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Preliminary View
The statutory removal of a director
generally is governed by the provision of section 262 of the Companies and
Allied Matters Act, Cap C20 LFN 2004 (“CAMA”). In the case of Longe v FBN
Plc (2010) 6 NWLR (Pt 1189) SC 1, the Supreme Court held that the provision
of section 262 of CAMA also applies to removal of executive and non-executive
director alike. However, it appears that different consideration should apply
where a director sought to be removed has disappeared or gone missing. Let us
consider some of the issues that may play out in the course of removing a
director who is missing.
generally is governed by the provision of section 262 of the Companies and
Allied Matters Act, Cap C20 LFN 2004 (“CAMA”). In the case of Longe v FBN
Plc (2010) 6 NWLR (Pt 1189) SC 1, the Supreme Court held that the provision
of section 262 of CAMA also applies to removal of executive and non-executive
director alike. However, it appears that different consideration should apply
where a director sought to be removed has disappeared or gone missing. Let us
consider some of the issues that may play out in the course of removing a
director who is missing.
Statutory Procedure for Removing
Directors
Directors
The procedure in section 262 of CAMA to
be adopted in removing an executive director is summarized as follows:
be adopted in removing an executive director is summarized as follows:
1. A Special notice of
the meeting to remove a director must be issued to all plenary members of the
board of directors and a copy of the notice must be served on the director. A
special notice according to section 236 of CAMA is a notice of twenty-eight
(28) days given before a meeting holds. The notice shall specify the place,
date and time of the meeting, and the general nature of the business to be
transacted at the meeting (i.e. removal of the director) in sufficient details
to enable those to whom it is given decide whether to attend or not. The
director (whether or not he is a member of the company) shall be entitled to be
heard on the resolution at the meeting. See Section 262 (2) of CAMA.
the meeting to remove a director must be issued to all plenary members of the
board of directors and a copy of the notice must be served on the director. A
special notice according to section 236 of CAMA is a notice of twenty-eight
(28) days given before a meeting holds. The notice shall specify the place,
date and time of the meeting, and the general nature of the business to be
transacted at the meeting (i.e. removal of the director) in sufficient details
to enable those to whom it is given decide whether to attend or not. The
director (whether or not he is a member of the company) shall be entitled to be
heard on the resolution at the meeting. See Section 262 (2) of CAMA.
1. Where the special
notice mentioned above is given and the director concerned makes a
representations in writing to the company in respect of the special notice (not
exceeding a reasonable length) and requests their circulation to members of the
company, the company shall, unless the representations are received by it too
late for it to do so-
notice mentioned above is given and the director concerned makes a
representations in writing to the company in respect of the special notice (not
exceeding a reasonable length) and requests their circulation to members of the
company, the company shall, unless the representations are received by it too
late for it to do so-
(a) state the fact of the
representations having been made by the director in any notice of the
resolution issued to members of the company; and
representations having been made by the director in any notice of the
resolution issued to members of the company; and
(b) Send a copy of the
representations to every member of the company to whom notice of the meeting is
sent (whether before or after receipt of the representations by the company);
See section 262 (3) CAMA
representations to every member of the company to whom notice of the meeting is
sent (whether before or after receipt of the representations by the company);
See section 262 (3) CAMA
(c) If a copy of the
representations is not sent out to board members either because it is received
too late or because of the company’s default, the executive director to be
removed may (without prejudice to his right to be heard orally) request that
the representations shall be read out at the meeting.
representations is not sent out to board members either because it is received
too late or because of the company’s default, the executive director to be
removed may (without prejudice to his right to be heard orally) request that
the representations shall be read out at the meeting.
(d) However, the copies of the
representations need not be sent out and the representations need not be read
out at the meeting if,
representations need not be sent out and the representations need not be read
out at the meeting if,
- on
the application either of the company or - any
other person who claims to be aggrieved,
the court is satisfied that the rights
to make representation are being abused to secure needless publicity for
defamatory matter and the court may order the company’s costs on an application
under section 262 to be paid in whole or in part by the director,
notwithstanding that he is not a party to the application.
to make representation are being abused to secure needless publicity for
defamatory matter and the court may order the company’s costs on an application
under section 262 to be paid in whole or in part by the director,
notwithstanding that he is not a party to the application.
The above means that representations of
the director to be removed may not be circulated to plenary members or read at
the meeting. However, in order to prevent the circulation of the
director’s representations to board members or from being read at the meeting where
the executive director is to be removed, a prior order of court must be
obtained by either the company or any other interested person.
the director to be removed may not be circulated to plenary members or read at
the meeting. However, in order to prevent the circulation of the
director’s representations to board members or from being read at the meeting where
the executive director is to be removed, a prior order of court must be
obtained by either the company or any other interested person.
1. Where the board of
directors is of the view that the allegation against the executive director
concerned is proved, the board shall pass a simple resolution to remove him.
