APPOINTMENT
OF COMPANY DIRECTORS Iyke Ozemena Attorney, Corporate Consultant and
Author: By s.18 any two or more persons may form and incorporate a
private company. The articles of such a company would have the names of
the two persons as its directors. This is so as a result of
pre-incorporation agreement. 1 After incorporation the company can
appoint its first directors if necessary through resolutions or by
naming them in the memorandum and articles. 2 The requirement that
there should be at least two directors is a mandatory one. At no time
shall the number fall below two; but if it does, the company has one
month to appoint a new director. 3 A director or member of a company
having knowledge that the number of directors has fallen below the
minimum of two for more than 60 days while still carrying out its normal
business by the company during that period. 4 Shareholders have the
power to appoint Directors at the general meeting by ordinary resolution
-- s.303 Companies Act 1985: UK. For the purposes of clarity, a
director is a person duly appointed by the company in accordance with
the provisions of the Companies Act. 5 It is not an imposter or
impersonator, but acclaimed proxies or aides of the directors are
exempted. See internal management rule: Turquand. Appointment of
subsequent directors shall be the business of general meetings.
Proposed names are tabled, scrutinized and voted for. 6 Appointment of
directors may become necessary where the present directors resign, die
or removed. Whichever is the case, the remaining shareholders or their
accredited representatives shall have the power to apply to the court
for an order to convene a meeting in which all those entitled to
attend a general meeting could appoint new directors. If for any reason
the representatives are unable to convene the meeting the creditors are
allowed under this section (s.248(2)) to do so for the sole purpose of
appointing new directors. Casual vacancies for directors do exist when a
director(s) dies, resigns, disqualified, or removed. Because of the
smooth running of the company appointment of new directors to replace
them become necessary. In this circumstance, the Board of Directors are
empowered to fill the vacancies which would later be approved or
otherwise in the next general meeting. In the case of removed director,
his successor's tenure shall be the remainder of the predecessor's
tenure. It is to be noted that the shareholders have the same powers as
the directors with regards to filling casual vacancies. This is a very
important power in the hands of directors for they can use the
opportunity of casual vacancy to shift the balance of power in the
company to their interests. 7 Section 255 allows a person to be
appointed a director for life provided that he is removable under s.262
which prescribes the procedure for the removal of directors. Once a
person is appointed a director in consonant with the Act, his acts shall
be valid notwithstanding any defect or disqualifying circumstances
surrounding his appoint. This provision applies to the Secretary or a
manager bona fide acting for the company, purports to appoint two or
more persons as directors in one piece of resolution. 8 To stripe
it off this element of invalidity, the members must all agree to such
proposal without any vote against it. Then on presentation before the
meeting it shall be taken to have complied with the provision of this
section. 9 A resolution moved not in compliance with this section
shall be void. 10 However, it does not apply to a resolution altering
the company's articles. 11 The Law Reform Commission recommended
that a company should have the powers of natural persons to realize its
objectives. The Directors are its human agents through which it acts.
As for who is a Director, the Commission recommended a proper definition
to include a "person duly approved" by a company to superintend the
affairs of the company, and those "held out" by the company to be
Directors. It went further to recommend that all Directors of
registered companies called various names , like Marketing, Personnel or
Corporate Directors should be duly appointed by the company in a
general meeting. A third party dealing with these directors would not be
prejudiced by their disqualification, if any. But those fake directors
would be liable personally to the tune of N1000 fine for each day of
the default and his acts would not bind on the other hand if the company
was in default, it shall pay a fine of N1000 for each day of the
default. It recommended that retention of shadow Directors subject to
legal relationship that binds them and suggested that Article 75 Table A
and s.175 of the former Companies Act be incorporated where appointment
and removal of directors are found in a section. On the filling of
casual vacancies it recommended that a meeting of shareholders should be
convened within 28 days of the appointment for ratification. But
Directors found guilty should be disqualified for 10 years instead of 5
years. And court should have the power to make qualificatory order. As
to the office of the Director, when a Director retires or vacates, it
proposes incorporation of Article 87 of Table A verbatim.
Corporations, it proposes should continue to be appointed as Directors
in public companies provided a permanent representative is a the Board
who would be approved by the general meeting. Such representative is
removable by the general meeting and could be replaced by the company.
It recommended against appointment of Corporate Directors in private
companies. Bibliography CAMA = Companies and Allied Matters Act
1990 LRC = Law Reform Commission 1. Section 246 (1)
CAMA 2. Section 247 3. Section 246 (2) 4. Section 246
(30 5. Section 244 (1) 6. Section 248 (1) 7. Section
248 (1) 8. See FRIENDLY'S comment in ESSEX UNIVERSAL CORPORATION
V. YATES 305 F2 d 572 1962 p.581 9. Section 260 10.
Section 261 (1) 11. Section 261 (2) 12. Section 261
(4) <P> Author: DIRECTORS: Duties & Enforcement | http://www.amazon.com/dp/B005783S6S <P> GUIDE TO FINAN$IAL $ECURITY | http://www.amazon.com/dp/B005E
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