shares is
fixed at a specific figure e.g. 5%, 10% etc. Dividend only becomes payable
when it is declared. Preference shares have priority over ordinary shares. Thus,
dividend must be paid to preference shareholders before the ordinary
shareholders. However, they cannot participate in the profit of the company in
excess of the fixed dividend unless they are Participating Preference Shares.
Preference shares may be cumulative or non-cumulative.

A. Cumulative Preference Shares (s. 169): Cumulative preference shares


entitle the holder to a roll-over of unpaid dividend to the subsequent years. For
example, where the company due to insufficient profits is unable to pay a
dividend in one year, it must accumulate the arrears of dividend to the next year
or subsequent years until they are fully paid from the profit of later years. Thus,
the presumption is that preference shares are cumulative UNLESS it is
specifically stated as non – cumulative.

B. Non-Cumulative Preference Shares: Non-cumulative preference shares Do


not carry the right to roll over unpaid dividend to the following financial year.
Once the dividend is not paid in a particular year, that is the end of the matter.

C.Participating Preference Shares: These are preference shares which apart


from receiving their fixed dividend in the usual way, also have the right to
participate equally with the ordinary shareholders in surplus assets.

D.Redeemable Preference Shares: Generally, shares are not redeemable by the


company without the court’s consent nor can a company purchase its own
shares (s. 147).

The Act however allows a company limited by shares, on the authorisation of its
articles to issue preference shares which are redeemable at the company’s
option (s.184 CAMA 2019)

The conditions for such redemption by the company are provided in S. 182(2)
CAMA: The shares shall not be redeemed unless they are fully paid, and
redemption shall be made only out of: (a) profits of the company which would

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otherwise be available for dividend; or (b) the proceeds of a fresh issue of
shares made for the purposes of the redemption.

2. EQUITY/ORDINARY SHARES
Ordinary shares are referred to as the equity share capital of the company. They
carry the remaining of distributed profits after the preference shares have been
paid their fixed dividend.
They are the risk bearing shares. However, they enjoy unrestricted right to
participate in the surplus assets of the company.

3. DEFERRED SHARES
This is also referred to as Founders’ shares where they are issued to
promoters or management shares if the issue is made to Directors. They
usually carry the right to the remaining of distributed profits after a certain fixed
dividend has been paid to the ordinary shares.

RIGHTS ISSUE

The existing members of a company have pre-emptive rights (right of first


refusal) in the new issue of shares if it is authorised by the articles: S142
CAMA 2019

NON-VOTING AND WEIGHTED SHARES


A weighted share carries more than one voting right. A non–voting share
carries no right to vote. The CAMA has absolutely abolished non–voting shares.
Also, the Act prohibits the issuance of weighted shares (140). The only
exception is with reference to preference shares. S. 10 BOFIA- BANKS
shareholders votes are as per their paid-up shares.

CIRCUMSTANCES WHEN PREFERENCE SHARES CAN CARRY


MORE THAN ONE VOTE-SECTION 168 CAMA
Preference shares shall carry a right of more than one vote per share in the
following circumstances, but not otherwise.
a. Upon any resolution during such period as the preferential dividend or any
part of it remains in arrears and unpaid, such period starting from a date
NOT MORE 12 MONTHS or such lesser period as the articles may
provide, after the due date of the dividend or
b. Upon any resolution which varies the rights attached to such shares (e.g.
changing cumulative preference shares to non-cumulative preference
shares), or
c. Upon any resolution to remove an auditor of the company or to appoint
another person in place of such auditor; or

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d. Upon any resolution for the winding up of the company or during the
winding up of the company.
e. Any special resolution of a company increasing the number of shares of
any class S. 168 (2)

ISSUE OF SHARES AT A PREMIUM-S.145 CAMA 2019


Shares can be issued at a premium (i.e. above the nominal amount) in certain
circumstances. The excess amount have to be paid in the Share Premium
Account of the company (s. 145 (1)&(2)).

USES OF THE SHARE PREMIUM ACCOUNT


According to s. 145(3), the amount in the share premium account can be used
for the following:

a. Paying up for unissued shares of the company to be issued to members of


the company as fully paid bonus shares;

b. In writing off:
 The preliminary expenses of the company;
 The expenses of, or the commission paid, or discount allowed on, any
issue of shares of the company; or
 In providing for the premium payable on redemption of any redeemable
share of the company.

ISSUE OF SHARES AT A DISCOUNT-S.146


Issue of shares at a discount is allowed provided:
1. A Resolution of the company authorising it is passed in general meeting
of the company (the resolution specifies the maximum rate of discount at
which the shares are to be issued).
2. An application is made to the Federal High Court to approve/confirm it
before it is issued.
3. Shares must be issued within one month after sanctioning by court.

TECHNICAL TERMS USED IN RELATION TO SHARES.

1. Capital Gearing
It is used in describing the proportion of preference shares to ordinary shares. If
the percentage of preference shares is higher than that of ordinary shares, it is
said TO BE HIGH GEARED. If percentage is lower, it is LOW GEARED. If it
is equal, it is MEDIUM GEARED.

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2. Authorised Share Capital
The authorised share capital is the amount of capital a company proposes to be
incorporated with and the share capital of the company at every material time
the company is a going concern. The authorised share capital should not at any
time fall below the authorised minimum share capital as stipulated by S. 27(2).

3. Issued Share Capital


This is the proportion of the share capital issued or allotted to shareholders
who have either paid or agreed to pay for it. The issued share capital shall not
be less than 25% of the authorised share capital at incorporation.

4. Unissued Shares
These are the reserved shares, which have not been made available or issued to
members. It is also referred to as reserved capital. It cannot be called except in
the event of winding up or other contingencies as determined by the company

5. Fully Paid Up Shares


This is the portion of the issued share capital, which has been fully paid up or
credited as paid up by members.

6. Unpaid Capital
This is the amount still unpaid on the issued capital and which can be called
up at any time when needed.

7. Call on Shares
This is a notice by the directors of a company, which is served on members to
pay up the amount remaining unpaid on the shares subscribed by them. The
time stipulated shall not be less than one month from the last preceding call
(S.158).

8. Lien on Shares
The company has first and paramount lien on all its issued shares which have
remained unpaid (S.164).

TO GIVE CONTROL/VOTING RIGHTS IN THE COMPANY

i. Have preference (preference will give guaranteed/fixed return on


investment)
ii. Have deferred shares (because it is the cheapest share in the company,
even cheaper than ordinary shares and still carry voting rights).

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iii. Be a life director (not subject to rotation) under s. 281 of CAMA 2019
provided he is removable under s. 288 (removal of a director before
the expiration of his tenure).
iv. Be the custodian of the company seal so major contracts cannot be
done without him.
v. Be the signatory to the company; and
vi. Have the lion shareholding in the company.

ii. DEBENTURES

This is a certificate given by a company acknowledging the repayment of a loan


obtained from the holder i.e. a written acknowledgement of indebtedness (a debt
instrument). NB: It could also be a mortgage transaction btw two companies
S. 191 OF CAMA 2019 and;

UNION BANK v. TROPICS FOODS LTD


GENERAL AUCTION ESTATE CO. v. SMITH;
INTERCONTRACTORS (NIG.) LTD. v. NPFMB

Pursuant to S43 CAMA, a company acquires the powers of a natural person of


full capacity so the company can borrow money and mortgage its property for
the repayment of such loan (s191 CAMA).

TYPES OF DEBENTURES

1. Perpetual Debenture
Debenture created with the intention that it will not be redeemed, or it will only
be redeemed upon the happening of a remote event or contingency. On the face
of it, the concept of perpetual debenture runs contrary to the general principle of
mortgage (i.e. once a mortgage always a mortgage and there must be no clog on
the equity of redemption) (s. 196) is a statutory exception to these common law
principles, which creates a perpetually irredeemable debenture. People who
have high stakes in certain corporations e.g. Dangote (can afford to stake
everything, as long as, the company remains a going concern) since he is like
the alter ego of Dangote group of companies.

2. Convertible Debenture
This is a debenture which is issued upon the terms that in lieu of redemption or
repayment, it may be converted into shares in the company either at the option
of the holder or the company upon terms as stated in the debenture instrument
(s. 197).

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3. Secured & Unsecured Debenture
Debentures may either be secured by a charge over the company’s property or
may be unsecured by any charge. Thus, it is called a naked debenture (s. 198).

4. Redeemable Debenture
A company limited by shares may issue debentures which are or at the option of
the company are to be liable, to be redeemed (s. 199). Thus, it is repayable at a
fixed term as per terms of issues. Redeemable debentures can also be re-issued
subject to S. 200(1).

5. Bearer Debenture
This is a debenture which is repayable to holder of the instrument. Thus, a
bearer debenture is a transferable negotiable instrument and payable to holder in
due course. It is transferable by mere delivery until due time for redemption.

6. Registered Debenture
This debenture is repayable to only the Registered Holder of Instrument (i.e. the
person whose name appears in Certificate and Register. Unlike bearer
debenture, it is non-negotiable, but it is transferable in a manner prescribed by
the Debenture Instrument.

7. Syndicated Loan Debenture/Paripassu Mortgage Debenture


This involves a consortium of lenders having one asset charged and created in
series, but with a paripassu clause i.e. that the later series created shall share
equally with the earliest. This is usually created where the value of the asset
security outweighs the total loan. This is usually used to finance mega project
which would be difficult and risky for only one lender to lend such huge sum.
They rank equally in sharing in the event of enforcement of the security. The
separate legal personalities of the individual lenders are subsumed under and
held by the Trustees of the Debenture holders appointed under the Trust Deed
created by the consortium.

Upon creation of paripassu mortgage debenture, the company shall within 90


days after execution of the Trust Deed file with CAC the following particulars:

 Total amount secured by the whole series,

 Dates of resolution authorising the issue of the series,

 A general description of the property charged,

 Names of the trustees, if any, for the debenture holders; together with the
deed containing the charge, or, if there is no such deed, one of the
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debentures of the series: SECTION 228 CAMA

TIME LIMIT TO ISSUE DEBENTURES Certificate


Time limit within which to issue Debenture or Debenture Stock Certificate to
holders is 60 days whether it is by allotment/transfer (S. 192)

RIGHT OF A DEBENTURE HOLDER s. 201

A) Right to be paid back the money lent to the company


B) Any interest thereon
C) To sue the company for payment of any amount payable
D) To sue the trustees of the debenture trust deeds for compensation for any
breach of duties

BECOMING AND CEASING TO BE A (SHAREHOLDER) MEMBER

MEMBERSHIP OF A COMPANY - (SECTION 105 OF CAMA)

WHO IS A MEMBER OF A COMPANY?

A member of a company is a person having constituent proprietary


interest in the company and whose name has been entered in the Register of
Members. A person who undertakes to make a contribution, in the event of the
winding up of a company limited by guarantee, becomes a member of the
company when his name is entered in the Register of Members.

Section 105(2) of the Act provides that every other person who agrees in
writing to become a member of a company and whose name is entered in its
Register of Members shall be a member of the company.

With respect to a company having a share capital, each member shall be a


shareholder of the company and shall hold at least one share. In such a
company, the term “members” and “shareholders” may be synonymous, but it is
not necessarily so.

In PONMILE V. SPARKS ELECTRICS (NIG.) LTD. (1986) 2 NWLR 519,


the court distinguished between a shareholder and a member of a company
limited by shares and observed that entry in the Register of the company is
another method of proof of being a shareholder but it is not the only method,
nor can the absence of that method of proof invalidate other methods.

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In OILFIELDS SUPPLY CENTRE LTD. V. JOHNSON (1987) 2
NWLR 625, it was held that the share certificate is not the only means of
establishing shareholding and that even oral evidence, if cogent, may suffice.

This is not so in the case of membership as entry in the register is an


indispensable condition. While a member of a company registered with shares
must be a shareholder of the company, the converse is not necessarily true for a
shareholder will not become a member until his name is entered in the Register
of members. See Section 105(2) of the Act.

Section 109 of the Act provides that a shareholder must be registered within 28
days of the conclusion of the agreement to become a member. In the case of a
subscriber to the memorandum, at the registration of the company, and if default
is made in entering the name, the court may compel the company to do so. See
Sections 109 and 115 of the Act.

CAPACITY TO BE A MEMBER - (SECTION 106 OF CAMA)

As a general rule, any person may become a member of a company but infants,
personal representatives of deceased persons, companies and aliens are subject
to special rules.

1. INFANTS

Section 20(1)(a) of the Act provides that a person under the age of 18 years of
age shall not join in the formation of a company or be a subscriber to the
Memorandum of Association unless there are two other subscribers of full age
and capacity, that is, persons not disqualified under Section 20(1) of the Act.
Section 106(2) of the Act provides that where an infant becomes a member of a
company, he will not be counted in determining the legal minimum number of
members.

Note, however, that any person under the age of 18 years may still subscribe to
the memorandum or otherwise become a member, subject to the general
disability of an infant to contract under the general law. Thus, his contract to
take shares in a company is voidable at his instance any time before he attains
the age of 18 or within a reasonable time thereafter. Unless he repudiates his
liability within this period, an infant will be liable to pay any calls made on his
shares and if he decides to repudiate, his liability on future calls will cease.

In general, he will be unable to recover money paid in respect of his shares


unless there has been a total failure of consideration for which the money was

10
paid. See STEINBERG V. SCALA (LEEDS) LTD

2. MARRIED WOMEN

Under the Married Women’s Property Laws of the States, a woman has the
same contractual rights and is liable to the same obligations as anyone else as
regards the holding of shares.

3. PERSONAL REPRESENTATIVES

On the death of a shareholder, the shares are transmitted to his personal


representatives, that is, his executors or administrators and the production of the
probate of the Will or Letters of Administration of the estate of the deceased
person is sufficient evidence of the grant. This is provided in Section 173 of the
Act. The personal representatives of deceased persons are the only persons
recognised as having any title to the deceased interest in the shares. They can
sell and transfer the shares without being first registered as members. See
Section 179(4) of the Act.

However, until the personal representative of a deceased shareholder complies


with the provision of Section 179(3) of the Act, he cannot, unless otherwise
provided in the Articles, be entitled to exercise any right conferred by
membership in relation to meetings of the company. Section 179(3) of the Act
provides that:

“If the person so becoming entitled elects to be registered himself, he shall


deliver or send to the company a notice in writing signed by him stating that he
so elects and if he elects to have another person registered, he shall testify his
election by executing to that person a transfer of the shares.”

4. COMPANIES

A company is regarded in law as a person and, therefore, by virtue of Section 18


of the Act which requires two or more persons to form and incorporate a
company, it may be one of the subscribers of the memorandum of another
company. Just as an individual that subscribes the memorandum is to sign it, a
company that subscribes the memorandum is to sign by the Secretary or
Director of the company. See Section 95(1)(b) of the Act. However, Section
20(3) of the Act provides that a company in liquidation shall not be capable of
becoming a member of a company.

5. ALIENS

An alien may acquire shares in a company and become a member by complying


11
with the various requirements of the law regulating the rights and capacity of
aliens to engage in trade or business in Nigeria. This is provided in Section
20(4) of CAMA. Some of the other laws, which have to be complied with, are:

Section 17 of the Nigerian Investment Promotion Commission Act which


requires alien to register with the Commission before commencing business in
Nigeria;

Obtaining business permit under Section 8 of the Immigration Act, 1963;

Section 7 of the Securities and Exchange Commission Act, 1988;

Section 8 of the Investments and Securities Act (ISA), 1999 which empowers
the Securities and Exchange Commission (SEC) to keep and maintain Foreign
Direct Investments (FDI) and Foreign Portfolio Investments (FPI) in Nigeria;

Sections 173 and 179 of CAMA. Section 173 of the Act requires the production
of a document which is by law sufficient evidence of probate of a Will or letters
of administration of an estate. Section 179, on the other hand, deals with
transmission of shares.

HOW TO BECOME A MEMBER

A person (natural or legal) can become a member of a company having a share


capital, whether limited or unlimited in the following ways:

i. Subscribing to the memorandum (s. 105);

ii. Allotment and Registration (ss. 149, 150 & 129);

iii. Transfer (ss. 175 & 176); or

iv. Transmission (ss. 179); followed by registration of the transferee in the


Register of Members.

v. However, where a company is limited by guarantee, in addition to


subscription, a person can become member by an undertaking as in
section 27(4)(b) followed by registration by the company.

i. BY SUBSCRIPTION

The subscribers are persons who sign the Memorandum of Association and
Articles of Association of a company. The first members acquire their
membership by subscription. See Sections 105(1) and 27(2)(b). On the

12
registration of the company, the subscribers are deemed to have agreed to
become members and their names must be entered in the Register of Members.
Section 105(3) now enables a subscriber of the memorandum to hold shares as a
trustee for another person, but he shall disclose in the memorandum that fact
and the name of the beneficiary.

ii. BY ALLOTMENT AND REGISTRATION

One of the ways a person can subsequently become a member of a company is


by applying for allotment of shares. On an application for shares by an
individual, the company may allot shares to him by notifying him of the
acceptance of the offer made in his application. He then becomes a member
and is entitled to have his name entered in the Register of Members (s. 150).

iii. BY TRANSFER
The shares or other interest of a member in a company are properties
transferable in the manner provided in the Articles of the company. See Section
175 of the Act. A person may become a member of a company by having the
shares of that company transferred to him by the holder of those shares. The
transfer from an existing member to another may be by sale, gift or some other
transaction which to all intents and purposes, must be lawful (s. 175). for the
transferee to become a member, transferee’s name must be entered in the
register of members, otherwise the transferor remains the member with all the
rights and obligations. However, a company may refuse to register a transfer of
shares on the following grounds:

a. If the shares is not fully paid up and the company does not approve the
transfer.
b. The company has a lien on the shares.
c. Non-payment of requisite fees on instrument of transfer.
d. The instrument of transfer is not accompanied by share certificate or other
evidence to show transferor’s right to make the transfer.
e. The instrument is in respect of more than one class of shares (s. 176 (3)(4))

iv. BY TRANSMISSION
The vesting of shares in the personal representatives on the death of a
shareholder is known as transmission of shares rather than transfer. This
occurs upon the death of a shareholder who may have died intestate or
willed the shares to a beneficiary (S. 179 and 180). On the death of a
member, the survivor(s), where the deceased was a joint holder or the
personal representative of
the deceased, where he was the sole holder, shall be the only persons recognised
by the company as having any title to his interest in the shares. See Section

13
179(1) of the Act.

v. BY ESTOPPEL

Where a person’s name is inadvertently placed on the Register of Members, and


he knows and assent to it, he will then be estopped from denying that he is a
member.

