Proceedings of Directors are regulated by the Companies and Allied Matters Act (CAMA) 2020 through its provisions which along with its provisions on the topic of directors’ remunerations constitute the focus of this article.
Main Provisions of CAMA 2020 on Directors’ Proceedings
– The act provides that a Company’s directors may meet together for the dispatch of business,adjourn and otherwise regulate their meetings as they think fit, and the first meeting of the directors shall be held not later than six months after the incorporation of the company.
– Unless the articles provide otherwise, any question arising at any meeting is decided by a simple majority of votes, and in case of an equality of votes, the chairman has a second or casting vote.
– A director may, and the secretary on the requisition of a director shall, at any time summon a meeting of the directors.
– The directors may elect a chairman of their meetings and determine the period for which he is to hold office, but if no such chairman is elected or if at any meeting the chairman is not present within five minutes after the time appointed for holding same, the directors present may choose one of them to be chairman of the meeting.
-The directors may delegate any of their powers to a managing director or to committees consisting of such member or members of their body as they think fit and the managing director or any committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may be made by the directors.
– A committee may elect a chairman of its meeting, and if no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the same, the members present may choose one of them to be chairman of the meeting.
-A committee may meet and adjourn as it deems proper, and any question arising is determined by a majority of votes of the members present,and in the case of equality of votes the chairman has a second or casting vote.
– A resolution in writing, signed by all the directors for the time being entitled to receive notice of a meeting of the directors, is 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 is entitled to one vote.
Quorum
– Unless the articles provide otherwise, the quorum necessary for the transaction of the business of directors are two where there are not more than six directors, but where there are more than six directors, the quorum is one-third of the number of directors, and where the number of directors is not a multiple of three, then the quorum is one third to the nearest number.
– Where a committee of directors is appointed by the board of directors, the board shall fix its quorum, but where no quorum is fixed, the whole committee shall meet and act by a majority.
Failure to have a Quorum
– Where the board is unable to act because a quorum cannot be formed, the general meeting may act in place of the board and where a committee is unable to act because a quorum cannot be formed, the board mayact in place of the committee.
Notice of Meeting
-Every director is entitled to receive notice of the directors’ meetings, unless he is disqualified by any reason under the Act from continuing with the office of director.
– There shall be given 14 days’ notice in writing to all directors entitled to receive notice unless provided in the articles.
– Failure to give notice in accordance with the preceding paragraph above invalidates the meeting.
– Unless the articles provide otherwise, it is not necessary to give notice of a meeting of directors to any director absent from Nigeria, but if he has given an address in Nigeria, the notice shall be sent to such an address.
Remuneration of Directors
– The act provides remuneration of the directors is determined by the company in general meeting and such remuneration is deemed to accrue from day-to-day.
– The directors may also be paid travelling, hotel and other expenses properly incurred by them in attending and returning from meetings of the directors, committee of the directors, general meetings of the company or in connection with the business of the company.
– Where remuneration has been fixed by the articles, it is alterable only by a special resolution.
– A company is not bound to pay remuneration to directors, but where the company agrees to pay, the directors shall be paid such remuneration out of the fund of the company.
-The amount of remuneration is a debt from the company so that if directors take office on the basis of the articles, they shall be able to sue the company on account of the debt or prove it in liquidation.
– A director who receives more money than he is entitled to, is guilty of misfeasance and is accountable to the company for such money.
– The remunerations of directors is apportionable.
Remuneration of a Managing Director
– A managing director receives such remuneration (whether by way of salary, commission, participation in profits, or partly in one way and in another) as the directors may determine.
– Where a managing director is removed for any reason under section 288 of CAMA 2023, he may claim for breach of contract if there is any or where a contract could be inferred from the terms of the articles.
-Where he performs some services without a contract, he is entitled to payment on a quantum merit (pro-rated/partial) basis.
Prohibition of Tax-free Payments to Directors
-It is not lawful for a company to pay a director remuneration (whether as director or otherwise) free of income tax, or calculated by reference to or varying with the amount of his income tax, or at or with the rate or standard rate of income tax, except under a contract which was in effect at the commencement of this Act, and provides expressly, and not by reference to the articles, for payment or remuneration.
– Any provision contained in a company’s articles or in any contract other than such a contract as mentioned in subsection (1), or in any resolution of a company or of a company’s directors for payment to a director of remuneration as mentioned in subsection (1), shall have effect as if it provided for payment, as a gross sum subject to income tax, of the net sum for which it actually provides.
-This provision does not apply to remuneration due before this Act comes into effect or in respect of a period before it comes into effectm
Prohibition of Loans to Directors in certain circumstances
– Under CAMA 2020, It is not lawful for a company to make a loan to any person who is its director or a director of its holding company, or to enter into any guarantee or provide any security in connection with a loan made to such a person as earlier mentioned by any other person :
Provided that nothing in this section applies:
(a) subject to the provision above, to anything done to provide any such person as mentioned in this subsection with funds to meet expenditure incurred or to be incurred by him for the purposes of the company or for the purpose of enabling him to properly discharge his duties as an officer of the company ; or
(b) in the case of a company whose ordinary business includes the lending of money or the giving of guarantees in connection with loans made by other persons, to anything done by the company in the ordinary course of that business.
– This provision does not authorise the making of any loan, or the entering into any guarantee, or the provision of any security except-
(a) with the prior approval of the company given at a general meeting at which the purposes of the expenditure, the amount of the loan or the extent of the guarantee or security, are disclosed ; or
(b) on condition that, if the approval of the company is not given at or before the next annual general meeting, the loan shall be repaid or the liability under the guarantee or security shall be discharged, within six months from the conclusion of that meeting.
– Where the approval of the company is not given as required by any such condition, the directors authorising the making of the loan, the entering into the guarantee or the provision of the security, are jointly and severally liable to indemnify the company against any loss arising from it.
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