Where there is no proof of the allegations, the procedure ends here. The
director should be allowed to continue with his duties.
directors is of the view that the allegation against the executive director
concerned is proved, the board shall pass a simple resolution to remove him.
Where there is no proof of the allegations, the procedure ends here. The
director should be allowed to continue with his duties.
1. The resolution by
which the director is removed shall be filed with CAC within fifteen (15) days
and where a new director is appointed to fill the vacancy, a CAC Form 7 (Change
of Directors and Particulars of Directors) must be filled and filed with CAC.
All the correspondence materials of the company should then be corrected to
reflect the new changes.
which the director is removed shall be filed with CAC within fifteen (15) days
and where a new director is appointed to fill the vacancy, a CAC Form 7 (Change
of Directors and Particulars of Directors) must be filled and filed with CAC.
All the correspondence materials of the company should then be corrected to
reflect the new changes.
Can the Company Remove a Director by
any other means?
any other means?
Section 262 (6) of CAMA appears to
permit a company to deviate from the procedure discussed above in removing a
director where a different mode of removal is provided in a binding agreement
between the company and the director (e.g. Contract of Service) or where the
Articles of Association provides that the company can remove the executive
director in any other manner. Section 262 (6) of CAMA provides as follows:
permit a company to deviate from the procedure discussed above in removing a
director where a different mode of removal is provided in a binding agreement
between the company and the director (e.g. Contract of Service) or where the
Articles of Association provides that the company can remove the executive
director in any other manner. Section 262 (6) of CAMA provides as follows:
“Nothing in this section shall
be taken as depriving a person removed under it of compensation or damages
payable to him in respect of the termination of his appointment as a director
or of any appointment terminating with that as director, or as derogating from
any power to remove a director which may exist apart from this section.”
be taken as depriving a person removed under it of compensation or damages
payable to him in respect of the termination of his appointment as a director
or of any appointment terminating with that as director, or as derogating from
any power to remove a director which may exist apart from this section.”
However, the Supreme Court in Longe
v. FBN Plc (supra), failed to advert its mind to the clear and unambiguous
provision above and held that the procedure for removal of a director in
Section 262 (1), (2) and (3) of CAMA is mandatory and that same applies to all
directors, both executive and non-executive notwithstanding anything contrary
in a contract of service between the company and the director. The sum total of
the reasoning of the Court of Appeal in that case, which ought to be the
preferred view, was that Mr. Bernard Longe being a managing director of the
First Bank Plc employed through a contract of service can be removed by the
bank in accordance with the said contract. Sadly, however, the Supreme Court
rejected the reasoning holding that the definition of directors in the CAMA
does not permit such distinction.
v. FBN Plc (supra), failed to advert its mind to the clear and unambiguous
provision above and held that the procedure for removal of a director in
Section 262 (1), (2) and (3) of CAMA is mandatory and that same applies to all
directors, both executive and non-executive notwithstanding anything contrary
in a contract of service between the company and the director. The sum total of
the reasoning of the Court of Appeal in that case, which ought to be the
preferred view, was that Mr. Bernard Longe being a managing director of the
First Bank Plc employed through a contract of service can be removed by the
bank in accordance with the said contract. Sadly, however, the Supreme Court
rejected the reasoning holding that the definition of directors in the CAMA
does not permit such distinction.
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Where a Director to be removed is
missing for seven (7) years or more
missing for seven (7) years or more
In a special circumstance, where a
director to be removed is missing, the procedure to be adopted depends on the
number of years for which the executive director has gone missing. Under
Nigerian law, a person who has gone missing may be presumed dead in accordance
with Section 164 (1) of the Evidence Act 2011 if he has been missing without
being heard of for seven (7) years by those, if any, who would naturally have
heard of him if he had been alive.
director to be removed is missing, the procedure to be adopted depends on the
number of years for which the executive director has gone missing. Under
Nigerian law, a person who has gone missing may be presumed dead in accordance
with Section 164 (1) of the Evidence Act 2011 if he has been missing without
being heard of for seven (7) years by those, if any, who would naturally have
heard of him if he had been alive.
Where a director has gone missing for
seven (7) or more years, the law presumes the executive director to be dead in
accordance with Section 164 (1) of the Evidence Act 2011 if he has been missing
without being heard of by those, if any, who would naturally have heard of him
if he had been alive. In the said circumstances, the removal of such missing
director is automatic by operation of law i.e. the CAMA. This can be inferred
from the provisions of Section 249 (1) of CAMA which provides that “The
board of directors shall have power to appoint new directors to fill any casual
vacancy arising out of death, resignation, retirement or removal.”
seven (7) or more years, the law presumes the executive director to be dead in
accordance with Section 164 (1) of the Evidence Act 2011 if he has been missing
without being heard of by those, if any, who would naturally have heard of him
if he had been alive. In the said circumstances, the removal of such missing
director is automatic by operation of law i.e. the CAMA. This can be inferred
from the provisions of Section 249 (1) of CAMA which provides that “The
board of directors shall have power to appoint new directors to fill any casual
vacancy arising out of death, resignation, retirement or removal.”