CONDITIONS FOR MEMBERSHIP

There are two conditions a person must comply with before becoming a
member of a company as indicated above:

a) the agreement to become a member either by subscribing the


memorandum, allotment, transfer, transmission; and

b) entry on the Register of Members of the shareholder’s name.

An exception to this general rule is in the case of death or bankruptcy, that is, by
operation of law where the shares are vested in the personal representatives of
the deceased or in trustee in bankruptcy, in the case of a bankrupt member.
Note that although the personal representative or trustee has the right to transfer
the shares and collect dividends, they cannot exercise the rights of membership
until registration takes place.

CEASING OF MEMBERSHIP

A person ceases to be a member when his name is removed from the Register of
Members. This may occur in the following ways:

i. TRANSFER OF THE SHARES

The transfer, which is a voluntary process on the part of the shareholder, shall
be by instrument of transfer and shall be without restrictions. The transferor
ceases to be a member when the transferee’s name is entered in the Register of
Members.

ii. FORFEITURE OF THE SHARES

This occurs where a member fails to pay for shares upon calls of by the
company (non-payment of calls). See section 165.

iii. SURRENDER OF THE SHARES

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This is a short cut to forfeiture in order to avoid the formalities required in a
situation where shares are to be forfeited.

iv. TRANSMISSION TO PERSONAL REPRESENTATIVES ON


DEATH OF MEMBER

This occurs by operation of law. It is an involuntary transfer since death


can be regarded as the end of all. Transmission requires no instrument of
transfer. The dead person only ceases to be a member of the company when
some other person is registered in his place.

REGISTER OF MEMBERS

Every company must keep a Register of Members in which are entered their
names, addresses and descriptions. See Sections 109, 110 to 115 of the Act.
Register of Members is one of the statutory books that must be kept by a
company.

METHODS OF OFFER OF SECURITIES (SHARES) TO THE PUBLIC-


RULE 279(1)

a. Direct Offer to the Public


 The company offers its shares to the public through an issuing house.
 The issuing house merely acts as an official agent of the company as it
packages and offers the shares to the public.
 The issuing house is a liaison between the company, the regulatory
authorities and the public.
 The terms and conditions of the offer are all contained in the prospectus.

NB-The risk of failure of the issue is borne by the company and not the issuing
house. Thus, to protect itself, the company usually arranges for the issue to be
underwritten at an agreed commission.

b. Offer for Sale


 The company sells the whole issue of shares to an Issuing House.
 The issuing house then offers the shares to the public at a higher price.
 The issuing house bears the risk of failure of the issue, and therefore
undertakes the responsibility of underwriting the issue. Thus, in the event
of failure, the issuing house indemnifies the company
 Prospectus is needed here –S.69(1);70;82;315

15
difference between direct offer and offer for sale
i. In a direct offer, the Issuing house gets commission while in offer for sale,
the issuing house gets profits.
ii. In a direct offer, the company undertakes the responsibility for
underwriting the shares; whereas in an offer for sale, the issuing house
undertakes the responsibility of underwriting the shares.

c. Placing: In placing, invitation is not made to the public whether directly


or indirectly. The shares of a company are allotted to an issuing house who
later sells the shares to a specialised client or institutional investors or pension
funds, cooperative societies.
 NB-The risk of failure is borne by the issuing house. Thus, it seeks to the
underwrite the issuing of the shares.

d. Placement (Private Placements)-Rule 340 Sec Rules 2013: This is


usually called private placement. This is a method of offering shares by a
public company which is not quoted on the stock exchange or by a private
company upon application by members subject to its articles and SEC approval.
NB - A private company cannot allow private placements to more than 50
persons.

e. Rights Issue-R.324-338 Sec Rules 2013.


This is the issue of shares by a company, which is directed only to existing
shareholders who are expected to acquire the shares in the ratio at which they
hold shares in the company. Rights issue is meant to preserve the leverage or
shareholding equilibrium.

However, no company can have rights issue of shares unless there is pre-
emptive rights clause in its Articles.
 Every company can have a pre-emptive rights clause in its Articles of
Association (i.e. right to offer shares first to existing shareholders before
transferring to the Public). Applies to private companies
NB-a rights circular must be registered-S.54 ISA & RULE 326 ISA

However, this should not be confused with Restriction of Transfer of Shares by


a private company -S. 22(5) CAMA

Disadvantages of Rights Issue


a. Shares are sold at a lower price than it would have been sold in the market
(could lead to insider trading)
b. There could be the problem of the shareholders not having enough money
to purchase the rights issue.
c. The precarious nature of the capital market or the problems associated

16
with the management of the companies may make a shareholder reluctant
to purchase new shares in the company.

f. Hybrid Offer
This consists of rights issue and offer of shares to the public

g. Bonus Issue-no prospectus needed-S.69(2) ISA.

FIXED/FLOATING CHARGES
One way of raising money for a company is by given a fixed or floating charge
on its assets. Loan and debenture may be secured or unsecured (s. 203 (1)).
Where a loan or debenture is secured, it may be secured by fixed or floating
charges-s.203(2) CAMA

a. Fixed Charge
A fixed charge attaches to a particular property when the charge is created. A
fixed charge is normally legal or equitable in nature. The advantage is that the
particular asset charged is ear marked and kept available to satisfy the charge’s
claims. The company cannot dispose of the asset or create other charge ranking
in priority to the present charge. The disadvantage is that the lender is confined
to the asset charged in the fixed charge and cannot proceed against other assets
of the company.

However, it should be noted that, a fixed charge on any property shall have
priority over a floating charge affecting the same property until crystallisation
and the person in whose favour the fixed charge is made has notice of such
prohibition (s. 203)

b. Floating Charge
A floating charge means an equitable charge over the whole or a specified part
of the company’s undertakings and assets including cash and uncalled capital of
the company both present and future, but not on a particular asset. A floating
charge shall not preclude the company from dealing with such assets until when
the charge crystallises. A charge crystallises when any of the following
conditions exist:

a. The security becomes enforceable, and the holder takes possession of


such assets, or appoints a receiver or manager; or
b. The court appoints a receiver or manager of such assets on application of
the holder.
c. The company goes into liquidation.

17
See section 203(1).

On the happening of any of the events stipulated above, the charge shall be
deemed to crystallise and to become a fixed equitable charge on the company’s
assets that are subject to the charge (s. 203(2))

Both floating and fixed charges are recognised securities and registrable under
s.203. Also, both floating and fixed charges must be registered within 90 days
of creation (s.203)

Distinction between floating and fixed charge

 A floating charge does not prevent or preclude the chargor from dealing
with the charged property/asset adversely provide it is in the normal
course of business; whereas the chargor in a fixed charge is precluded
from dealing adversely with the object of a fixed charge in any situation

 In a floating charge, there is no crystallisation until the occurrence of a


certain event(s) e.g. a breach, winding up. The floating charge hovers
over the charged assets until crystallisation. A crystallised floating charge
has the same effect as a fixed charge.

29/03/2023
The Effect of Failure to Register Debentures with the CAC
1. The loan agreement is not void ab initio and the mortgagee can recover the
loan
2. The loan amount becomes repayable immediately as the debenture is
rendered unsecured.
3. The collateral is lost, and the debt becomes a simple debt.
4. The interest of the mortgagee is then equitable, and it loses priority over the
debentures registered.
5. The Debenture becomes void against the creditors and liquidators of the
company
S. 222 of CAMA 2019 and Capital Finance Co. Ltd v. Stokes

However, it should be noted that, the debenture holder/company may apply to


the Federal High Court by Originating Motion supported by an affidavit to
extend the time within which to register a Charge with the CAC (Moses & Sons
v. Bank of the North)

18
REMEDIES OF DEBENTURE HOLDERS FOR THE DEFAULT IN
REPAYMENT OF THE LOAN
1. Action in Court to recover the principal and interest – AMANDA V.
IKOM NIG PLC
2. Bring a Petition for winding-up of the company on the ground of its
inability to pay its debt – s.571(d) & 233(2)(b)(ii)
3. Specific performance
4. Debenture holders action – s.233(2)(a)
S. 232, 233 and 475 of CAMA

ADDITIONAL REMEDIES FOR SECURED DEBENTURES


1 Power of sale if it is a debenture secured on a fixed asset
2 Foreclosure of the security property – s.233(2)b(i) CAMA
3 Debenture holders action to enforce security
4 Appointment of a receiver or manager over the company
NASHTEX INTL V. HABIB NIGERIA BANK
S.233(1) CAMA
5 To take and enter possession of the security used for the loan
6 Valuation of security and providing proof of balance upon winding up.

2. DIRECTORS
i. DIRECTORS - (SECTION 269 OF CAMA)

Directors are persons appointed to direct and manage the business of the
company. See Section 269 of CAMA. Directors need not be shareholders
except where there is share qualification in the Articles of Association. Every
company registered under CAMA must have a minimum of two directors. See
Section 271 of CAMA. There is no statutory maximum, but the company may
by its Articles provide for maximum number of directors.

In the case of Re: Forest of Dean Coal Mining Company, Sir Jessel M. R. stated
as follows:

“Directors have sometimes been called trustees or commercial trustees and


sometimes they have been called managing partners. It does not matter what
you call them so long as you understand what their true position is, which is that
they are really commercial men managing a trading concern for the benefit of
themselves and all other shareholders in it…”

19
Section 269(2) of the Act provides that there shall be every rebuttable
presumption that all persons who are described by the company as directors
whether as Executive or otherwise, have been duly appointed.

WHO ARE DIRECTORS?

 Section 269(1) CAMA: Directors of a company registered under this Act


are persons duly appointed by the company to direct and manage the
business of the company.

 Section 868 CAMA: "director" includes 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;

 Section 270(1) CAMA: "director" shall include any person on whose


instructions and directions the directors are accustomed to act.

 Section 270(3) CAMA: For the avoidance of doubt, the fact that a person
in his professional capacity gives advice and a director acts on it shall not
be construed to make such a person under this Act a person in accordance
with whose directions or instructions the director of a company is
accustomed to act.

 Section 269(2) CAMA: a person described by the company as Director is


deemed to have been so duly appointed.

 Where a person not duly appointed as director acts or holds himself out as
having been duly appointed without the concurrence of the company,
then:

a) Criminal liability: s269(3) CAMA, he shall be guilty of an offence


and on conviction be liable to imprisonment for 2years or to a fine of
N100 for each day he so acts or holds out himself as a director, or to
both such imprisonment or fine and shall be restrained by the
company

b) Civil liability: Where a person not duly appointed as a director acts as


such on behalf of the company, his act shall not bind the company and
he shall be personally liable for such action; provided that where it is
the company which holds him out as director the company shall be
bound by his acts s276CAMA 2019

20
 Director is the alter ego of a company and therefore said to be the mind
and brain behind company’s activities and constitute the policy making as
well as the executive organs of the company-YALAJUAMAYE v.
AREC

TYPES OF DIRECTORS OF A COMPANY

A) EXECUTIVE
B) NON-EXECUTIVE
C) MANAGING DIRECTOR
D) CHAIRMAN
E) FIRST DIRECTOR
F) CASUAL DIRECTOR
G) ALTERNATE DIRECTOR
H) SHADOW DIRECTOR
I) LIFE DIRECTOR
J) NOMINEE DIRECTOR

EXECUTIVE DIRECTORS

 They are full time or salaried Directors who are appointed to take charge
of day-to-day running of company affairs.

 They occupy dual status as alter ego as well as an employee of the


company. As an alter ego they sit at Board meetings formulating policy
directions for the company, and as employees, they are in charge of
implementation of the policies of the company.

 In addition to his employment he must also have a contract of service


that specifies his schedule of duties and responsibilities.

 s. 272 appointment of first directors

 s. 273 appointment of subesequent directors

 s. 274 appointment of casual directors

NON-EXECUTIVE DIRECTORS

21
 These are directors appointed without any additional administrative role
assigned to them. They are only entitled to operate as alter ego of the
company. Unlike executive directors, they are not given any office in the
company.
 Not involved in the day-to-day management and they are not
employees.

 These are directors who are not entitled to remuneration but only
reimbursement for their out of pocket expenses in carrying out the
company affairs EXCEPT as provided in the ARTICLES OF
ASSOCIATION

 They attend Board Meetings when fixed.

 Section 305(4) states that the same standard of care in relation to the
director's duties to the company shall be required for both executive and
non‐executive directors.

MANAGING DIRECTORS/CEO

 The Managing Director is the Chief Executive Officer and takes full
responsibility for activities of the company. He sees to the day-to-day
administration of the company.

 He is usually either appointed from among the Directors (whether


executive or non-executive), who exercises powers delegated to him by
the Board of Directors. - Section 88(b) CAMA.

 The MD occupies a dual position both as an employee/servant and alter


ego of the company. -LEE v. LEE FARMING CO

 Since the MD and other Executive Directors are appointed on the basis of
their skills and hence entitled to remuneration, they possess a service
contract which spells out the terms and conditions of employment.

CHAIRMAN OF THE BOARD OF DIRECTORS

 The Chairman of the Board is also the Chairman of the Company and
presides over the Board and General meetings of the Shareholders of the
company. - S. 265 of CAMA.

22
 He is appointed by the Board of Directors from among the board.-
Section 289(4). It is usually from the Non-executive directors that the
Chairman of the Board is elected, and he presides over the board
meetings and general meetings.

 Sometimes some Companies appoint MD as chairman and CEO, taking


the position of both non-executive and executive Director. This is usually
in Private companies with small spread of shareholders. But note: this
dual position has been abolished in Banks and public companies
following the Code of Corporate Governance.

 NB: Power & Privileges of Chairman. – Casting Vote in a deadlock;


Presides over BOD and General Meetings; power and discretion in
adjournment of meetings; he is an alter-ego of the company.

ALTERNATE DIRECTOR

 This is the Director who is appointed to take the position of another Director
in the event of absence.

 It is the Director that appoints his alternate but is approved by the


resolution of the General Meeting. Here, two directors are appointed to
alternate one position. Either of them can occupy the position and
attend board meetings in the absence of the other.

 There must be a provision in the Articles of Association of the company


recognising the possibility of creating this position.

 Although two directors are appointed in the one position, only one of them
can function at a time, and they are counted as one for the purpose of
counting the number of directors.
 The Alternate Director ceases to hold office whenever the substantive
Director ceases to hold office

SHADOW DIRECTOR

 This type of director is not formally appointed and is the only type of
director without an official record of appointment and removal.

23
 The shadow director is a person in accordance with whose directions and
instructions, who operates from outside the company, the board of
directors of the company are accustomed to act. - S. 270 of CAMA.

 At what point can someone be reckoned as a shadow director?

 Can a Single Act make a person a Shadow Director? SECRETARY OF


STATE v. BECKER a single act cannot make a person a shadow
director but there must be in existence a custom, habit, pattern, or
tradition.

 One is considered a shadow director for the limited purpose as provided


in ss. 279, 301 CAMA.

 It arises when considering the above sections only.

 As such, a person cannot come and say that he is a shadow director just to
claim benefit accruing to the company.

 The removal is deemed once the board of directors is no longer


accustomed to his directions and instructions.

 An Exception to the above rule is professionals acting in their


professional capacity as engaged by the company to advise it.

 The essence is to prevent a person whose influence is great on the


company from excluding himself from the company’s liabilities.

22/03/22
LIFE DIRECTOR

 Section 281 of CAMA: This is a person appointed as a director of the


company for life.
 A life director is exempted from retirement by rotation as a major
advantage.
 However, he is removable under
o S. 288 of CAMA
o under Section 284(1) or
o where he is disqualified s.277 (share qualification); s280
restraint of fraudulent person
o s.284 vacates the office.

LIFE DIRECTOR
24
Sometimes, the Articles appoint a person life director. In such a case, it is not
necessary to re-elect him, and the articles usually expressly exclude him from
the operation of the clause relating to retirement by rotation. He is normally
given wide powers of management and in practice, he will probably be a major
shareholder in the company. He is, however, subject to removal under Section
288 of the Act, that is, by an Ordinary Resolution of which special notice is
given as provided under Section 281.

NOMINEE OR REPRESENTATIVE DIRECTOR

 This is a director appointed by a Company to represent the company as a


director on the board of another company. Because the law requires a
human being to represent the company in the board of that other
company, the company is obliged to appoint a nominee to represent it in
the Board for a fixed period. -Section 283 CAMA.

 Section 283(e) provides that the following persons shall be


disqualified from being director (i) a corporation other than its
representative appointed to the board for a given term.

 Upon filling returns at CAC the company files the name of the
representative of the Director Company. Such a director should be
reflected as a Representative/ Nominee of the company appointing him in
the Particulars of Director (CAC FORM 7)

FIRST DIRECTORS

 Initial directors of the company which cannot be less than 2.

 S. 272 CAMA: Subject to section 246 of this Act, the number of directors
and the names of the first directors shall be determined in writing by the
subscribers of the memorandum of association or may be named in the
articles of association (not advisable).

 Consent letter of the Director stating that he approves of his


appointment as Director.

CASUAL DIRECTOR

 Where there is a vacancy arising out of death, resignation, retirement, or


removal of a Director, the Board of Directors shall appoint new persons

25
to fill any such casual vacancy subject to approval by the members in
general meeting and if not approved, he shall cease to be a director -S.
274(1)&(2)

 The new appointee steps into the shoes/tenure of the removed or dead or
retired director. He merely enjoys the unexpired residue of the term of
the initial director.

OTHERS: INTERLOPERS & ASSIGNEES

NUMBER OF DIRECTORS

 The minimum number of directors of a company is NOT LESS THAN 2


directors - section 271 of CAMAat all times and maximum as may be
stated in the Articles.

*Note the provision of the Code of Corporate Governance 2011


which prescribes minimum of 5.

 Where the number falls below the legal minimum (less than 2
directors), that is one director is running a company more are to be
appointed WITHIN 1 MONTH and the company shall not carry on
business after the expiration of that month unless new directors are
appointed. - S.271(2) CAMA

 LIABILTY- A director or member of a company who knows that a


company carries on business after the number of directors has fallen
below two for more than 60 days shall be liable for all liabilities and
debts incurred by the company during that period when the company so
carried on business: s.271(3) CAMA

 Section 274(3): The directors may increase the number of directors so


long as it does not exceed the maximum allowed by the articles, but the
general meeting shall have power to increase or reduce the number of
directors generally and may determine in what rotation the directors shall
retire, provided that such reduction shall not invalidate any prior act of
the removed director.

