Legal Procedures For The Removal And Appointment Of Company Directors Under The Nigerian Law

In Nigeria, the Companies and Allied Matters Act 2020 (CAMA) governs the appointment and removal of company directors.

Shareholders wishing to remove a director are to issue a special notice (28 days before the general meeting) of the resolution seeking to remove the concerned director, and or to appoint some other director in the stead of the director so to be removed.

In this article, we respond to some important questions on the legal procedures for the removal and appointment of company directors under the Nigerian law.

 

Under what circumstances can a director be removed in Nigeria?

A director in Nigeria can be removed under the following circumstances:

• By Ordinary Resolution: Shareholders can remove a director through an ordinary resolution passed at a general meeting, regardless of the director’s term of office.
• Breach of Duty: A director may be removed for failure to perform their duties, such as not attending meetings or violating fiduciary duties.
• Incapacity or Illness: If a director is incapacitated or mentally unfit to perform their duties.
• Bankruptcy: If the director becomes bankrupt or enters into a voluntary arrangement with creditors.
• Failure to Comply with Legal Requirements: Directors who fail to comply with Nigerian corporate laws, including those set out in the Companies and Allied Matters Act (CAMA), may face removal

 

What is the process for removing a director in Nigeria?

The process for removing a director in Nigeria generally involves

1. Notice of the Meeting: A notice must be given to the company and all shareholders that a resolution for the removal of the director will be proposed at a general meeting.
2. Passing a Resolution: An Ordinary resolution must be passed at the general meeting by a majority of shareholders, with a minimum of 51% voting in favour of removal.
3. Opportunity for Defense: The director facing removal must be given an opportunity to defend themselves at the meeting.
4. Filing with the Corporate Affairs Commission (CAC): Once the resolution is passed, the company must notify the Corporate Affairs Commission (CAC) of the director’s removal.

 

Can a director be removed without their consent in Nigeria?

Yes, a director can be removed without his or her consent in Nigeria, as long as the removal is done in accordance with the provisions of the Companies and Allied Matters Act (CAMA) and the company’s Articles of Association. The director’s consent is not required to pass a resolution for their removal, although they must be given the opportunity to present their case before the shareholders.

 

Are there any protections for directors against unfair removal in Nigeria?

Yes, there are some protections for directors against unfair removal:

• Right to be Heard: Directors must be given the opportunity to defend themselves at the general meeting before any decision is made.
• Appeals: If the director believes the removal is unjust, they can challenge the decision in court, especially if there are claims of misapplication of the law or violation of the company’s Articles of Association.
• Legal Framework: Removal must comply with both the company’s Articles of Association and the provisions of the Companies and Allied Matters Act (CAMA).

 

Can a director who has been removed claim severance benefits in Nigeria?

A removed director may be entitled to severance benefits only if it is stipulated in their contract of employment or in the company’s Articles of Association. In the absence of such terms, the director is typically not entitled to severance unless otherwise agreed or provided by law.

 

What happens to the director’s position after they are removed?

After a director is removed from office, the position becomes vacant, and the company may appoint a new director to replace the vacant position. The appointment of a new director must follow the company’s procedure, which may involve shareholder approval or board nomination, depending on the company’s Articles of Association.

 

Is the process for the removal of a director from a private company different from a public company in Nigeria?

The basic process for removing a director is similar in both private and public companies, but there may be additional procedural requirements for public companies, such as compliance with the rules set by the Nigerian Stock Exchange (NSE) and disclosure requirements. Public companies may also face more scrutiny and regulations related to the removal of directors.

 

Can a director be removed for personal reasons, like conflict with shareholders, in Nigeria?

A director can be removed for personal reasons, including conflicts with shareholders, but such conflicts must be handled within the framework of the company’s governance structure and CAMA. Personal conflicts alone may not be sufficient for removal unless they affect the director’s ability to fulfil their duties or violate their legal obligations to the company.

 

Can a director who is also a shareholder be removed from their position as a director in Nigeria?

Yes, a director who is also a shareholder can be removed from their position as a director. The process for removing a director is governed by the Companies and Allied Matters Act (CAMA), which allows shareholders to pass a resolution to remove a director regardless of their status as a shareholder.

 

Can the director who is also a shareholder be removed from their position as a shareholder in Nigeria?

No, the director cannot be removed from their position as a shareholder simply because they have been removed from their position as a director. Shareholders are owners of the company, and their ownership is not contingent on their role as a director. Removing a shareholder would require a separate process, such as selling or transferring their shares or invoking a clause in the company’s Articles of Association (if any) that allows for the forfeiture or compulsory sale of shares under certain conditions.

Note: The content of this article is anticipated to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstance.

 

By Ayoola Hassan for Adeola Oyinlade & Co.

 

Adeola Oyinlade & Co. is a leading full-service law firm in Nigeria offering legal support to both local and foreign clients in the area of family law.

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