It is useful to mention that the onus
of proof of the fact that a missing director has been so missing for seven (7)
years or more lies squarely on the company which is acting through the board of
directors.
of proof of the fact that a missing director has been so missing for seven (7)
years or more lies squarely on the company which is acting through the board of
directors.
Where a Director to be removed is
missing for less than seven (7) years
missing for less than seven (7) years
In order to remove a director who has
gone missing for less than seven (7) years, the provisions of Section 262 (1),
(2) and (3) of CAMA provide for the procedure for removal. It is appreciated
however that a missing person may be difficult (or impossible) to be served
with a notice of a meeting as required by Section 262 (2) of CAMA. The
difficulty can be taken care of by resorting to provisions of Section 220 (1)
and (2) of CAMA which provides as follows:
gone missing for less than seven (7) years, the provisions of Section 262 (1),
(2) and (3) of CAMA provide for the procedure for removal. It is appreciated
however that a missing person may be difficult (or impossible) to be served
with a notice of a meeting as required by Section 262 (2) of CAMA. The
difficulty can be taken care of by resorting to provisions of Section 220 (1)
and (2) of CAMA which provides as follows:
“(1) A notice may be given by the
company to any member either personally or by sending it by post to him or to
his registered address, or (if he has no registered address within Nigeria) to
the address, if any, supplied by him to the company for the giving of notice to
him.
company to any member either personally or by sending it by post to him or to
his registered address, or (if he has no registered address within Nigeria) to
the address, if any, supplied by him to the company for the giving of notice to
him.
(2) Where a notice is sent by
post, service of the notice shall be deemed to be effected by properly
addressing, pre-paying, and posting a letter containing the notice, and to have
been effected in the case of a notice of a meeting at the expiration of seven
days after the letter containing the same is posted, and in any other case at
the time at which the letter would be delivered in the ordinary course of
post.”
post, service of the notice shall be deemed to be effected by properly
addressing, pre-paying, and posting a letter containing the notice, and to have
been effected in the case of a notice of a meeting at the expiration of seven
days after the letter containing the same is posted, and in any other case at
the time at which the letter would be delivered in the ordinary course of
post.”
Effect of Non-compliance with Removal
Procedure
Procedure
The office of a director is a statutory
office regulated by CAMA in terms of appointment, tenure of office and removal
procedure. It is trite law that where the employment contract of an employee is
regulated by statute, such contract is statutorily flavoured and the employee
enjoys a special status over and above an ordinary staff. In matters of
discipline or dismissal of the employee, the procedure laid down by law must be
strictly followed. Where removal does not follow the procedure, the employee is
entitled to be reinstated to the employment.
office regulated by CAMA in terms of appointment, tenure of office and removal
procedure. It is trite law that where the employment contract of an employee is
regulated by statute, such contract is statutorily flavoured and the employee
enjoys a special status over and above an ordinary staff. In matters of
discipline or dismissal of the employee, the procedure laid down by law must be
strictly followed. Where removal does not follow the procedure, the employee is
entitled to be reinstated to the employment.
It is however debatable if the
above-stated statutory protection of a director’s office can be extended to a
director or managing director whose appointment, powers, duties, remuneration
and tenure of office are regulated by his contract of service. It is debatable
because the combined reading of section 41 (3), section 262 (1) and (6) of CAMA
are to the effect that a director’s removal may be provided otherwise than in
CAMA. Therefore, where removal of a director complies with his contract (and
not the CAMA), the removal ought to be upheld. Any claim for reinstatement
ought to be refused. Unfortunately, the foregoing point was not raised in Longe
v. CBN thus, leading the Supreme Court to conclude absolutely that all
directors and managing/executive directors of a company can only be removed in
line with section 262 of CAMA and that failure to comply with section 262 of
CAMA nullifies the removal. That will be an issue for another day.
above-stated statutory protection of a director’s office can be extended to a
director or managing director whose appointment, powers, duties, remuneration
and tenure of office are regulated by his contract of service. It is debatable
because the combined reading of section 41 (3), section 262 (1) and (6) of CAMA
are to the effect that a director’s removal may be provided otherwise than in
CAMA. Therefore, where removal of a director complies with his contract (and
not the CAMA), the removal ought to be upheld. Any claim for reinstatement
ought to be refused. Unfortunately, the foregoing point was not raised in Longe
v. CBN thus, leading the Supreme Court to conclude absolutely that all
directors and managing/executive directors of a company can only be removed in
line with section 262 of CAMA and that failure to comply with section 262 of
CAMA nullifies the removal. That will be an issue for another day.
By; Kayode Omosehin