26
APPOINTMENT OF DIRECTORS

APPOINTMENT OF FIRST DIRECTORS - (SECTION 272 OF CAMA)

The first directors of a company are appointed in writing by the subscribers to


the Memorandum of Association. The first directors may also be appointed by
naming them in the Articles of Association. See Section 272 of CAMA.
Subsequent directors are appointed by members in a General Meeting.

The Articles or Memorandum may also empower other person or officer to


appoint subsequent directors and where such power exists, it may be enforced
by a third party or a conferee may enforce the power even where he is not a
member of the company. See Section 46(3) of the Act.

Appointment of Subsequent Directors

 These are Directors appointed after the company is incorporated and


while the company is operating in ordinary course of business.

 The members at the annual general meeting shall have power to re-elect
or reject directors and appoint new ones – S. 273(1).

 May also be Appointed by a Named Person in the Articles which


provision gives him power to appoint directors of the company

 At a general meeting a director is appointed by an ordinary Resolution. In


a public company one ordinary resolution cannot be used to appoint more
than one director except a resolution had earlier been passed by the
general meeting to that effect. Section 287(1) CAMA

 *Not applicable to private companies which can use one resolution to


appoint multiple directors.

 If articles exclude rotation rule (i.e. the directors don’t retire at the
AGM), members can reject directors by removal

 Upon appointment of subsequent directors, the company shall file at the


CAC FORM CAC 7A(Change in Particulars of Directors) within 14
days of the change accompanied by the resolution of the appointment –
Section.

Appointment of Directors after Death of all Directors and Shareholders

27
 Any of the personal representatives of the dead Directors and
shareholders shall apply to the Court for an order to convene a general
meeting of all the personal representatives of the shareholders entitled
to attend and vote at general meeting to appoint new directors. Where
they fail to convene the meeting; the creditors if any, shall do so S.
273(2)

 Note- Power can be conferred on an outsider to appoint or remove


directors in the memorandum or articles of association, and that
power is enforceable by that person notwithstanding that he is not a
member or officer of the company: S. 46 (3) of CAMA and
WOODLAND v. LOGAN.

RETIRING DIRECTORS - (SECTION 284(2) OF CAMA)

Reappointment of retiring directors is one of the ordinary business at an


Annual General Meeting
Section 284(2) of the Act provides that where a director
presents himself for re-election, a record of his attendance at
the meeting of the Board during the preceding one year must be
made available to the members at the annual meeting where he
is to be re-elected.

ROTATION OF DIRECTORS - (SECTION 285 OF CAMA)

Unless otherwise provided by the Articles of Association of a company,


at the first AGM, all directors shall retire from office and at the AGM in every
subsequent year, one third of the directors for the time being, or if their number
is not three or a multiple of three, then the number nearest to one third shall
retire from office as provided in Section 285(1) of the Act.

A retiring director who offers himself for re-election is deemed to have been re-
elected unless:

i. Another person is elected to fill his place; or

ii. It is expressly resolved at the meeting not to fill the vacancy


created by his retirement; or

28
iii. A resolution for his re-election has been put to the meeting
and lost. See Section 285(3) of the Act.

Exception: life director

Sometimes, the Articles appoint a person life director. In such a case, it is not
necessary to re-elect him, and the articles usually expressly exclude him from
the operation of the clause relating to retirement by rotation. He is normally
given wide powers of management and in practice, he will probably be a major
shareholder in the company. He is, however, subject to removal under Section
288 of the Act, that is, by an Ordinary Resolution of which special notice is
given as provided under Section 281.

DISQUALIFICATION OF DIRECTORS:

o Section 283 CAMA: The following persons cannot be appointed as


directors of a company:
o Infant under 18 years of age
o A lunatic or person of unsound mind
o A person disqualified under sections 279 (insolvency); 280 (fraud)
persons who have been convicted of fraudulent practices in relation
to company matters is banned from taking part in the management
of a company for 10 years; and 284 (vacation) of the Act.

o S. 277 Failure to hold qualification shares: Where the Articles of


Association require one before one can become a director, such office
will be vacated where the Director fails to obtain such qualification
shares within a period of two months.

o A corporation other than its representative appointed to the Board for a


given period. See Section 283 of CAMA.

VACATION OF OFFICE OF DIRECTORS (SECTION 284 OF CAMA)

Vacation of office of a director may arise from death, appointment of a


liquidator, disqualification, resignation, retirement or removal. A person
appointed director shall vacate his office:

29
i. if he ceases to be a director for failure to hold qualification shares;

ii. if he becomes an undischarged bankrupt;

iii. if he is prohibited by any order of the court made under Section 280 of
the Act by reason of his being fraudulent;

iv. if he becomes of unsound mind, or if he resigns his office by notice in


writing to the company.

Section 284 states: The office of director shall be vacated if the director‐

(a) Ceases to be a director by virtue of section 277 of this Act (SHARE


QUALIFICATION- where articles provide for a DIRECTOR to hold
particular number of shares in the company); or

(b) becomes bankrupt or makes any arrangement or composition with his


creditors generally; or

(c) Becomes prohibited from being a director by reason of any order


made under section 280 of this Act; or

(d) Becomes of unsound mind; or

(e) Resigns his office by notice in writing to the company.

v. NOTE expiration of tenure as fixed by the relevant regulatory body e.g.


CBN rule of 10 years for bank CEOs

vi. Under this section, vacation of the office is automatic by provision of


law.

AGE LIMIT OF DIRECTORS (SECTION 282 OF CAMA)

Section 283(a) of CAMA provides for the minimum age of appointment


of a person as a director which is 18 years and above. Generally, there is no
maximum age for appointment as directors except that restriction has been
placed in respect of a director of a public company who is 70 years or more. A
person may be appointed a director of a public company notwithstanding that he
is 70 years or more provided the provision of section 282 is complied with.
Section 282 provides that special notice of the resolution approving the
appointment of the director must be given to the company. The notice to the
company and to the members must state the age of the director. Section 278(1)
of the Act provides that any person who is appointed or to his knowledge
30
proposed to be appointed director of a public company and who is 70 or more
years old shall disclose this fact to the members at the General Meeting. Failure
of any to so do as required under Section 278(2) of the Act shall constitute an
offence and that person shall be liable to a fine as may be prescribed by the
commission.

MODE OF VOTING ON APPOINTMENT OF DIRECTORS -

(SECTION 287 OF CAMA)

Unless the Articles of a company otherwise provide, appointment of directors is


by Ordinary Resolution. A private company can and usually appoints its
directors by a single resolution. A public company is required to appoint each
director by a separate resolution. However, a public company may appoint two
or more directors by a single resolution if the meeting unanimously passes a
resolution that it should be so made. See Section 287(1) of the Act.

REMOVAL OF DIRECTORS - (SECTION 288 OF CAMA)

The Articles of a company or the contract appointing a director may


provide for his removal from office. However, Section 288(1) of the Act
provides that a company may, by an Ordinary Resolution of which Special
Notice is given, remove a director before the expiration of his period of office
notwithstanding anything in its Articles or in any agreement between it and the
director. The intention of this provision is explicit. The shareholders must have
power to remove the Board. But the director retains his right to claim
compensation or damages for wrongful termination of his employment. See the
following cases:

LONGE V. FIRST BANK OF NIGERIA PLC.

YALAJU AMAYE V. AREC. LTD (1990) 4 NWLR (PT. 145) 422.

OLUFOSOYE V. FAKOREDE

Special notice is required also of any resolution to appoint as director some


other person instead of the director so removed at the meeting at which he is
removed. See Section 288 of the Act. The notice of resolution must be
forwarded forthwith upon receipt to the director who is entitled not only to be
heard on the resolution at the meeting but also to make representation of
reasonable length to be forwarded at his request to the members who are given
notice of the meeting. A vacancy created by the removal of the director if not
31
filled at the meeting at which is removed may be filled as a casual vacancy.

Any person so removed is entitled to compensation or damages payable to him


by reason of his termination of appointment as a director or of any appointment,
for example, as Managing Director. See Section 288(6) of the Act. A director
who was unlawfully removed could still be properly removed despite the
improper notice and procedure adopted earlier, since the company has a
statutory right to remove anybody from its Board although that person may
apply for a winding up order of the company on the ground that it is just and
equitable for the court to make such an order. That was the decision in AREC
LTD. V. YALAJUAMAYE (1986) NWLR 653.

PROCEDURE FOR REMOVAL OF DIRECTORS UNDER SECTION


288 OF CAMA exam qtn

Check to find out if direct and simpler power of removal other than Section 288
is provided by the Articles or contract and apply it if available.

The person(s) wishing to remove the director must issue(s) notice of the
resolution to the company at least 28 days before the date of the meeting.
Section of the Act:
Where by any provision contained in this Act, special notice is
required of a resolution, the resolution shall not be effective
unless notice of the intention to move it has been given to the
company not less than twenty eight days before the meeting at
which it is to be moved and the company shall give its members
notice of any such resolution at the same time and in the same
manner as it gives notice of the meeting or if that is not
practicable, shall give them notice thereof, either by
advertisement in a newspaper having an appropriate circulation
or in any other mode allowed by the Articles, not less than
twenty one days before the meeting:

Provided that if, after notice of the intention to move such a


resolution has been given to the company, a meeting is called
for a date twenty eight days or less after the notice has been
give, the notice though not given within the time required by this
section shall be deemed to have been properly given for

32
purposes thereof.

Upon receipt of the notice, the Secretary to the company will:

(a) send a copy of it to the director concerned;

(b) issue notice of the meeting at least 21 days before the date of the meeting.
The notice will be accompanied by any representations made by the director and
state the fact of the representations having been made.

(c) At the meeting:

i. give audience to the director and read to the members his


representations if they were received too late or were not sent to the
members owing to the company’s default.

ii. Pass ordinary resolution removing the director.

(d) File form of particulars of directors and of any changes therein, that is,
Form CAC 7A to the CAC to reflect the removal within 14 days of remove.

(e) Enter the fact of removal in the Register of Directors and where necessary
also amend the Register of Directors’ Shareholding.

See YALAJU-AMAYE V. AREC LTD (SUPRA).

DUTIES OF DIRECTORS

Directors occupy a key position in the management of a company and are,


therefore, subject to certain obligations. Directors are both trustees and agents
of the company they represent. All the normal rules of agency apply. A
director’s duties are not capable of precise definition although CAMA has
attempted a codification of the duties, but they are by no means exhaustive.
Broadly speaking, directors owe two duties namely:

Fiduciary duties and

Duties of care and skill.

33
1. FIDUCIARY DUTIES
 Directors owe fiduciary duties to the following persons:

i. Company to which it must observe utmost good faith in any


transactions with it or on its behalf.
ii. Shareholders when acting as shareholders’ agent.
iii. Shareholder in any transaction affecting his interest.
iv. Any person dealing with the company’s securities-Section 305(2)

The fiduciary duties of directors


i. Duty to act bona fide for the benefit of the company.
ii. Exercise power for proper purpose: Section 305(5)
iii. Not to fetter discretion to vote in a particular way: Section 305(6)
iv. To avoid conflict of duty and interest.
v. Not to make secret profits by appropriating corporate assets or
opportunities.

i. DUTY TO ACT BONAFIDE FOR THE BENEFIT OF THE


COMPANY

 A director shall act at all times in what he believes to be the best interest of
the company as a whole so as to preserve its assets, further its business, and
promote the purposes for which it was formed and in such manner as
faithful, diligent, careful, and ordinary skilful director would act in the
circumstances - S. 305 (3); ARTRA IND. NIG. LTD V. NIGERIAN
BANK FOR COMMERCE AND INDUSTRY

 The interest of employees and members is to be considered in the


performance of his functions- S. 305(4)

ii. DUTY TO EXERCISE POWER FOR A PROPER PURPOSE

 A director shall exercise his power for the purpose for which it is specified
and shall not do so for a collateral purpose.

 However, such powers when exercised for proper purpose are VALID even
if it incidentally affected a member adversely. - S. 305(5)

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iii. DUTY NOT TO FETTER DISCRETION TO VOTE IN A
PARTICULAR WAY

 A director is a trustee of the company as such he shall not exercise his


discretion to vote in a particular way WITHOUT the consent of the
company, being the Beneficiary. - S. 305(6) CAMA

 Therefore, a Director cannot make a valid agreement among other Directors


with shareholders or outsiders to vote in a particular way at Board
meetings.

iv. CONFLICT OF INTEREST: DUTY NOT TO

 Section 306(1) of CAMA provides that the personal interest of a director


shall not conflict with any of his duties as a director under this Act. This
may arise in various ways:

 The golden rule is that a director must not, without the consent of the
company, make any profit out of his position in the company beyond his
agreed remuneration. That was the decision in BOSTON DEEP SEA
FISHING CO. V. ANSELL (1888) 39 CH. D. 339

 The duty of a director not to misuse information obtained from the


company by virtue of his position continues even after he has ceased to
be a director or officer of the company. See Section 306(5) of the Act.
See also the case of INDUSTRIAL DEV. CONSULTANTS LTD
(IDCL) V. COOLEY (1972) 1 WLR 443 where the director resigned
but was still held liable to account.

 A director must not use the company’s property to make secret profit or
achieve other unnecessary benefits.

By virtue of Section 307 of the Act, holding of multiple directorships by a


person does not preclude him from derogating from his fiduciary duties to each
company of which he is a director. Therefore, he is not permitted to use the
property, opportunity or information obtained in the course of the management
of one company for the benefit of the other company or to his own or other
person’s advantage.

35
 The personal interest of a director shall not conflict with any of his duties
as a director-S. 306 (1)

 Any director of a company who is in any way whether directly or


indirectly, interested in a contract or proposed contract with the company,
shall declare the nature of his interest at a meeting of the directors of a
company-S. 303 (1)

 For a proposed contract, the director shall declare his interest at a Board
meeting where the contract was first considered; where not interested on that
date, the next meeting held after he became so interested S. 303(2)
NB -A director is prohibited from entering into guarantee or provision of
security with the company. S. 296(1)

 Payments made to a director by way of compensation for loss of office or


retirement must be disclosed to members in general meeting and approved
by them-S. 299(3)

 A director is restricted from the acquisition of non-cash asset of the company


without approval by resolution of general meeting (S. 310)

v. DUTY NOT TO MAKE SECRET PROFITS AND EXPLOIT


CORPORATE ASSETS INFORMATION AND
OPPORTUNITIES

 A director shall not accept a bribe, a gift or commission either in cash or


kind from any person or a share in the profit of that person in respect of any
transaction involving the company in order to introduce the company to deal
with such a person-S. 313(1)

 However, if the gift is unsolicited in the form of gratitude after the


transaction has been completed, the Director may be allowed to keep the
gift provided he declares it before the Board. The Board’s decision
approving his keeping the gift is to be entered in the Minutes Book of
Directors-S. 313(3)

 Directors are not allowed, either during or after the termination of their
service with the company to use for their own benefit anything, property,
trade secret or confidential information entrusted in them by virtue of their
position.

36
 This duty also extends to officers who have access to such information.

 The fact that a person holds multiple directorships shall not derogate
from his fiduciary duties to each company; he is not to use information
from one company to the advantage of the other company-Section 307

CONSEQUENCES FOR BREACH OF DUTY NOT TO MAKE SECRET


PROFIT

a. The director shall be accountable to the company for any secret


profits or unnecessary benefit derived by him. - S. 306(3)
b. The director may be sued by the company to recover such secret
profit or benefit. - S. 313(2)

 It does not matter that the Director acted bona fide: Regal (Hasting) Ltd v.
Gulliver

2. DUTY OF CARE AND SKILL

COMMON LAW POSITION

The Common Law position of a director’s duty of care and skill was considered
at length by ROMER J. in RE: CITY EQUITABLE FIRE INSURANCE
CO. LTD. (1925) CH. 407 where he held inter alia that in discharging his duty,
a director must act honestly. He was not bound to give continuous attention to
the affairs of the company but ought to attend meetings when reasonably able to
do so. Hence, only the Chairman was liable for the losses. Any negligence of
others was not “wilful” and they were excluded by the Article.”

Romer J. then laid down the following proposition after considering all the
earlier authorities on the issue.

“A director need not exhibit in the performance of his duties a greater degree of
skill than may reasonably be expected from a person of his knowledge and
experience.”

37
What this means is that a director will be judged by the skill (low or high)
which he holds out about himself.

The case of SHONOWO V. ADEBAYO (1969) 2 ALR Comm. 419 is a


classic example of a company destroyed by the incompetence and carelessness
of its directors.

In the case of RE: BRAZILIAN RUBBER PLANTATION ESTATE LTD.


(1911) 1 CH. 425, Neville J. said:

“A director is not bound to bring any special qualification to his office. He may
undertake the management of a rubber company in complete ignorance of
anything connected with the rubber without incurring responsibilities for the
mistakes which may result from such ignorance while if he is acquainted with
the rubber business, he must give the company the advantage of his knowledge
when transacting the company’s business.

A director is not bound to give continuous attention to the company’s affairs.


His duties are of intermittent nature to be performed at periodical Board
meetings and at meetings of any Committee of the Board upon which he
happens to be placed. He is, however, bound to attend all such meetings though
he ought to attend whenever in the circumstances he is reasonably able to do
so.”

Thus, at Common Law, a director may safely be ignorant, inexperience and


lacking in judgment so long as he is honest.

POSITION UNDER CAMA

The duty of care and skill expected of a director is now clearly stated in Section
308 of CAMA 2019.

Section 308(1) of the Act provides that every director of a company shall
exercise the powers and discharge the duties of his office honestly, in good faith
and in the best interests of the company and shall exercise that degree of care,
diligence and skill which a reasonably prudent director would exercise in
comparable circumstances.

If he fails to observe that degree of care and diligence, he may be liable for
negligence and breach of duty as provided in Section 308(2) of the Act. The
same standard of care is required for all directors unless there is justification for
exception. See Section 308(4) of the Act.
38
But in the case of an Executive Director, additional liability and benefit may
arise under the contract of employment (express or implied) between such
executive director and the company.

In order to deal with a situation where a director deliberately shirks his


responsibility, Section 308(3) of the Act provides that a director is individually
responsible for the actions of the Board in which he participated and absence
from the Board’s deliberation, unless justified, will not relieve a director of such
responsibility.

In effect, the new law under CAMA is to the effect that the standard of care
required from a director is an objective one, that is, it is a fixed standard
depending on the skill and knowledge a reasonable, prudent director of his class
would exercise if faced with similar circumstances.

ENFORCEMENT OF THE DUTIES OF DIRECTORS

INTRODUCTION

As a general rule, it is the company’s responsibility to enforce the


directors’ duties but because of the powerful administrative machinery of the
company at the disposal of directors, it is not easy for the company to enforce
the duties and so the usual way of doing so is by removing the directors under
powers given by Section 288(1) of the Act which provides that a company may,
by ordinary resolution requiring special notice, remove a director
notwithstanding the provision in the Articles or even in the agreement between
the company and the director.

It should be noted that in several companies, directors would normally be


the controlling shareholders, a situation which makes their removal difficult and
sometimes impossible. In such a case, the following remedies are available to
shareholders:

1. Petition for winding up the company on the ground that it is just and
equitable to do so. See Section 571(e) of CAMA.

2. Relief on the ground that the affairs of the company are being conducted
in an illegal and oppressive manner. See Sections 354 to 356 of CAMA.

3. To commence misfeasance proceedings against a director or other


officers of a company. Misfeasance means ‘compromised integrity’. See
Section 507 of the Act. This section provides a remedy against the unlawful
39
acts of directors and other officers and is available only when the company is in
liquidation. Where a director (or a manager or liquidator or any officer of the
company) has misapplied or retained or has become liable for any money or
property of the company or is guilty of any misfeasance or breach of duty in
relation to the company which would involve civil liability at the suit of the
company, an application may, after investigation, be made to the court to
compel him to repay or restore the money or property or contribute by way of
compensation towards restoring the company’s assets.

4. Investigation of the company’s affairs by the CAC under Sections 357


and 358 of CAMA

Under Sections 357 and 358 of the Act, application may be made to the
Commission for an investigation into the affairs of the company and if satisfied
that there is good ground for this, it will direct the appointment of an inspector.

REGISTER OF DIRECTORS AND SECRETARIES

Section 318(1) of CAMA 2019 provides that every company must keep at its
registered office a Register of its Directors and Secretaries. The Register must
contain the following particulars with respect to each director, namely,

(a) forename and surname (present);

(b) any former forename and surname;

(c) his usual residential address;

(d) his nationality;

(e) his business occupation, if any;

(f) particulars of any other directorships held by him and

(g) the date of his birth.

This is provided in Section 319 of the 2019 Act.

REMUNERATION OF DIRECTORS - (SECTION 293 OF CAMA)

40
Section 293 of CAMA provides, inter alia, that:

“(1) The remuneration of the directors shall from time to time be determined
by the company in general meeting and such remuneration shall be deemed to
accrue from day to day.

(2) The directors may also be paid all travelling, hotel and other expenses
properly incurred by them in attending and returning from meetings of the
directors or any Committee of the directors or general meetings of the company
or in connection with the business of the company.”

Section 293 (3) of the Act provides that where the Articles fix the remuneration,
it can only be altered by a special resolution.

The company is not bound to pay remuneration to directors but where the
company agrees to pay, the directors must pay such remuneration out of the
funds of the company and such payment is apportionable. See Section 293(4)
and (7).

Where a company goes into liquidation before it has determined the


remuneration of the director as provided in Section 293(1) of the Act, the
director is not entitled to any remuneration. Nor are directors entitled to
preferential payments of fees in winding up since they are not servants of the
company.

REMUNERATION OF MANAGING DIRECTOR - (SECTION 294 OF


CAMA)

Although the remuneration of the Managing Director is regulated by Section


293 of the Act, it shall be determined by the directors. Section 294 of CAMA
provides as follows:

294(1): “A Managing Director shall receive such remuneration (whether by


way of salary, commission or participation in profits or partly in one way and
partly in another) as the directors may determine.

294(2): Where the Managing Director is removed for any reason


whatsoever under Section 288 of this Act, he shall have a claim for breach of
contract if there is any or where a contract could be inferred from the terms of
the Articles.

41
294(3): Where he performs some services without a contract, he shall be
entitled to payment on a quantum meruit.”

29/03/22

LIABILITY OF DIRECTORS

1. Liability in Contract

When a director contracts as agents on behalf of the company, like any other
agent, he is not personally liable on the contract. See Palmer’s Company Law,
paragraph 62-02 at page 922. This is an application of the general principles of
agency and under this principle, the director may be personally liable where he
contracts in such a way as to assume personal liability.

Note that where a director contracts in his own name without disclosing that he
is acting for a principal, he may be personally liable to third parties on the
contract. That was the decision in the case of ELKINGTON AND CO. V.
HURTER (1892) 2 CH. 452.

Even where he contracts as a director but without using words that bind the
company, he will be personally liable.

2. Liability in Tort

“Any director who personally commits a fraud or any other tort in the course of
his duties is liable to the injured party. This is based on the principle that
whoever commits a wrong is liable for it himself and nonetheless that he was
acting as an agent or servant on behalf, and for the benefit of another.” See
Palmer’s Company Law, paragraph 64-65 at page 972.

A director who has not authorised a fraud committed by his co-directors cannot
be held responsible for it.

Where there is a breach of the duty of care as explained earlier, the director will
be liable to the company for any loss sustained and action may be brought by
the company to restrain him from committing or continuing the breach. If the
breach has been committed, proceedings may be taken for damages or
compensation for restoration of the property of the company, if traceable; for
rescission of the contract in question; or for an account of any profits made. In

42
addition, the director may be dismissed summarily.

3. Personal Liability of Directors

Section 316 of CAMA is apparently intended to deal with the rampant


complaints about directors who obtain loans or advance on behalf of the
company for specific projects and divert them to their personal use. The section
deals with cases -

(a) where a company receives money by way of a loan for specific purposes,
or

(b) where it receives money or other property by way of advance payment for
the execution of a contract or project.

In any of these cases, if the company, with intent to defraud, fails to apply the
money or other property for the purpose for which it was received, every
director or other officer of the company who is in default is personally liable to
the party from whom the money or property was so received and not applied for
the purpose for which it was received. But this provision does not affect the
liability of the company itself, and so, it may be joined in any action against the
directors.

BREACH OF SECTIONS 118 AND 271 OF CAMA 2019

A director in PLC may also be personally liable where the company carries on
business without having at least 2 members as provided in Section 118 of the
Act or without having 2 directors as provided under Section 271 of the Act. If
the company carries on business for more than 6 months after the membership
has fallen below 2, THE REMAINING director or officer who knows that it so
carries on business is liable jointly and severally with the company for the debts
of the company contracted during the period.

With regard to the number of directors, Section 271(3) of the Act provides that
a director or member of a company who knows that the company carries on
business after the number of directors has fallen below 2 for more than 60 days
is liable for all liabilities and debts incurred by the company during that period.

PROCEEDINGS OF DIRECTORS

43
BOARD MEETINGS - (SECTION 289 OF CAMA 2019)

The directors may meet for the despatch of business, adjourn and otherwise
regulate their meetings, as they think fit. See Section 289 of CAMA.

The first meeting of the directors must be held not later than 6 months after the
incorporation of the company. Questions at meetings shall be decided by a
majority of votes, and the Chairman has a casting vote in case of equality of
votes.

A director may and the secretary on the requisition of a director shall, at any
time, summon a meeting of the directors s.289(3).

THE CHAIRMAN OF BOARD MEETINGS s. 265

The directors may elect a Chairman of their meetings. This Chairman will
naturally become the Chairman of the company and determine the period for
which he is to hold office. If no Chairman is elected or if at any meeting, he is
not present within 5 minutes after the time appointed for the holding of the
meeting, the directors present may choose one of their number to be Chairman.

DELEGATION BY THE BOARD

The maxim “delegatus non potest delegare” applies to directors in the same way
as to all agents. A person to whom a function has been delegated may not
himself delegate it further without the consent of his principal.

Section 88 of CAMA, however, provides that Directors may delegate any of


their powers to the managing director or to Committees consisting of such
member or members of their body as they think fit and such Committees must
conform to the directors’ regulation. Thus, a Committee may consist of a single
director.

A Committee has power to elect its own chairman and a substitute in his place
where he is absent. This Chairman also has a casting vote. The Committee
regulates its own conduct of meeting as it thinks proper.

QUORUM AT BOARD MEETINGS - (SECTION 290 OF CAMA)

Unless the Articles express a contrary intention, the quorum necessary for

44
the transaction of business of directors shall be 2 where they are not more than 6
but where they are more than 6, the quorum shall be one third to the nearest
number where the number of directors is not a multiple of three.

The Board fixes the quorum of committee appointed by it and where it fails to
do so, the whole committee shall meet and act by a majority. Where the Board
cannot act because a quorum cannot be formed, the general meeting may act in
its place and the Board also acts in place of the committee where the committee
cannot form a quorum.

There are, however, situations when the Board can dispense with holding
meeting. Section 289(8) of CAMA provides that:

“A resolution in writing, signed by all the directors for the time being entitled to
receive notice of a meeting of the directors, shall be as valid and effectual as if
it had been passed at a meeting of the directors duly convened and held.”

In all the directors’ meetings, each director shall be entitled to one vote.

NOTICE OF DIRECTORS’ MEETINGS s 292

Every director shall be entitled to receive notice of the directors’ meetings


unless he is disqualified by any reason from acting as director under the Act.
Unless the Articles otherwise provide -

(1) 14 days notice in writing to all directors entitled to receive notice will be
sufficient.

(2) Non-compliance with this provision invalidates the meeting.

(3) It shall not be necessary to give notice of a meeting of director to any


director who is outside Nigeria during the period of the meeting.

3.COMPANY SECRETARIES

45
APPOINTMENT OF COMPANY SECRETARIES -

(SECTION 330 OF CAMA 2019)

Like Section 169 of the Companies Act, 1968, Section 330 of CAMA
makes it mandatory for companies, whether private or public, to appoint
Company Secretaries but unlike the Companies Act of 1968, the Companies and
Allied Matters Act, 1990 appears to have raised the status of a Company’s
Secretary to one which is reserved for qualified professionals only. See Section
332 of CAMA.

It is the duty of Company Directors to ensure that a person that is appointed


Company Secretary possesses the relevant experience and skill.

QUALIFICATION FOR APPOINTMENT AS COMPANY SECRETARY


– (SECTION 332 OF CAMA)

Section 332 of the Companies and Allied Matters Act, 1990 provides it shall be
the duty of a director of a company to take all reasonable steps to ensure that the
Secretary of the company is a person who appears to him to have the requisite
knowledge and experience to discharge the functions of a Secretary of a
company.

In the case of a public company, the same Section provides that a Secretary
must have one of the specified qualifications:

a) A member of the Institute of Chartered Secretaries and Administrators; or

b) A Legal Practitioner within the meaning of the Legal Practitioners Act,


1975; or

c) A Member of the Institute of Chartered Accountants of Nigeria (ICAN);


or

d) Any person who has held the office of a Secretary of a public company
for at least 3 years of the 5 years immediately preceding his appointment;
or

e) A body corporate or firm consisting of qualified persons under


paragraphs (a), (b), (c) or (d).

DUTIES OF COMPANY SECRETARIES -

46
(SECTION 335(1) OF CAMA)

The Companies and Allied Matters Act makes provision for both general and
specific duties for Company Secretaries. Section 335(1) of the Act provides
that the duties include the following:

a) Attending the meetings of the Board of Directors and company general


meeting – whether AGM, statutory general meeting or extra-ordinary
meeting.

b) Rendering all the necessary secretarial services in respect of the meeting


and

c) Advise on compliance by the meeting with the applicable rules and


regulations.

d) The Board of Directors have Committees. When they are meeting, the
Company Secretary is the one statutorily empowered to service these
meetings.

e) The Company Secretary is the compliance officer, the liaising officer


between the company and the CAC.

f) Keep all statutory books, register of members, register of debenture


holders et cetera. It is his duty to maintain the registers to ensure that
they are properly kept.

g) Carrying out such administrative and other secretarial duties as directed


by the directors of the company. See Section 335(1) of the Act.

OMNIBUS DUTIES OF COMPANY SECRETARIES

Company Secretaries are to carry out duties as may be assigned to them by


Board of Directors from time to time.

STATUS of Secretary

In BARNETT HOARES AND COMPANY V. SOUTH LONDON


TRAMWAYS COMPANY (1887) 18 QBD 818, particularly at 817, the
position of the status of a Company Secretary was described thus:

“A Secretary is a mere servant. His position is that he is to do what he is told,


and no one can assume that he has any authority to represent anything at all.”
47
Thus, his duties, since this decision, were seen as clerical and ministerial only.

However, in PANORAMA DEVELOPMENT (GUILDFORD) LTD. V.


FIDELIS FURNISHING FABRICS LTD (1971) 2 QB 711, Lord Denning
stated:

“Times have changed. A Company Secretary is a much more important person


nowadays than he was in 1887. He is an officer of the company with extensive
duties and responsibilities…. He is no longer a mere clerk.”

As shown above, the duties of Company Secretary in Nigeria, as in many other


jurisdictions is now statutorily defined. Although appointed by the Board of
Directors, a Company Secretary is no longer their servant. In the performance
of his statutory duties, the Company Secretary is entitled to resist any
interference from the shareholders, that is, the members of the company, the
Board of Directors or even the Managing Director. See the following cases:

1. OKEOWO V. MIGLIORE (1979)

2. WIMPEY NIGERIA LTD. V. BALOGUN (1987) 2 NWLR (PT. 28) 322.

Note that although Section 335 spells out the duties of a Company Secretary, he
cannot suo motu, that is, on his own volition, exercise any power expressly
vested by statute or the Articles of Association in the directors. See Section
335(2) of the Act.

When it comes to providing the administrative and secretarial services to


accomplish those management decisions, he is at liberty to take appropriate
decisions.

LIMITATION OF POWER AND AUTHORITY OF COMPANY


SECRETARIES

Section 335(2) of CAMA provides that the Secretary cannot, without the
authority of the Board exercise any powers vested in the directors. It is
submitted that since an unauthorised act is expressly prohibited by Section

48
335(2) of the Act, such act cannot be later ratified by the Board since it is void
ab initio. That was the decision in ADEBESIN V. MAY AND BAKER
NIGERIA LTD decided before the enactment of the Act.

FIDUCIARY DUTIES OF SECRETARY s. 334 CAMA 2019


A secretary does not owe fiduciary duties to the company. However, where he
is acting as its agent he owes fiduciary duties to it, and as such is 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 COMPANY SECRETARIES

It is the duty of the Board of Directors of a company to appoint and remove


Company Secretaries. See Section 333(2) of CAMA with respect to the
removal of Company Secretaries of public companies. However, the Board of
Directors can no longer arbitrarily remove a Company Secretary from office
unless as provided by CAMA in Section 333(2).

THE PROCEDURE FOR THE REMOVAL OF COMPANY


SECRETARIES

The procedure for the removal of a Company Secretary is as follows:

The Board of Directors must serve a Notice on the Secretary stating:

a. that it is intended to remove him from office;

b. the ground for the proposed removal;

c. that he may resign from office within 7 days;

d. that he may make a defence in writing which must be submitted within 7


days;

If after the notice, the Secretary neither resigned from office nor made any
defence, the Board of Directors may remove him from office and report to the
General Meeting at the next meeting.

49
Where the Company Secretary makes a defence, written or oral, which in the
opinion of the Board of Directors is unsatisfactory:

If the ground on which the Secretary is to be removed from office is fraud or


serious misconduct, the Board of Directors may remove him from office and
report the same to the company’s general meeting.

If the ground on which the Company Secretary is to be removed is other than


fraud or serious misconduct, the Board of Directors shall not remove him but
may suspend him from office pending the next General Meeting of the company
when the suspension will be reported and the company will take a decision.

If the next general meeting ratifies the suspension of the Company Secretary
from office, he shall be removed from office and the effective date of removal
shall be the date the Board of Directors suspended him from office.

Note that the procedure for the removal of Company Secretaries must be strictly
complied with. See the case of ERONINI v. HABO AND ORS. (1957) 1
NSCC 17.

HOW CAMA HAS ENHANCED THE STATUS OF COMPANY


SECRETARIES

A) Section 330(1) of CAMA 2019 has made it mandatory for every company
in Nigeria to appoint a Company Secretary. So, the office is made
statutorily relevant by virtue of that Section.

B) Section 332 of CAMA has considerably enhanced the status of Company


Secretary by restricting the eligibility for appointment as Company
Secretary of public companies to only qualified professionals, viz,
lawyers, chartered accountants and ACIS members.

C) The duties of a Company Secretary are now statutorily prescribed in


Section 335 of the Act. Therefore, they are no longer errand boys to the
Board of Directors or mere clerical officers of the company.

D) Job Security.

E) Although Company Secretaries are appointed by the Board of Directors


and are removed by them Section 333(2), has prescribed the procedure
for the removal of Company Secretaries.

F) Company Secretaries are now statutorily acknowledged as officers of the


company who, within their administrative sphere or responsibilities, may

50
initiate acts which will be binding on the company. To this extent, one
may say that CAMA has enhanced the status of Company Secretary, but
you have to be critical in appraising this point.

4. MEETINGS AND RESOLUTIONS

MEETINGS
Types of meetings of a company

1. Statutory meeting.
2. Annual General Meeting (AGM)
3. Extra – ordinary General Meeting (EGM)
4 Court – ordered meeting (some authors add this)

STATUTORY MEETING

 SECTION 235- Every public company shall, within a period of 6 months


from the date of its incorporation, hold a general meeting of the members
of the company to be referred to as the ‘statutory meeting’

ESSENTIAL FEATURES OF STATUTORY MEETING


a. Solely for Public companies (PLC)
b. It is compulsory.
c. To be held within 6 months of the date of incorporation of the
company.
d. It must be held in Nigeria-S. 240
e. Notice must be sent to members AT LEAST 21 DAYS BEFORE
THE MEETINGS. -Sections 235 (2); 241

However, shorter notice is allowed if agreed in the case of:


i. A meeting called as the annual general meeting, by all the
members entitled to attend and vote there at; and
ii. Any other general meeting, by all majority holding not
less than 95% in nominal value of the shares with right
to attend and vote, or in the case of a company not
having a share capital, together representing not less than
95 per cent of the total voting rights at that meeting of all
the members– S. 241 (2)(b).

51
BUSINESS TRANSACTED AT STATUTORY MEETING
S.235(8): The members of the company present at the statutory meeting may:

a) Discuss any matter relating to the formation of the company and


commencement of business.
b) Consider the statutory report, and
c) Consider matters arising from the statutory report

STATUTORY REPORT:

 The directors shall AT LEAST 21 DAYS before the day on which the
statutory meeting is held, forward to every member of the company
statutory report – S. 235(2)
 The statutory report shall be CERTIFIED BY NOT LESS THAN
TWO DIRECTORS or by a director and the Secretary of the company -
S. 235(3)
 The directors shall also deliver a certified copy of the statutory report to
the CAC within 14days – S. 235 (6)

CONTENTS OF STATUTORY REPORT:

 S. 235(3) CAMA:

a. The total number of shares allotted, either as fully paid up, partly paid up
or partly paid up otherwise than in cash. For shares partly paid up the
extent to which they are so paid up, or the consideration for which they
have been allotted.
b. The total amount of cash received by the company in respect of all the
shares allotted, distinguished as aforesaid.
c. The names, addresses and descriptions of the directors, auditors,
managers, if any, and secretary of the company.
d. The particulars of any pre-incorporation contract together with the
particulars of any modification or proposed modification.
e. Any underwriting contract that has not been carried out and the reasons,
therefore.
f. The arrears, if any due on calls from every director.
g. The particulars of any commission or brokerage paid or to be paid on the
issue or sale of shares or debentures to a director or manager.

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An abstract of the receipts of the company and of the payments made from them
up to a date: S. 235(4)

The Statutory Report as it relates to shares and capital account (receipts and
payment) shall be certified by the auditors -S. 235(5)

RESOLUTION ON STATUTORY REPORT

By S. 235(9) CAMA, if a member wishes to propose a Resolution on any


matter arising out of the statutory report, from the date of his receipt of the
statutory report, he must give a further 21 days notice to the company, of
his intention to propose such a resolution in the general meeting.

EFFECT OF NON-COMPLIANCE
Failure to hold statutory meeting or deliver statutory Report would result to:

 The Company and any officer in default shall be guilty of an offence and
liable to a fine as may be specified by CAC in a regulation for every
day during which the default continues: Section 236.
 It can constitute a ground for winding up of the company by the court-S.
571(b)CAMA. Judge can in his discretion instead of winding up the
company; make an order that the statutory meeting be held.

NB: Statutory report to be submitted to CAC immediately after statutory


meeting

ANNUAL GENERAL MEETING

 SECTION 237:
a. It is compulsory for all companies. Every company shall in each year hold
a general meeting as its annual general meeting in addition to any other
meetings in that year

b. A company should hold its first AGM within 18 months of


incorporation.

c. Subsequent AGMs should be held within15 MONTHS between them but


so long as a company holds its first AGM within 18 months of its
incorporation, it needs not hold it in that year or in the following year
- S. 237(1)(a).

53
NB: In exams when given the exact date of incorporation. Calculate the
18 months and include the date, month and year.

d. Apart from the first AGM, CAC can extend the time of holding any
subsequent AGM by not more than 3 months. S. 237(1)(b).

e. The AGM must be held in Nigeria -S. 240

f. Notice must be sent to members AT LEAST 21 DAYS before the


meeting but shorter notice is allowed if agreed to by all the members
entitled to attend and vote. S. 241(2)(a).

Procedure to Compel Holding of AGM where in default:

i. A member can apply to the CAC urging the CAC to call or direct the
calling of a general meeting and give such ancillary directions as it thinks
appropriate which includes a direction that one member of the company
present in person or by proxy may apply to the Federal High Court for an
order to take a decision which shall bind all the members. -S. 237(2)If a
member’s application is timely and the CAC grants the order to hold the
meeting in that year, the meeting is an AGM of that same year.

ii. However, where a meeting so held is not held in the year in which the
default in holding the AGM occurred, the meeting is not to be treated
as the company’s AGM of the previous year, unless at that meeting the
company resolves that it shall be so treated. S. 237(3)

iii. If the company resolves that it should be treated as its AGM of the
previous year, a copy of the Resolution shall, WITHIN 15 DAYS AFTER
THE PASSAGE, be filed with the CAC. S. 237(4).

iv. Section 237(5): The company and every officer who is in default shall be
guilty of an offence and be liable to a fine as determined by CAC in a
regulation for non-compliance.

BUSINESS TRANSACTED AT ANNUAL GENERAL MEETING


Two types of businesses are transacted at the AGM of company and they are as
follows: ordinary and special businesses.

ORDINARY BUSINESS OF AGM- Section 238CAMA


i. Declaration of dividend.
ii. Presentation of the Financial Statements – the Reports of Directors and
Auditors

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iii. Election of directors in place of those retiring/fresh appointment of
directors.
iv. Appointment and Fixing of remuneration of the auditors.
v. Appointment of members of the Audit committee for Public Companies.

SPECIAL BUSINESS OF AGM


Any other business not listed as ordinary business of AGM in Section 238 is
deemed Special Business of AGM.

EXTRA – ORDINARY GENERAL MEETING-SECTION 239


 Extra – ordinary General Meeting (EGM) is the General Meeting held at
any time to transact business that cannot conveniently wait for the next
Annual General Meeting (AGM).
 NB- An EGM can hold at any time and need not hold in Nigeria – S. 240

WHO CAN CONVENE AN EGM?


i. Board of Directors.
ii. Any Director if there are not sufficient Directors within Nigeria capable
of acting to form a quorum
iii. Requisition by members holding not less than 1/10thof the paid up
share capital of the company, or in the case of a company not having a
share capital, members of the company representing not less than one
tenth of the total voting rights of all the members having at the said date
a right to vote at general meetings of the company. And the directors shall
on receipt of the requisition forthwith proceed duly to convene an
extraordinary general meeting of the company, notwithstanding anything
in its articles.

PROCEDURE FOR MEMBERS’ REQUISITIONED EGM

1. The Requisitionist must deposit a signed requisition at the registered


office of the company, stating “the objects of the meeting” and the
Resolutions which they intend to propose. -S. 239(3)

2. If the directors do not WITHIN 21 DAYS from the date of the deposit of
the requisition proceed duly to convene a meeting, the requisitionists, or
any one or more of them, representing more than ½ of the total voting
rights of all of them, may themselves convene a meeting. However, such
meeting must be convened within 3 months of the deposit of the

55
requisition. S. 239(4)

3. Any reasonable expenses of the requisitionists in convening the meeting


shall be repaid to the requisitionists by the company -S. 239(6)

4. If no quorum is present at the requisitioned meeting, within one hour


from the time appointed for the meeting, it is dissolved i.e. that would be
the end of the matter, there is no adjournment S. 239 (3) CAMA.

Business Transacted at Extra – ordinary General Meeting.

 Businesses transacted at an extra – ordinary general meetings are deemed


“SPECIAL BUSINESS”-By Section 239(8) CAMA. Therefore, a matter
which constitutes ORDINARY BUSINESS CANNOT be discussed at
EGM.

 Example, appointment of director is an ordinary business and cannot be


done at EGM. What of removal of a director? Removal is not an ordinary
business; therefore, a director can be removed at an EGM.
COURT – ORDERED MEETING

 SECTION 247: The FEDERAL HIGH COURT can upon an


Application by interested Party, order a company’s meeting in the
following circumstances:

1. If for any reason, it is impracticable to call a meeting of the company


or of the board of directors in any manner prescribed by the Articles or
CAMA

2. Upon application of any director of the company or of any member of


the company who would be entitled to vote at the meeting, the court
can make all or any of the following orders:
o That the meeting be called, held and conducted in any manner,
the Court thinks fit.
o Give such ancillary or consequential directions as it thinks
expedient including a direction that one member of the
company present in person or by proxy may apply to the CT for
an order to take a decision which shall bind all the members:
S.247(2)

3. The directions should be confined to directives that will facilitate the


holding the meeting and not to grant reliefs relating to the

56
decisions/resolutions that may be passed or proposed in the meeting if
held.

4. In the event of all the directors and shareholders dying, any of the
personal representatives shall be able to apply to the court for an order
to convene a meeting of all the personal representatives of the
shareholders entitled to attend and vote at a general meeting to appoint
new directors to manage the company, and if they fail to convene a
meeting, the creditors, if any, shall be able to do so: S. 273(2)

Practical examples/instances of court ordered meeting


 Court ordered meeting for restructuring scheme. Where there is a scheme
proposed for a merger, compromise, arrangement or reconstruction btw
two or more companies, any of the companies can apply to the Federal
High CT to order separate meetings of the companies: Ss. 117, 126 ISA
2007

 Where a company makes a compromise with its members or creditors but


not involving sale of the company’s assets it requires the approval of a
specified majority of creditors and/or members with the sanction of the
court. Such decision must be reached in a court ordered meeting: s751
CAMA (power to compromise with directors)

HIERACHY OF ORDER OF CALLING A MEETING


1) DIRECTORS
2) MEMBERS
3) PERSONAL REPRESENTATIVES
4) CREDITORS

CHAIRMAN OF A MEETING
 The chairman of the AGM is also the Chairman of the Board of
Directors. If he is not present after 5 minutes of the time for the
Board meeting, another will be appointed to act as chairman – S. 289(4)
of CAMA

 If it is a general meeting of the company for which he is not present


WITHIN ONE (1) HOUR of the scheduled time, another will be
appointed to chair the meeting – S.265(2) of CAMA.

THE FUNCTIONS OF A CHAIRMAN OF A MEETING


A. To ensure the meeting is properly conducted.

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B. Preservation of order
C. To ensure that all questions that arise in the course of a meeting are
properly decided
D. To preside over both the Board and company meetings
E. To act bona fide in the interest of the company
F. He has the power to adjourn meetings
G. He has a casting vote on issues if there is a vote tie by the members

ISSUES AFFECTING VALID CONVENING OF COMPANY MEETING


The issues affecting the validity of a meeting are mainly:
Notification of meetings,
How to notify those that are entitled to receive notice,
Venue of the meeting

VENUE OF MEETING
 Company meetings that must be held in Nigeria are STATUTORY
MEETING AND ANNUAL GENERAL MEETING. -S. 240 CAMA.
Thus, EXTRA – ORDINARY GENERAL MEETING need not hold
in Nigeria.

ELIGIBILITY TO ATTEND COMPANY MEETING

 SECTION 243: The following persons are entitled to receive Notice of a


general meeting, and thus are eligible to attend.
a. Every member
b. Legal representative, receiver or a trustee in bankruptcy of a
member.
c. Every director of the company.
d. Every auditor of the company - S.410 CAMA
e. Company Secretary

- Also see LONGE V FIRST BANKNIG PLC (Supreme CT judgment)

 NOTE-Apart from the listed persons, no other person is entitled to


receive Notices of General Meetings and/or attend meetings- S. 243
(2)

 Auditor: section 410(1) CAMA reconfirms the fact that a company’s


auditor shall be entitled to attend any general meeting of the company and
to receive all notices

NOTICE OF MEETING
No business may be transacted at any general meeting unless notice of it has

58
been duly given - S. 242(3).

CONTENTS OF NOTICE
 S. 242(1): A valid notice of a meeting must specify
a. The Place, Date and Time of the meeting;
b. The type of meeting
c. Agenda i.e. general nature of the business to be transacted
- For AGM, it is sufficient to state in the Notice; that the
meeting is to transact “Ordinary Business” and state each
item of ordinary business that would be discussed.
- For Special Business, terms of the resolution should be set
out in the notice of meeting.
d. Provision should be made for proxy attendance and other
matters requiring notice.
e. The order by which the meeting is brought. It should be
expressed to be BY ORDER OF THE BOARD OF
DIRECTORS or REQUISITIONED BY MEMBERS, BY
ORDER OF THE COURT’
f. Signed by Company Secretary.

LENGTH OF NOTICE

 S. 241(1): The notice required for all types of general meetings is 21


DAYS from the date on which the notice was sent out.

 However, a shorter notice may be agreed by all the members entitled to


attend and vote at the AGM OR by members representing 95% of the
voting rights/shares for other General meetings. -S. 241(2).

MODE OF SERVICE OF NOTICE


 S. 244: notice may be given by the company to any member either
A. Personal service
B. By post to the person entitled or to his registered address, if he has no
registered address within Nigeria to the address if any supplied by
him to the company for giving of notice to him or abroad if no
registered address is given within Nigeria.

 Where a notice is sent by post and the letter is properly addressed and
stamped, then the addressee is deemed to RECEIVE it 7 DAYS after
the letter is posted – S. 244 (2).

 Thus, the 21 DAYS is calculated from that time.

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EFFECT OF FAILURE TO GIVE NOTICE OF MEETING

 S. 245 – Failure to give notice of meeting to a person entitled to receive


it shall, when he applies to court, invalidate the meeting. see also
LONGE V FIRST BANK

 The EXCEPTION is where such failure is an accidental omission on


the part of the persons giving the notice.

 NOTE-However, if the failure was due to a misrepresentation or


misinterpretation of the provisions of CAMA or the Articles this shall
not amount to accidental omission - S. 245(2): LONGE V FIRST
BANK (where they misinterpreted CAMA).

ADDITIONAL NOTICE FOR PUBLIC COMPANIES

 S. 246 CAMA: In addition to the normal individual notices sent out,


every Public Company (PLC) shall AT LEAST 21 DAYS before any
General meeting advertise a notice of such meeting in at least two daily
newspapers.

Current trend in corporate governance


 Adequate notice
 Service of notices must be effective and proposed to reach the company
 Proof of service.

PROXY

 Proxy means a person nominated by any member to attend a company


meeting on his behalf, takes part in the voting and can exercise the same
right as the member appointing him.

 NB: a member who appoints a proxy must be entitled to attend and


vote at the meeting.

 A proxy may not be a member of the company-SECTION 254(1)


CAMA

 Proxy is not allowed in company without share capital unless its Articles
permit e.g. LTD/GTE. Proviso to S. 254 (1)CAMA

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How a Proxy is appointed

 The Notice of meeting MUST provide for member’s right to appoint


proxy-Section 254(2). NOTE – Breach of this constitutes an
offence.

 The instrument appointing a proxy shall be in writing under the hand of


the appointer or of his Attorney duly authorised in writing. If the
appointer is a corporation, the Proxy Instrument shall either be under
seal or under the hand of an officer or Attorney duly authorised-S.
254(6) CAMA

 The Proxy instrument shall be deposited at the registered office or


head office of the company or at such other place within Nigeria as is
specified for that purpose in the Notice of the meeting- S. 254(7)

 Proxy Form/Instrument is to be lodged not later than 48 HOURS before a


meeting or adjourned meeting -S. 254(3)

 If it is an instrument in respect of Poll voting, it has to be deposited NOT


LESS THAN 24 HOURS before the time appointed for the taking of
poll. S. 254(7)

REVOCATION OF PROXY’S APPOINTMENT

 The appointer may have a change of mind after appointing a proxy. He is


allowed to revoke the Proxy and attend the meeting by himself. But
unless he has successfully revoked the Proxy, he can no longer be
allowed in the meeting as he will have double attendance.

 For the Proxy to be validly revoked, the Revocation must be


communicated to the company timely before the commencement of the
meeting or adjourned meeting in which the Proxy is to be used.

 This rule also applies to personal representative of a shareholder who dies


after appointing a proxy. The trustee in bankruptcy and transferee of a
shareholder who buys shares from a shareholder after appointing a proxy.

CORPORATE REPRESENTATION

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 A company, which is a shareholder or member of another company is
required to appoint any person by a Resolution of the Board to be its
representative in the general meetings of the company of which it is a
member-SECTION 255 CAMA

 NB: Such a Representative is not thereby a Proxy and can therefore


exercise the right of the Company S. 255(2) e.g. can appoint Proxy
under S. 230(1).

 NB-A creditor company (including a holder of debentures) of another


company can also appoint a Representative to be attending the
creditors meeting in the debtor company. S. 255(1)(b)

ISSUES AFFECTING VALIDITY OF PROCEEDINGS AT MEETINGS

QUORUM

 Quorum refers to the total number of members present in person or by


proxy, whose presence satisfies the required minimum number of
members that would be present for the meeting to start and progressively
proceeded to the expected end.

HOW IS QUORUM DETERMINED?

 SECTION 256(1) CAMA: Unless otherwise provided in the articles;


no business shall be transacted at any general meetings unless a quorum
of members is present at the time when the meeting proceeds to business
and throughout the meeting.

 SECTION 256(2) CAMA: Unless otherwise provided in the articles,


the quorum for a meeting shall be:
a. 1/3 of the total number of members of the company or 25 members
(whichever is less) present in person or by proxy.
b. Where the number of members is not a multiple of 3, then the
number nearest to 1/3.
c. Where the number of members is 6 or less, the quorum shall be 2
members.

 For the purpose of determining a quorum, all members or their proxies


shall be counted – S. 256(2)

62
QUORUM DURING THE PROGRESS OF THE MEETING

 Unless the Articles otherwise provides, quorum is to be maintained from


the starting of the business of the meeting and throughout the meeting.

 Where quorum was formed at the commencement of a meeting, but the


quorum was lost as the meeting progressed, then the chairman ought
to direct on the fate of the meeting.

 The chairman’s direction depends on whether the reason for


withdrawal from the meeting was for “sufficient” or “insufficient
reason”.

 If it is for insufficient reason or for the purpose of reducing the quorum,


the meeting can continue with the number present, and their decision
shall bind all the shareholders and where it remains only one member, he
may seek direction of the court to take a decision. S. 256 (3)

 If it is for sufficient reasons, the meeting shall be adjourned to the same


place and time, in a week’s time. If there is no quorum still at the
adjourned meeting, the members present shall be the quorum and their
decision shall bind all shareholders. If only one member is present at the
adjourned meeting, he may seek direction of the Fed High Court to take a
decision. S. 256 (4)

VOTING

 Voting is done to ascertain the support for a particular resolution


proposed by members. There are basically two types of voting at any
General meeting: S. 248(1):

a. Show of hand
b. By demanding a poll

SHOW OF HAND: This is voting according to the number of persons present


and entitled to vote in a meeting, which also include a vote by a proxy. It is
determined by counting the number of members supporting or opposing a
Resolution.

DEMAND OF POLL
Voting on a poll entails the shareholders voting according to the number of
shares they own. Although one share attracts one vote, certain classes of shares

63
are permitted to have weighted shares i.e. attracts more than one vote e.g.
preferential shares – S. 143
Proxies also vote according to the number of shares which the member they are
representing hold.

PROCEDURE UPON DEMAND OF POLL

 If a poll is duly demanded, the result of the previous show of hands is


then disregarded. The poll shall be taken in such manner as the chairman
directs, and the result of the poll shall be deemed to be the Resolution
of the meeting at which the poll was demanded- SECTION 250(2)

 However, a poll demanded on the election of a chairman or on a question


of adjournment shall be taken forthwith, and on any other question shall
be taken at such time as the chairman of the meeting directs, and any
business other than that upon which a poll has been demanded may be
proceeded with pending the taking of the poll: section 250 (4)

RESTRICTIONS ON DEMAND OF POLL

 The right to demand poll shall not be limited by Articles EXCEPT on


the election of chairman and adjournment of meeting. Where the
Articles limits the right, the provision in the Articles shall BE VOID:
SECTION 249(1)

 Thus a Company’s Articles can validly restrict the use of poll voting in
respect of election of the Chairman or adjournment of meeting.

 NOTE-However, there SHALL BE NO RIGHT to demand on poll on


the election of members of the Audit Committee under S. 359
CAMA. This is an absolute bar Section 249 (3)

WHO CAN DEMAND A POLL?

SECTION 248(1) a – d:
 The following persons can demand a poll
i. The Chairman, where he is a shareholder or a proxy.
ii. At least three members PRESENT IN PERSON OR BY PROXY.
iii. Any member or members present in person or by proxy and

64
who represent not less than 1/10 of the total voting rights.
iv. Any member or members holding shares not less than 1/10 of the
total fully paid up shares in the capital of the company.

CHAIRMAN’S CASTING VOTE

SECTION 250(3): In the case of an equality of votes, whether on a show of


hands or on a poll, the Chairman is entitled to a second or casting vote to
break the tie.

RESULT OF VOTE

 For show of hands, the Chairman’s declaration of the result is


conclusive. Thus, no one can re-count hands after such declaration
unless a poll is demanded.

 An entry to that effect in the Minutes Book shall be conclusive


evidence of the result, without proof of the number or proportion of the
votes recorded in favour of, or against the resolution.

 For Poll, in computing the majority, the number of votes cast for and
against the resolution should be counted. Section 258(4)

RESOLUTIONS

 Resolutions refer to decisions taken at the company meetings; arrived at


through voting, or unanimous agreement by members entitled to vote.

 There are two basic types of Resolutions


i. Ordinary Resolution.
ii. Special Resolution

ORDINARY RESOLUTION

 This is a resolution passed by a simple majority of votes cast by members


being entitled to vote either in person or by Proxy- SECTION 258(1)
 Ordinary resolution is presumed unless special resolution is mentioned
and expressly required.

SPECIAL RESOLUTION

65
 This is a resolution passed by not less than ¾ (75%) of the votes cast by
such members being entitled to vote either in person or by proxy, OF
WHICH 21 DAYS NOTICE (or agreed shorter notice), specifying the
intention to propose the resolution as a special Resolution has been
duly given. -SECTION 258(2)

NB: Notice of LESS THAN 21 DAYS may be given where members agree
(95% of nominal value of shares or 95% total voting rights in company with no
share capital)

Matters requiring Special Resolution

S/N MATTER ENABLING


PROVISION IN
CAMA

1. CHANGE OF NAME S. 31
2. ALTERATION OF ARTICLES S.48
3. ALTERATION OF OBJECTS S.46
4. REDUCTION OF CAPITAL S. 106
5. VOLUNTARY WINDING UP S. 457
6. COMPULSORY WINDING UP S.408
7. RE-REGISTRATION OF LTD AS PLC S. 50(1)
8. RE-REGISTRATION OF PLC AS LTD S.53

9. RENDERING THE LIABILITY OF DIRECTORS UNLIMITED S. 289

10. RE-REGISTRATION OF UNLTD AS LTD S.52


11. VARIATION OF CLASS RIGHTS S. 141
12. ARRANGEMENT OR RECONSTRUCTION ON S. 538
SALE OF ASSETS OF A COMPANY
13. PAYMENT OF INTEREST OUT OF CAPITAL IN CERTAIN CASES S. 113
14. TREATMENT OF RESERVE LIABILITY OF S.134
COMPANY HAVING SHARE CAPITAL

MATTERS REQUIRING SPECIAL NOTICE

 Special resolution deals with the number of votes to be cast for a


decision;
 Whereas Special Notice deals with how to inform those entitled to
attend and vote on the Resolution.

66
 The procedure is …
a. The member gives Special Notice of his intention to the company
at LEAST 28 DAYS before the date of the meeting at which he
intends to move the Resolution; the Resolution is enclosed in the
Notice.

b. On receipt of the members notice, the company in turn will give the
members 21 days’ notice; the proposed Resolution should be
enclosed in the notice.

c. Where the company fails to call a meeting for a date 28 days less
after the notice has been given, this will not invalidate the
meeting.

EXAMPLES OF RESOLUTION THAT REQUIRES SPECIAL NOTICES


ARE:

1. Appointment as Auditor a person OTHER than a retiring Auditor.


2. Removing an Auditor before expiration of his term of office S.
411
3. Appointing or re-appointing a Director aged more than 70 for a
Public Company S. 282
4. To Remove a director from office. S. 288
5. To appoint new Director to replace a removed Director in the same
meeting after removal, pursuant to S. 288 (2).

DATE OF PASSING OF RESOLUTION

 Resolutions passed at company meeting, even at an adjourned meeting


shall be treated as passed on the date on which it was actually passed
and not an earlier date – S. 263

 For Written Resolution, it is deemed to be passed when the last


signature is affixed to the resolution.

REGISTRATION OF CERTAIN RESOLUTION

 S. 262(1)&(4) CAMA: Printed copies of the following Resolution and


Agreement must be forwarded to CAC for registration WITHIN 15
DAYS AFTER its passage:

i. Special Resolution

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ii. Unanimous resolution on issue, which requires Special
Resolution.
iii. Unanimous Class Resolution
iv. Resolution for voluntarily winding up of a company under S.
620(a) CAMA

REQUISITION OF RESOLUTION

 S. 260(1)&(4): Members holding 1/20 of the total voting rights in a


company can requisition a notice of their Resolution on an issue, and
cause the company to circulate it to members entitled to attend the
meeting in which the Resolution is proposed to be moved:

WRITTEN RESOLUTION

 Section 259 provides that all resolutions shall be passed at general


meeting and shall not be effective unless so passed. Provided that in the
case of a private company, a written resolution signed by all the
members entitled to attend and vote shall be as valid and effective as if
passed in a general meeting

ADJOURNMENT OF MEETINGS

 A meeting may be adjourned either because


i. No Quorum is formed at the original meeting, or
ii. The business was unfinished at the original meeting.

 The Chairman may with the consent or directive from the members at the
meeting, adjourn the meeting from time to time and from place to place.
No new business is allowed at the adjourned meeting, only the
unfinished business from the original meeting shall be transacted S.
264 (1)

 It is not necessary to give notice of adjourned meeting unless it is


adjourned for 30 days or more, then notice must be given: S. 264 (2)

QUORUM AT ADJOURNED MEETING

 If within ONE HOUR from the time an adjourned meeting is due to


start, a quorum is not present;
- If the meeting is convened upon the requisition of members, the
meeting shall be dissolved.

68
- If not a requisitioned meeting, it shall stand adjourned to the
same day in the next week, at the same time and place or to such
other day, time and place as directed by chairman and in his
absence, the directors: S. 264 (3)

 NB-At the second adjourned meeting, any two or more members


present shall form a quorum and their decision shall bind all
shareholders; and if only one member is present, he may seek the
direction of the court to take a decision. S. 264 (4)

MINUTES OF PROCEEDINGS

 Every company shall keep minutes of all proceedings of general


meetings, board meetings and meeting of its managers, if any:
SECTION 266 (1)

 Where there is default, the company and every officer in default shall be
guilty of an offence and liable to a fine of N500: Section 266 (4)

 The minutes when signed by the Chairman of the meeting or the


chairman of the next succeeding meeting, shall be prima facia evidence of
the proceedings and that the meeting was duly held and convened, and
matters agreed to the meeting are deemed to be valid – S. 266 (3)

FORM OF MINUTES

 SECTION 550 CAMA: The Minutes can be kept in any of the


following forms
i. Bound books
ii. Loose leaves
iii. Photographic film form
iv. Stored on any information storage device capable of being
reproduced into intelligible written form e.g. Compact Disks (CD),
Flash drives etc.

INSPECTION OF MINUTE BOOKS AND OBTAINING COPIES

 The Minutes Book, should be kept at the registered office of the


company, and shall be open for inspection by members for at least 6
hours in a day without charge; but for copies to be delivered to them,

69
a token cost is to be paid (the company is obliged to supply the copy
WITHIN 7 DAYS of member’s request: S. 267 (1)& (2) CAMA

 It is an offence not to allow members to inspect or refuse to give them


copies of minutes upon request.

 A member can sue the company for an order to compel immediate


inspection/supply of copy of minutes-SECTION 267 (4)

 INT’L AGRIC. INDUSTRIES (NIG) LTD V. CHIKA BROTHERS.

5. MAJORITY RULE AND MINORITY RIGHTS


THE RULE IN FOSS v. HARBOTTLE (1843) 2 HARE
461
It is a well-established principle that a company is a separate legal person
from its members. Once it is accepted that the company is a legal person, it
follows that if a wrong is done to the company, the company is the proper
person to bring an action. Therefore, as a rule, when a company is incorporated
and is a going concern, the wish of the majority must prevail for it is important
that the principle of democracy should prevail. A company must, therefore, act
in accordance with the decisions taken by the majority of its members willing
and able to vote.

Also, it is part of the rule that once powers have been delegated to directors, the
majority cannot derogate from the powers of the directors for the day-to-day
management of the company. Powers of the majority rule extend to every facet
of the company’s affairs. The majority of members have power to:

 Alter the Memorandum and Articles of Association of the company.

 They appoint and dismiss the directors.

 If they so desire, they can put an end to the business.

The rule is that in an action to remedy any wrong done to the company or where
irregularity has been committed in the course of a company’s affairs, the
proper plaintiff is the company itself. It is the majority who determines
70
whether the company should sue for redress or not. The facts of FOSS v.
HARBOTTLE (SUPRA) are as follows:

F. and T. were shareholders in a company which was formed to buy land for use
as a pleasure park. The defendants were the other directors and shareholders of
the company. F. and T. alleged that certain of the defendants had sold land
belonging to them to the company at an exorbitant price. F. and T. now asked
the court to order that the defendants make good the losses to the company. The
Court held that since the company’s Board of Directors was still in existence,
and since it was still possible to call a general meeting of the company, there
was nothing stopping the company from obtaining redress in its corporate
character and that the action of F. and T. could not be sustained.

The rule has been held to apply not only to incorporated bodies but also to
unincorporated associations. It was accordingly applied to trade unions in
COTTER V. NATIONAL UNION OF SEAMEN (1929) 2 CH. 58 and
MBENE V. OFILI (1968) 1 ALR COMM. 235 and to Jamal-Ul-Muslim of
Lagos on the ground that it was a body possessing a Constitution or a set of
rules and regulations entitling it to sue and be sued as a legal entity.

See also the following cases: Yalaju Amaye v. Arec. The majority rule applied
in this case.

The majority rule was relaxed in Edokpolo V. Sem-Edo Wire Industries Ltd
(1984) 7 Sc.

Abu Bakare V. Smith The majority rule also applied.

BASIS AND RATIONALE FOR THE RULE IN FOSS AND


HARBOTTLE

If every individual member of the company were permitted to sue anyone who
had injured the company through a breach of duty, there could be as many
actions as there are shareholders, that is, it prevents multiplicity of suits.

Legal proceedings would never cease and there would be enormous wastage of
time and money.

The rule prevents the company from being torn into pieces by multiplicity of
actions. In the case of LA COMPAIGNIE DE MAYVILLE v. WHITLEDY
(1896) 1 CH. 788, Kay L.J. stated that:

“The proper course in the case of any matter which relates to the internal
management and trade affair of the company is to call a meeting and that is
71
practically the only remedy which this court allows a director or a shareholder
of a company to take; otherwise we should have companies torn to pieces by
litigation of this kind. The court has always set itself resolutely against such
litigation.”

If an individual member could sue a person who had caused loss to the company
and the company then ratified that person’s act at a general meeting, then a legal
proceeding would be quite useless, for a court will naturally hold that the will of
the majority prevails. This is essentially based on Partnership doctrine that the
court will not interfere in matters of internal management. Courts will generally
not act in vain. This is based on one of the maxims of Equity that “Equity will
not act in vain.” In MACDOUGALL V. GARDINER (1875) 1 CH D. 13, the
court held that the plaintiff must fail as the action was asking for the
interference of the court in the internal affairs of the company.

A defendant in a corporate litigation will be better protected if the company is


the main plaintiff because the defendant’s rights like counter-claim, set-off, et
cetera are preserved if the company is sued.

EXCEPTIONS TO THE RULE IN FOSS v. HARBOTTLE

At Common Law, various devices were adopted to reduce the harsh


effects of the rule in FOSS V. HARBOTTLE through the creation of various
exceptions by the courts in the interest of justice. These exceptions have now
been enacted under Section 343 of CAMA.

PROTECTION OF INDIVIDUAL MEMBER’S RIGHT - (SECTION 343


OF CAMA)

Without prejudice to the rights of members under sections 346 to 351 and
sections 353 to 355 of this Act or any other provisions of this Act, the court, on
the application of any member, may by injunction or declaration restrain the
company from the following ‐

(a) entering into any transaction which is illegal or ultra vires;

(b) purporting to do by ordinary resolution any act which by its constitution or


the Act requires to be done by special resolution;

(c) any act or omission affecting the applicant's individual rights as a member;

(d) committing fraud on either the company or the minority shareholders where
the directors fail to take appropriate action to redress the wrong done;

72
(e) where a company meeting cannot be called in time to be of practical use in
redressing a wrong done to the company or to minority shareholders; and

(f) where the directors are likely to derive a profit or benefit or have profited or
benefited from their negligence or from their breach of duty.

There are several individual membership rights. For example, if you did not
receive your notice of meeting and you heard that your company is holding its
Annual General Meeting in a particular place, you can approach the court and
seek to restrain the company from holding that meeting because it is your
individual right. See Section 344(b) of the Act. Section 344 of the Act
provides that if the application is granted, such aggrieved member shall not be
entitled to damages but to declaration or injunction restraining the company
from doing a particular act. In PENDER V. LUSHINGTON (1877) 6 CH. 70,
an action was brought by a shareholder whose vote was rejected on behalf of
himself and all others who had voted for him for an injunction to restrain the
directors from acting on the footing of the votes being bad. The court held that
the plaintiffs were entitled to an injunction.

FORMS OF ACTION

An aggrieved shareholder can bring either:


a personal action;
a representative action or
a derivative action,

But depending on whose right he is protecting. See Sections 343 to 344 of


CAMA.

SECTION 344 CAMA

(1) Where a member institutes a personal action to enforce a right due to him
personally, he shall not be entitled to any damages but to declaration or
injunction to restrain the company and/or the directors from doing a particular
act.

(2) Where a member institutes a representative action on behalf of himself


and other affected members to enforce any rights due to them, he shall not be
entitled to any damages but to a declaration or injunction to restrain the
company and/or directors from doing a particular act.

(3) Where any member institutes an action under this section, the court may
73
award costs to him personally whether or not his action succeeds.

(4) In any proceedings by a member under Section 343 of this Act, the court
may, if it thinks fit, order that the member shall give security for costs.

Section 345: For the purpose of Section 343 and 344 of this Act, “member”
includes -

the personal representative of a deceased member; and

any person to whom shares have been transferred or transmitted by operation of


law.

1. PERSONAL ACTION

A personal action is a situation where a member sues for wrong done to him in
his capacity as a member. In other words, the individual member is bringing his
own action. This can occur under Section 344(c) of the Act.

2. DERIVATIVE ACTION

Derivative action is an action by the company for the wrong done to it but since
it will not sue as plaintiff, provisions are made for a minority to sue on its behalf
and not on behalf of the shareholders.

Although the action is framed as a representative one on behalf of the aggrieved


minority and other shareholders, it is, in fact, an action which should be
properly brought by the company if it had not refused to do so and the action is,
therefore, derived from the right of the company to sue, hence, it is described as
a derivative action.

CONDITIONS FOR THE APPLICATION OF DERIVATIVE ACTION

Section 346: (1) Subject to the provisions of subsection (2) of this section, an
applicant may apply to the court for leave to bring an action in the name or on
behalf of a company or to intervene in an action to which the company is a party
for the purpose of prosecuting, defending or discontinuing the action on behalf
of the company.

(2) No action may be brought, and no intervention may be made under


subsection (1) of this section, unless the court is satisfied that -

 the wrongdoers are the directors who are in control and will not take
necessary action;

74
 the applicant has given reasonable notice to the directors of the company
of his intention to apply to the court under subsection (1) of this section if
the directors of the company do not bring, diligently prosecute or defend
or discontinue the action;

 the applicant is acting in good faith; and

 it appears to be in the interest of the company that the action be brought,


prosecuted, defended or discontinued.

WHO MAY APPLY?

The following may apply to court under a derivative action as an applicant:

a registered holder or a beneficial owner and a former registered holder or


beneficial owner of a security of a company;

a director or an officer or a former director or officer of a company;

the Corporate Affairs Commission; or

any other person who, in the discretion of the court, is a proper person to make
an application for that purpose.

See Section 352 of the Act, the Definition Section. See also the following
cases:

TIKA-TORE PRESS V. ABINA

LADEJOBI V. ODUTOLA HOLDINGS LTD (2002) 3 NWLR (PT. 753).

UNIPETROL NIGERIA PLC V. AGIP NIGERIA PLC (2002) 14 NWLR


(PT. ) 312.

WILLIAMS V. EDU (2002) 3 NWLR (PT. 754) 400.

With respect to derivative action as provided in Section 346 of the Act, the
court may, at any time, make any such order as it thinks fit. See Section 347(1)
of the Act.

The court may also make one or more of the following orders (Section 347(2)).
 an order authorising the applicant or any other person to control the
conduct of the action;
 an order giving direction for the conduct of the action;
 an order directing that any amount adjudged payable by a defendant in
75
the action be paid in whole or in part, directly to former and present
security holders of the company instead of to the company;
 an order requiring the company to pay reasonable legal fees incurred by
the applicant in connection with the proceedings.

EVIDENCE OF SHAREHOLDERS APPROVAL NOT DECISIVE

Section 348 of CAMA states that an action brought under Section 343 of this
Act shall not be stayed or dismissed by reason only that it is shown that an
alleged breach of a right or a duty owed to the company has been or may be
approved by the shareholders of such company but evidence of approval by the
shareholders may be taken into account by the court in making an order under
Section 347 of this Act. Under Section 349, the court’s approval is required
before a derivative action is continued.

COSTS OF THE ACTION

Under Section 347(2)(d) of CAMA, the court is empowered to order the


payment of reasonable legal fees incurred by the applicant in connection with
the proceedings. An applicant is not required to give security for costs in any
action brought in respect of a derivative action. See Section 350 of the Act.
But the court may at any time order the company to pay to the applicant interim
costs before the final disposition of action. See Section 351 of the Act.
STOP: 19/04/22

3. RELIEF OR REMEDY ON GROUND OF OPPRESSIVE OR


UNFAIRLY PREJUDICIAL CONDUCT - (SECTIONS 353 - 354 OF
CAMA)

Where a member of a company alleges that the affairs of the company are being
conducted in an unfairly prejudicial or oppressive manner, such a member may
apply to the court for relief by petition. This is provided in Section 354 of the
Act.

WHO MAY APPLY FOR RELIEF?

Under Section 353 of CAMA, an application to the court by petition for an


order pursuant to Section 354 of this Act dealing with relief on ground of
oppressive conduct may be made by any of the following persons:
 a member of the company;
 a director or officer or a former director or officer of the company;

76
 a creditor;
 the Corporate Affairs Commission;
 any other person who, in the discretion of the court, is the proper person
to make the application.

See IJALE PROPERTIES LTD. V. OMOLOLU-MUILELE (2000) FWLR


(PT. 5) 709.

Note that the personal representatives of a deceased shareholder and any person
to whom shares have been transferred or transmitted by operation of law may
also apply for this relief. See the following cases:

1. OGUNADE V. MOBILE FILM (WEST AFRICA) LTD for the


definition of “oppressive conduct”. In this case, Karibi-Whyte, J. (as he then
was) adopted the dictionary meaning of the word “oppressive” to mean “an act
which is burdensome, harsh and wrongful”.

2. WILLIAMS V. WILLIAMS (1995) SCNJ 26.

Where the court is satisfied that there is need to intervene, the court may make
any of the following orders as the court thinks fit for giving relief in respect of
the matter complained of:
 an order that the company be wound up;
 an order for regulating the conduct of the affairs of the company in
future;
 an order for the purchase of the shares of any member by other members
of the company;
 an order for the purchase of the shares of any member of the company
and for the reduction accordingly of the company’s capital;
 an order directing the company to institute, prosecute, defend or
discontinue specific proceedings so authorising a member or members or
the company to institute, prosecute, defend or discontinue specific
proceedings in the name or on behalf of the company;
 an order varying or setting aside a transaction or contract to which the
company is a party and compensating the company or any party to the
transaction or contract;
 an order directing an investigation to be made by the Corporate Affairs
Commission;
 an order appointing a receiver or a receiver and manager of property of
the company;
 an order restraining a person from engaging in specific conduct or from
doing a specific act or thing;
 an order requiring a person to do a specific act or thing.

77
Section 355(3) of the Act provides that where an order that a company be
wound up is made under this Section, the provisions of this Act relating to
winding up of companies shall apply, with such adaptations as are necessary, as
if the order had been made upon an application duly filed in court by the
company.

6. EXTERNAL RESTRUCTURING
a) merger;
b) takeovers; and
c) acquisition.

Distinction btw takeover and acquisition is matter of law. Acquisition means the
purchase of controlling shares (any number of shares) by a company A from
another company B with the aim of having influence and control in company B
e.g. to have more voting rights to influence decisions of the company, appoint
directors, veto decisions. Takeover is acquisition of not less than 30% in the
share capital of the company.

Before 2007 ISA, a merger can only arise from amalgamation of 2 or more
companies but from ISA 2007, a merger can arise from acquisition of shares.
Once acquisition is up to 51%, SEC will direct that the companies should
merge. Acquisition doesn’t affect the corporate identity of the acquired
company. Also, takeover doesn’t affect corporate identity of the offeree.
S117-119 ISA.
S117 definition section
SEC (Consolidated) Rules: Rule 421 – definition section.
These define merger, acquisition.
S119 ISA: defines
S131 ISA – 151 ISA: details about a takeover

EXTERNAL OPTIONS IN CORPORATE RESTRUCTURING

1. MERGERS: the companies are called merged companies

78
2. ACQUISITIONS: this is an acquisition by one company of sufficient or
controlling shares in another company to give the acquiring company
control over that other company.
3. TAKE-OVERS:

SCOPE OF THE REGULATIONS ON EXTERNAL RESTRUCTURING-


R.422
S.118 ISA
The provisions of this regulation shall apply to:
(1) Public or private companies;
(2) Every merger, acquisition or combination between or among companies,
involving acquisitions of shares or assets of another company.
(3) Partnerships;
(4) Any Merger, Takeover, Acquisition or external restructuring undertaken by
any Federal Government owned Agency pursuant to statutory powers vested
in it.

EXEMPTED BODIES
1. The provisions of this regulation shall not apply to: -
a. Holding companies acquiring shares solely for the purpose of investment
b. In a small merger, the merging entities shall not be required to notify the
Commission of that merger but shall be required to inform the Commission
at the conclusion of the merger.
2. An acquisition in a private/ unquoted public company with assets or turnover
below N1 billion (small merger)

THE REGULATORY BODIES


The following regulatory bodies are involved in merger and acquisitions
1. Securities and exchange Commission (SEC)
2. Central Bank of Nigeria (CBN)
3. Federal High Court of Nigeria (FHC)
4. Nigeria Stock Exchange (NSE)
5. Corporate Affairs Commission (CAC)
6. Nigeria Deposit Insurance Corporation (NDIC)
7. Asset Management Corporation of Nigeria (AMCON)

Key Role of SEC


a. It is the apex regulatory body of capital market operations.
b. Grants pre-merger consent, clears scheme document and approves the
merger.
c. Grants authority to proceed in a takeover bid.

ROLE OF CBN

79
CBN gets involved in merger and acquisition, where banking institutions are
involved in the merger scheme.
The prior consent of the CBN Governor must be sought and obtained before any
such agreement. -S. 7 BOFIA

KEY ROLE OF FHC


a. Orders separate shareholders’ meetings of merging companies.
b. Deals with objections to shareholders’ meeting or to merger.
c. Sanctions merger – the merger becomes effective from the date the order
is given.

KEY ROLE OF NSE


a. It is a self-regulatory organisation.
b. It regulates listed public companies.
c. It regulates secondary market transactions.
d. Must be notified by listed companies of intention to merge.
e. Admits “new shares” to Daily Official List, de-lists “Scheme Shares” of
dissolved companies.

KEY ROLE OF CAC


a. Filing and certification of corporate resolutions and documents to be filed
with SEC.
b. Filing of sanction.
c. De-registration of dissolved companies.

THE LEGAL FRAMEWORK FOR MERGERS


The laws and Rules guiding merger are:
1. Investment and Securities Act 2007
2. CBN Act;
3. Banks and Other Financial Institutions Act 1991 (as amended)
4. Fed. High Court Act.
5. NDIC Act – for banks
6. AMCON Act
7. SEC (Consolidated) Rules 2013
8. Fed. High Court Rules
 Insurance Act
 National Insurance Commission Act
 IST rules
 Arbitration and Conciliation Act 2010

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7. WINDING UP AND DISSOLUTION OF
COMPANIES; BUISNESS AND NON BUISNESS
ORGANISATION

WINDING-UP OF COMPANIES

It is the process of liquidation of the assets of a company for the benefits of its
(i.e. distributed to) creditors, members and employees in accordance with
certain rules of priority.
TATE INDUSTRIES PLC V. DEVCOM M.B LTD.

COURT WITH JURISDICTION


The court having jurisdiction to wind up a company shall be the Federal High
Court within whose area of jurisdiction the registered or head office of the
company is situate or where it has maintained registered office for the PAST 6
MONTHS preceding the presentation of the petition- S. 570 CAMA.

APPLICABLE LAWS
a. CAMA
b. Company Winding up Rules 2001
c. Investment and Securities Act 2007
d. SEC Consolidated Rules 2013
e. NDIC Act
f. BOFIA
g. National Insurance Commission Act
h. FHCA
i. FHC Civil Procedure Rules 2019

REGULATORY AGENCIES-
a. CAC –It can present petition for winding up. It is a custodian of company
records-A company must file returns during winding up
b. FHC-court with jurisdiction to entertain winding up petition.
c. SEC
d. NSE
e. National Insurance Commission

EFFECT OF WINDING UP PROCEEDING ON THE LEGAL


PERSONALITY OF A COMPANY
The winding up of a company or the appointment of liquidator does not by itself
result in the death of the corporate body thereby removing its legal personality.

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A company under a winding up proceedings has not died it is still alive
though sick. A company “dies” on its dissolution C. S. (NIG.) PLC V.
MBAKWE

EFFECT OF A WINDING –UP ORDER


1. Action/proceedings against the company must be with the leave of
Court
2. Employees are automatically laid off
3. Any disposition of the company’s property and transfer of its shares after
the commencement of a winding up is void
4. The directors’ power to run the company ceases
NB-if a winding up order is made or a provisional liquidator is appointed,
no action or proceedings shall be proceeded with or commenced against the
company except by leave of the court S. 580 CAMA.
NOTE-However, what the section prohibits is action against the company
without leave of court and not the company proceeding against another
person. - ONWUCHEKWA V. N.D.I.C.

THREE WAYS OF WINDING UP


Basically, there are three types of winding – up
a. Winding up by order of court.
b. Voluntary winding up, members or creditors
c. Winding up subject to the supervision of the court-S.564 (1) CAMA
but only 2 modes of winding up

1. COMPULSORY WINDING UP BY THE COURT


The grounds for winding up by the court are provided under S. 571 CAMA viz:
a. The company has by special resolution resolved that the company be wound
up by the court.
b. Default is made in delivering the statutory report to the CAC or holding the
statutory meeting;
c. The number of members is reduced below two
d. The company is unable to pay its debts
e. The court is of the opinion that it is just and equitable that the company
should be wound – up.

B-DEFAULT MADE IN DELIVERING STATUTORY REPORT


This can only be brought by a shareholder and it must be before the expiration
of FOURTEEN (14) DAYS after the last day on which the meeting should

82
have been held under section 573(2)(b) of CAMA.
The court may, instead of making a winding-up order, direct that a meeting
be held or the report be delivered and make orders as to costs as it thinks fit –
section 574(3) of CAMA.
This ground is only applicable to public companies – section 235(1) & 236
CAMA

C-REDUCTION OF MEMBERS BELOW TWO


A company cannot be incorporated with less than two persons which is the legal
requirement – SECTION 18 OF CAMA.
A company which is in default of this would be wound-up by the court in
addition to other sanctions as to liability – SECTION 118 OF CAMA.
This is one of the cases where a contributory is expressly authorised to bring
a petition for winding-up – SECTION 573(1)(d) OF CAMA.

D-INABILITY TO PAY DEBTS-S. 572


A company would be deemed to be unable to pay its debts if the creditor to
whom it is indebted.
a. in a sum exceeding N200,000(it must exceed N2000); by a notice in
writing demanded for the debt to be paid; the company has for a PERIOD OF 3
WEEKS thereafter neglected to pay, then the company is unable to pay its
debts. -ADO IBRAHIM & CO LTD V. B.C.C. LTD, or
d. execution or other processes issued on a judgment or order of any court in
favour of a creditor of the company is returned unsatisfied in whole or in part:
S. 572(b), or
e. The court, taking into account any contingent or prospective liability of the
company is satisfied that the company is unable to pay its debts. - S. 572 (c)
CAMA

EXCEPTIONS-
S.572:
TATE V. DEVCOM
A company will not be deemed to be unable to pay its debt if:
1. The debt to a creditor is not due
2. No evidence of due demand for payment was made
3. If there is a bona fide dispute of the debt ONOCHIE V. ALAN
DICK & CO. LTD (2003); TATE INDUSTRIES PLC V
DEVCOM LTD (2004) RE LONDON&PARIS BANKING
CORP.
4. There is no evidence that the company is insolvent.
s. 572 of CAMA and
NB- demand must be made by an officer of the company-In NIGERIAN

83
COMMERCIAL & INDUSTRIAL ENTERPRISES LTD. V. REGISTRAR
OF COMPANIES it was held that a demand made by the solicitor to a
company for payment of debt was not a demand by an officer of the company.
NB-the SHC has jurisdiction when the debt claimed is unascertainable or in
dispute.

NB-however the denial of debt in bad faith cannot stop petition if amount
admitted is more than 200,000:00
The Demand is a statutory document and not a mere letter of correspondence
and should be formally titled as a STATUTORY DEMAND FOR
PAYMENT, and clearly set out the amount owed and a request to pay within
three weeks and a Notice that upon expiration, the creditor would take steps to
wind up the company.

27/04/2022
WINDING UP ON JUST & EQUITABLE GROUNDS UNDER S. 571 (e)
CAMA
The grounds upon which the court MAY ORDER winding up under just and
equitable grounds are:
a. The substratum of the company has disappeared, such as the inability of
the company to achieve its object clause or the company is deeply indebted: RE
YENIDIJE TOBACCO LTD
b. The company is formed for fraudulent purpose.
c. The company is a “bubble” as it has no business or asset or never
intended to carry on business in a proper manner.
d. Unfairly prejudicial or discriminatory act against the minority or other
members, culminating in lack of confidence in the management of the
company’s affairs by those in control of the company. IBRAHIMI V.
WESTBOURNE GALLERIES LTD.
e. If the company is small, grounds that would justify dissolution of
partnership on just and equitable ground is enough, such as deadlock. THE
MATTER OF THE STEVEDORING (NIG.) CO. LTD.

FACTORS GUIDING COURTS DISCRETION IN WINDING UP


UNDER 571(e)
 Whether it is just and equitable to wind-up a company depends on the
facts which are available to the court at the time of hearing of the
application as set out in the petition – RE WONDOFLEX TEXTILES
PROPERTY LTD. (1951) VLR 458.
 However, a petition on just and equitable ground should not be dismissed
basically because the petitioner has some other remedies since the motive

84
of the petitioner is irrelevant – OBASI V. PUREWAY
CORPORATION (NIG.) LTD. (1878) 4 FRCR 214.

NOTE-
The petitioner is not entitled to a winding-up order on the just and equitable
ground if his object is not a company purpose but the pursuit of a selfish
advantage in a question between himself and other shareholders –
ANGLO AMERICAN BRUSH CORPORATION LTD. V.
SCOTTISH BRUSH CO. LTD.

WHO MAY PETITION FOR COMPULSORY WINDING UP-S. 573


CAMA
a. The company (by special resolution);
b. A creditor, including a contingent or prospective creditor of the company
(e.g. secured creditor and debt to crystallise at a future date)
c. The official receiver;
d. A contributory (s566: under obligation to contribute to the indebtedness
of the company at winding up – owes debt to the company or has been allotted
shares which is yet to be paid up even though he has parted with the shares)
e. A trustee in bankruptcy, personal representative of creditor, contributory.
f. The CAC under S. 366 CAMA if it is in the public interest (NB: Registrar
General must assent or AGF must be notified and must consent before CAC can
present a petition for winding up of a company)
g. A receiver if authorised by the instrument under which he was appointed;
or
h. By all or any of those parties, together or separately.

STAYING OF WINDING UP AFTER WINDING UP ORDER


S. 601 (1) CAMA empowers the Federal High Court to stay winding up even
after the order is made.
It is not a form of Appeal, but a review of the entire proceedings leading to the
order.
This may be on the application of either a liquidator or official receiver, a
creditor or contributory.

APPOINTMENT OF LIQUIDATOR
The court may appoint a liquidator for the purpose of conducting the
proceedings in winding-up a company – section 585(1) of CAMA.
On the making of a winding-up order, if no liquidator is appointed, the official
receiver shall by virtue of his office become the liquidator – section 585(3)(b)
of CAMA.

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POWERS OF A LIQUIDATOR IN WINDING UP BY THE COURT
The liquidator, in a winding-up by court, exercises some powers, but the powers
must be sanctioned by the court or the committee of inspection – section 588(1)
of CAMA. These powers include –
a) The power to bring or defend any action in the name and on behalf of the
company; AGBAOYE V. CHIEF FEDERAL LAND OFFICER
b) The power to carry on the business of the company as may be necessary
for the purpose of the beneficial winding-up;
c) The power to appoint relevant professionals or legal practitioner to assist
him in the performance of his duties;
d) The power to pay all classes of creditors in full;
e) The power to make any compromise or arrangement with creditors or
persons claiming to be creditors; and
f) The power to compromise all calls, debts and liabilities capable of
resulting in debts.

2. VOLUNTARY WINDING UP-SECTION 620 CAMA


A company may be wound up voluntarily
a. When the period, if any fixed for the duration of the company by the
articles expires, or the event, if occurs, on occurrence of which the articles
provided the company is to be dissolved and the company in meeting has passed
a resolution (ordinary) requiring the company to wound up voluntarily (ordinary
resolution where articles state company is to exist for a fixed period, where the
company was incorporated for a specific purpose and the purpose is fulfilled
and when company was to exist until a particular occurrence/contingency and
that contingency happens)
b. If the company resolves by special resolution that company be wound up
voluntarily.
If a company passes a resolution for voluntary winding up, it MUST WITHIN
14 DAYS AFTER the passing of the resolution
i. Give notice of the resolution by advert in the Gazette, or
ii. Advertise in two daily newspaper and
iii. Give notice to CAC – s. 621

NB-The passing of the resolution is deemed to commence the voluntary


winding up S. 622

TYPES OF VOLUNTARY WINDING-UP


Voluntary winding-up is of two types, namely –
i. Members voluntary winding-up; and
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ii. Creditors voluntary winding-up.

i. MEMBERS VOLUNTARY WINDING-UP


This is where a statutory declaration of solvency shall be made by the directors
to the effect section 625(1) of CAMA.

CIRCUMSTANCES WHERE MEMBERS’ VOLUNTARY WINDING-UP


WILL BE CONVERTED TO CREDITORS WINDING-UP
a. There is no Statutory Declaration of Solvency made and filed in support of
the Resolution for winding-up
b. The liquidator is of the opinion that the company will not be able to pay its
debts within the 12 months stated in the declaration of solvency

ii. CREDITORS’ VOLUNTARY WINDING-UP


This occurs where the directors are not able to make a declaration of solvency at
the CAC – section 634(1) of CAMA.

CONSEQUENCES OF A VOLUNTARY WINDING-UP


The consequences of a voluntary winding-up are –
1. The company shall cease to carry on its business except so far as may be
required for the beneficial winding-up thereof. - S. 623
2. The corporate status and powers of the company shall not withstanding
anything to the contrary in its articles, continue until it is dissolved –
Proviso to S. 623
3. Any transfer of shares not made with the sanction or approval of the
liquidator shall be void.
4. Any alteration in the status of members of the company made after the
commencement of the voluntary winding-up shall also be void – section
624 of CAMA
5. On the appointment of a liquidator, all the powers of the directors shall
cease, except so far as the company in general meeting or the liquidator
sanctions the continuance thereof – S. 627 (2)
6. In a creditor’s voluntary winding up, the powers of the directors shall also
cease, except so far as the committee of inspection or if there is one, the
creditors sanction the continuance S. 636(2)
7. A voluntary winding up will operate as a discharge of employees of the
company is wound up because it is insolvent just as it will in the case of a
compulsory winding up.

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iii. WINDING-UP SUBJECT TO THE SUPERVISION OF THE COURT
This is provided for under sections 649, 651 and 653 of CAMA
This usually occurs when a company passes a special Resolution for winding-up
backed by a Petition filed to the Court to wind up the company subject to its
supervision.
The Court is the one to appoint the liquidator. section 652(1) of CAMA.
A winding-up subject to the supervision of the court is deemed to be a
winding-up by the court for the purposes of sections 576 and 577– section
651 of CAMA.
Where an order is made for a winding up subject to supervision, the court may
by the same or any subsequent order appoint an additional liquidator– section
652(1) of CAMA.

 The court is also empowered to remove any liquidator so appointed by


the court and may fill any vacancy, occasioned by the removal,
resignation or death – section 652(3) of CAMA.

EFFECT OF SUPERVISION ORDER


An order for winding-up subject to the supervision of the court has the
following effects –
1. The liquidator so appointed is free to exercise all his powers without the
sanction or intervention of the court Section 653(1) of CAMA.
2. The liquidator shall not exercise the powers specified in paragraphs (d),
(e) and (f) of section 588(1) of CAMA, that is, the power to pay all
classes of creditors in full; the power to make any compromise or
arrangement with creditors or persons claiming to be creditors; and the
power to compromise all calls, debts and liabilities capable of resulting in
debts respectively, EXCEPT with the sanction of the court – proviso to
section 653(1) of CAMA.
3. A winding-up subject to the supervision of the court does not amount to
winding-up by the court for the purpose of the provisions of CAMA as
specified in Schedule 12 – section 653(2) of CAMA.

MAJOR OFFICERS IN WINDING UP

Liquidator
Official Receiver
Provisional Liquidator
Receiver/Receiver Manager
Special Manager

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LIQUIDATOR
 A liquidator is a person appointed by the company or court to wind up the
affairs of the company and to distribute its assets among the creditors and
contributories in accordance with the articles.
 A liquidator represents the interest of the creditors, especially the
unsecured creditors. Thus, upon appointment all powers of director’s
cease.
 The LIQUIDATOR MUST, WITHIN FOURTEEN (14) DAYS
AFTER HIS APPOINTMENT PUBLISH IN THE GAZETTE AND
IN TWO (2) DAILY NEWSPAPERS and deliver to the commission for
registration a notice of his appointment –
SECTION 654 OF CAMA.

DISQUALIFICATION FOR APPOINTMENT AS LIQUIDATOR


The following are persons who are incompetent to be appointed or to act as
liquidator whether in winding up by, or under the supervision of the court or in
a voluntary winding up –
1. An infant.
2. Anyone found by the court to be of unsound mind.
3. A body corporate.
4. An un-discharged bankrupt.
5. Any director of the company under liquidation.
6. Any person convicted of any offence involving fraud, dishonesty, official
corruption or moral turpitude and in respect of whom there is a subsisting
order to restraint fraudulent persons – section 676(1) of CAMA.
NB-Any appointment made in contravention of the above shall be void –
section 676(2) of CAMA.
There are also further powers of a liquidator which are provided under section
588(2) of CAMA –
1. The power to sell the property of the company by public auction or
private arrangement.
2. The power to do all acts and to execute in the name and on behalf of the
company, all deeds, receipts and other documents.
3. The power to prove, rank and claim in the bankruptcy, insolvency or
sequestration of any contributory.
4. The power to draw, accept, make and indorse any bill of exchange or
promissory note in the name and on behalf of the company.
5. The power to raise any money required on the security of the assets of the
company.
6. The power to appoint an agent to do any business which the liquidator is
unable to do himself

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OFFICIAL RECEIVER-S. 582 CAMA
 An official receiver is the Deputy Chief Registrar to the Federal High
Court or any other officer designated for that purpose by the Chief Judge
of the Federal High Court.
 He is to receive the statement of Affairs of the company and to collate
information about the company in winding up.
Official Receiver is just a nomenclature given to the Deputy CR of FHC.

PROVISIONAL LIQUIDATOR
He is appointed by the Court before the making of a winding up Order and the
formal appointment of a liquidator. S-S. 585(3) (a) of CAMA
An official receiver may be a PROVISIONAL LIQUIDATOR when the
winding up order is made in a compulsory winding up until the appointment of
a liquidator. He continues to be so act wherever there is vacancy in the office of
a liquidator. S. 585 (3)(b)

RECEIVER
A receiver is appointed by the secured creditors under the power contained in
the debenture instrument, executed by the company and the creditors.
A receiver need not get involved in the management of the company. He only
has an eye in the income and expenditure of the company in order to realise
assets and pay off the debt due to the creditors: s. 552 CAMA

RECEIVER MANAGER
A Receiver Manager is not only concerned to realise the assets of the company
but takes over the management of the affairs of the company, to stabilise it to
make profit and pay off the creditors and then handover the company to the
members. He stands in a fiduciary relationship to the company and observe
utmost good faith towards it in any transaction with it or on its behalf: s. 553
CAMA

SPECIAL MANAGER
He is an officer appointed by the Chief Judge of the Federal High Court to assist
the Deputy Chief Registrar (i.e. Official Receiver) in the winding up of a
company by the order of the court: s. 599 CAMA

POWERS OF THE RECIEVER/MANAGER


1. Power to carry on the business of the company

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2. Power to use the company’s seal
3. Power to appoint other professionals to assist him
4. Power to sell and dispose of the property
5. Power to establish subsidiaries of the company
6. Power to raise or borrow money and grant security due over the property of a
company.

DIFFERENCE BETWEEN A COMPANY IN RECEIVERSHIP AND A


COMPANY IN LIQUIDATION.

A COMPANY IN RECEIVERSHIP is a company which has appointed a


receiver to manage the debts of the company. The company may still bounce
back as an effective going concern. A COMPANY IN LIQUIDATION is a
company in the process of winding up.

THE ORDER/PRIORITY OF PAYMENTS OF LIABILITIES UPON


WINDING-UP OF A COMPANY
1. All costs including the remuneration of the liquidator are paid out: S. 647,
657(5) of CAMA
2. Outstanding local rates and charges due from the company and payable
within 12 months next before the date of the winding-up Order or its
commencement are paid
3. Pay all PAYEE (Pay As You Earn) tax deductions, assessed taxes, land
taxes, properties or income taxes from the company not exceeding 1 year
before the winding-up Order or its commencement
4. Pay salaries of junior staff or servants of the company for services
rendered to the company and deductions under the National Provident
Fund Act
5. Settle claims of creditors and members. Secured creditors with
fixed/floating charges are paid first before the unsecured debentures
6. Settle preferential shareholders
7. Distribute the remaining assets to the ordinary shareholders -S. 657 of
CAMA

INVESTIGATION OF COMPANY’S AFFAIRS BY THE CORPORATE


AFFAIRS COMMISSION (CAC) - (SECTION 357 CAMA)

As part of the scheme to ensure proper administration and management of the


company, provisions are made for the CAC to appoint inspectors for the
purpose of investigating the affairs of a company.

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APPOINTMENT OF INSPECTORS

Sections 357 to 363 of CAMA provide for the circumstances under which
inspectors may be appointed, their powers, the procedure for such appointment
and report. The investigation also includes the membership of companies.

Section 357(1) of the Act provides that the CAC may appoint one or
more competent inspectors to investigate the affairs of a company and to
report on them in such manner as it may direct. No specific qualification is
required for appointment provided the appointee is generally competent. There
are three situations where inspectors can be appointed to investigate the affairs
of a company.
 on the application of the company or its members;
 on the declaration of the court that a company be investigated; and
 on CAC’s own motion.

1. ON APPLICATION OF THE COMPANY OR ITS MEMBERS

In the case of a company having a share capital, Section 357(2)(a) of the Act
provides that the application may be made by members holding not less than ¼
of the class of shares issued.

With respect to a company not having a share capital, Section 357(2)(b) of the
Act provides that the application may be made by not less than ¼ in number of
the persons on the company’s Register of Members.

Section 357(2)(c) of the Act provides that in any other case, the application may
be made by the company where, for example, there has been a lot of
concealment, under-declaration of profit and other illegality. See SPECTRA
NIGERIA LIMITED V. STABILINI VISIONINI NIGERIA LTD (1996) 6
NWLR (PT. 44) 239.

2. DECLARATION OF THE COURT THAT A COMPANY BE


INVESTIGATED

The Commission must appoint an inspector to investigate the affairs of the


company if the court order declares that its affairs ought to be investigated. The
order for investigation is one of those for which the court may make if it is
satisfied that an application for relief on the ground that the affairs of the
company are being conducted in an illegal or oppressive manner is well
founded. See Section 355(2)(g) of the Act.

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In OTONG V. MOGAL NIGERIA LTD (1978) FRCR 80, it was alleged that
the company had not filed any annual returns, had not had annual general
meetings and kept no minutes of any meetings and no books of account. The
court had no hesitation in directing the Registrar to appoint inspectors for a
thorough investigation of the affairs of the company.

3. ON THE COMMISSION’S OWN MOTION

Section 358(2) of CAMA provides that the CAC may appoint an inspector to
investigate the affairs of a company if it appears to it that there are
circumstances suggesting any of the following:

 that the company’s affairs are being or have been conducted with
intent to defraud its creditors in such a manner which is unfairly
prejudicial to some of its members; or

 that the company was formed for any fraudulent or unlawful purpose;
or

 that persons concerned with the company’s formation or management


of its affairs have been guilty of fraud, misfeasance or other
misconduct towards the company or its members; or

 that the company’s members have not been given all the information
with respect to its affairs which they might reasonably expect.

Note that members include the personal representative of a deceased member


and any person to whom shares have been transferred or transmitted by
operation of law. See Section 358(4) of the Act.

An inspector may be appointed to investigate the affairs of a company


notwithstanding that the company is being voluntarily in the course of winding
up. See Section 358(3) of the Act.

WINDING UP OF THE COMPANY ON JUST AND EQUITABLE


GROUND -

(SECTION 571(E) OF CAMA)

Section 571(e) of CAMA, provides that the court may wind up a

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company if the court is of the opinion that it is just and equitable that the
company should wind up. This provision is to protect the minority further in
cases of oppression by the majority. It should be noted that the court’s power
under this paragraph is discretionary.

The application may be brought by members of the company, the


creditors of the company and the CAC. See the following cases:

IDUGBOE V. OIL FIELD SUPPLY LTD (1979) ALR COMM. 1

RE: GERMAN DATE COFFEE COMPANY (1882) 20 CH. D. 169. In this


case, the court held that the substratum of the company had failed, and it was
impossible to carry out the objects for which it was formed.

THE ROLE OF PROFESSIONAL PARTIES INVOLVED IN


CORPORATE RESTRUCTURING.
1. Investment bank/financial adviser/issuing house:
(b) Formulate effective over all integration strategy for the entities involved.
(c) Conducting and coordinate due diligence on the acquirer and /or target.
(d) Provide fair and accurate information about the entities involved to their
existing shareholders.
(e) Coordinate the roles of all other professional parties to the merger,
including stock brokers, solicitors, reporting accountants and registrars.

2. The Solicitors to the merger


(b) Review legal documentation and provide a legal opinion on actual and/ or
threatened litigation.
(c) Obtain court hearing date for the proposed merger.
(d) Obtain court order sanctioning the scheme.
(e) Conduct the order of proceedings at the court ordered meetings.
3. The Auditor:
(b) Provide historical financial information on the entities involved.
(c) Assist merging entities with the preparation of financial forecasts.

4. The reporting accountants:


(a) They ensure that all material financial facts are fully disclosed clearly and
correctly.
(b) They provide an independent statement and opinion on the financial
information and adjustment (if any)
(c) Review the bases and assumptions underlining the financial projections and
subsequently provide a report on the financial forecasts.
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(d) Act as scrutinisers to verify the results of the voting at the court ordered
meetings.

5. The registrars:
(a) Dispatch the scheme documents to all share holders
(b) Establish court ordered meetings voting model.
(c) Establish court ordered meeting voting procedure.
(d) Prepare and dispatch new certificates to shareholders at conclusion of the
mergers.

6. Stock Brokers:
(a) They prepare the application for filing with the Nigerian Stock Exchange.
(b) Facilitate the quotations committee meeting
(c) Engage in sensitising and obtaining shareholder support and consent at the
court ordered meeting.
(d) Obtain Nigerian Stock Exchange approval for scheme of arrangement.

7. Company Secretary/Legal Adviser:


(a) Ensures that all relevant resolutions are passed and drafted and signed.
(b) Organise board meetings for requisite proposals.
(c) They coordinate meetings with various classes of shareholders and third
parties.
(d) Ensure that quorums are formed at the various meetings, court ordered
meetings or convened by the company.
OTHER DRAFTS-special resolution for merger – s121(5) ISA
Application to court for court ordered meeting for merger: petition under Rule
425b SEC Consolidated Rules 2013, Rule 4k Companies Proceeding Rules
1992

DISSOLUTION OF BUSINESS NAME UNDER PART B OF CAMA

DISSOLUTION OF A COMPANY
The procedure is:
1. Winding up must have been completed.
2. The application is made to court by the liquidator for a dissolution Order
3. Notice of the Order of dissolution made is to be given to the CAC
WITHIN 14 DAYS of the Order-S.617(1) CAMA
4. CAC shall record the dissolution of the company in its books – section
617(2) of CAMA.
NOTE-The liquidator or any other interested person may apply to the court to
make an order deferring the date of the dissolution. By virtue of S. 691 even
where the company is deemed to be dissolved, the court may on application by

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the liquidator or any other interested person, within 2 years of the dissolution
void the dissolution. That person must deliver the order to CAC within 7 days
after making the order.

EFFECT OF DISSOLUTION ORDER


 Once a company is fully wound-up and dissolved, it loses its legal
identity and ceases to exist (DIES) in law –
CBCL (NIG.) LTD. V. OKOLI;
SECTION 617(1) AND (2)
 The incorporated name cannot be used any longer.

DIFFERENCE BETWEEN LIQUIDATION AND


DISSOLUTION OF A COMPANY
During liquidation, the company can still sue in its corporate name. However, it
cannot be a member of a new company.
Conversely, during dissolution of a company, the company no longer exists in
its corporate entity as it is now dead.

DISSOLUTION OF PARTNERSHIP
This can be caused by any of the partners in the following ways –

1. By act of the parties: this can be done either:


(i) By giving notice of intention to dissolve the partnership (could be
provided for in the agreement); or
(ii) By reason of ill-health making a partner permanently incapacitated and
the partnership not being able to continue;
(iii) Where a partner creates a charge on his or her share of the partnership
property – section 34(b) of Partnership Law of Lagos; or
(iv) By providing for a clause like power of expulsion in the partnership
agreement/deed

2. By operation of law if:


(i) It is for a fixed term, at the expiration of the term
(ii) It is for an undertaking, at the performance of the undertaking and sharing
of the proceeds– Ureli v. Dada (1988) NWLR (Pt. 69) 237.
(iii) It is supervening illegality
(iv) It is for death or bankruptcy or insanity of a partner (i.e. partner has lost
legal capacity)

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3. By order of Court, in which a partner can apply that the partnership be
dissolved based on:

(i) Persistent breach of agreement – UREDI V. DADA;


(ii) Mental ground;
(iii) Where it is obvious that a partner is permanently incapable of continuing
with the partnership;
(iv) Carrying on the business at a loss; or
(v) any equitable ground.

PROCEDURE FOR DISSOLUTION OF THE PARTNERSHIP


1. Notice of requirement, dissolution, or expulsion is served on another partner
referring to the appropriate clause in the partnership agreement.
2. The partners prepare and execute the dissolution agreement.
3. Distribution of assets and liabilities will commence
4. Notice of dissolution/cessation is given to (THIS CAN BE DONE AFTER
expulsion)
a) Corporate Affairs Commission, if registered
b) Published in the gazette and national newspapers.
c) Clients or customers.

DISSOLUTION OF SOLE PROPRIETORSHIP


Death of the sole proprietor will lead to dissolution of sole proprietor except
provision in his will for a Personal Representatives to carry on the business for a
certain period of time was made.

Procedure for dissolution of a sole proprietorship upon death of sole proprietor:


 Evidence of the death of the sole proprietor
 Within a period of 3 months of the death, the PR shall submit to Registrar
General, the evidence of death together with the original certificate of the
business name and particulars of registration for cancellation (also attach
letter of probate/administration)
 Upon the payment of requisite fees, filing fees for cancellation,
 Evidence of payment of annual returns up to date or payment of the
annual returns, if necessary

The procedure for the dissolution of a partnership is as follows: S. 819 of


CAMA
1. The business will cease to be in existence by either a Resolution by the
partners or by a Court order or death of a sole proprietor.

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2. The partners shall file a Notice to CAC WITHIN 3 MONTHS of the
cessation of the business, stating that the firm/ individual has ceased to do
business under a business name with evidence attached.
a. A copy of the court order or evidence of consent of the partners must be
annexed to the notice.
b. The original particulars of the business registration should be
surrendered for cancellation (certificate of registration and other
particulars)
c. Pay the prescribed fees for filing the Notice.
3. Upon delivery of the notice to the Registrar of Business Name, the
Registrar may remove the firm, company or individual from the register.
4. If the Registrar has reasonable cause to believe that the firm, company or
individual is not carrying on business, the Registrar may send a notice to
the firm, company or individual enquiring whether or not the business is
being carried on.
5. Where there is no response WITHIN TWO (2) MONTHS, or the answer
to this is that there is no business being carried on, the Registrar may
remove the business name from the Register
Section 819(3) and (4) of CAMA.
Sometimes partnership business, even though registered under Part B is
governed by the partnership deed (even though this deed is not registered with
CAC).
There are several ways of bringing partnership to an end. However, recourse is
first had to the partnership deed. Where the partnership deed is silent: then,

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