Companies and Allied Matters Act: Making a case for a one-man board

The number of directors that a company should have is statutorily provided for in company law statutes. In the case of Nigeria, the Companies and Allied Matters Act, Cap C20, Laws of the Federation of Nigeria 2004 (CAMA) is explicit on the issue. Additionally, the codes of corporate governance applicable in Nigeria have provisions for such matters in respect of companies operating within their areas of coverage. In this article, our focus is on the stipulation of the CAMA regarding the minimum number of directors a private company should have. The propriety of stipulating a minimum number of directors for all companies in Nigeria is appraised and a recommendation made for the amendment of the CAMA by providing for a different minimum number of directors for private companies.


[Click on each button below to reveal more text!]

Statutory provisions on the minimum number of directors

Section 246(1) of the CAMA emphatically provides that every company registered on or after the commencement of the CAMA shall have at least two directors. To underscore the importance attached to companies having the minimum number of directors on their boards, section 246(2) of the CAMA further provides that that any company whose number of directors falls below two, must within one month of the minimum number of members falling below two members appoint new directors; also, such a company must not carry on business after the expiration of the one month, unless such new directors have been appointed. In addition, by virtue of section 246(3) of the CAMA, 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.

Thus, it is imperative that every company operating in Nigeria has at least the minimum number of directors statutorily provided for by the CAMA. It is recognised that the Articles of Association of a company may prescribed a minimum number of directors that a company may have; this can be higher than the statutory minimum, but certainly not lower. The situation is the same where codes of corporate governance prescribe a minimum number of directors.

The compelling case for a one-man board

It is evident from the provision of section 246(1) of the CAMA that there is no distinction between a private company and a public company as far as the minimum number of directors is concerned. The question that agitates the mind is whether such a provision is fair given the fact that generally most private companies are usually small family or one-man companies. It is contended that lumping private companies and public companies together in the prescription of the minimum number of directors for companies in Nigeria amounts to a refusal to face reality. In the first place, the complexity and scope of operation of private and public companies are generally not the same. For which reason, the prescribed minimum might be inappropriate for public companies.

Secondly, the stipulation of a minimum number of two directors for private companies has resulted in the common practice of people subscribing their names as directors of private companies when so requested to do so by the promoter of such companies without actually functioning as a director in such companies. A typical example is where a man gets his wife to subscribe as the second director of the company; a company she would not have anything to do with other than her involvement during the incorporation period.

Thirdly, it is obvious that financial institutions are more comfortable granting facilities to registered companies for several of the benefits incorporation confers on such entities: corporate personality, etc. In a country where cottage industries and SMEs are being encouraged to set up shops, the statutory requirement for a minimum of two directors for private companies is antithetical to such initiatives.

Fourthly, permitting a one-man board for private companies allows a promoter to run his show without unduly exposing his family to grave dangers which could result where the wife is a coerced director of his private company and never involved in the running and management of the company.

Fifthly, one-man board is not a strange practice in contemporary company law.

One-man board is not a novel practice

Private companies incorporated with a one-man board are not a very recent practice. There are examples in the industrialised economies where this practice has been on for a very long time. Typical examples are the United Kingdom and Australia.

Consequently, it is imperative that the CAMA is amended to permit one-man boards for private companies. This will occasion a different statutory minimum number of directors for private and public companies. If the much needed economic advancement desired for Nigeria is to be pursued, this is an amendment whose time has since come. It is, therefore, recommended that the CAMA be amended to provide for one-man board of directors for private companies as this will facilitate industry and creativity among other worthy benefits.

Next week, we shall consider another provision of the CAMA which deserves to be reviewed. Meanwhile, should you have any comments on this discussion on one-man board of director for private companies, kindly share them in the comments area of this post below. If you are already a registered user, you will be required to log in to comment on this post; otherwise, you will have to register before posting your comment. Registration is simple and FREE.


Posted in Law Tagged with: , , , ,
5 comments on “Companies and Allied Matters Act: Making a case for a one-man board
  1. Mayowa Awosika says:

    I agree that there is a need for a break from the one size fits all legislation on companies in Nigeria (CAMA).However it might not be totally foolproof for the issue of one man board to be considered along the line of private and public companies.
    Agreed most private companies in Nigeria are one man businesses and family companies, but that does not mean a one man board would be adequate for them. A step in that direction is as good as saying forget about corporate governance and that would be a grave mistake because it has been alleged that most family businesses and private companies that collapsed in Nigeria did so as a result of poor corporate governance.
    I would suggest that an amendment be considered along the line of the size of a company.Dividing companies into small and large ones might be a starting point. The reason for this position is that there are at the moment some private companies in Nigeria that could be regarded as big and medium in terms of turnover, capital base and staff strength. Any private company of this strength would need a strong,diligent, diverse and independent board. However, with an amendment based on private and public company, such company would fall prey to poor corporate governance practices. Drawing from recent experience with regards to the number of independent directors on the board of directors, if given the opportunity to have just a director, most companies in that category would gladly opt for it notwithstanding the inherent dangers. That would not be good news!!!
    At the moment, CAMA neither defines what a small company nor a large company is; it merely states under section 351 that A company qualifies as a small company in a year if for that year the following conditions are satisfied -(a) it is a private company having a share capital;(b) the amount of its turnover for that year is not more than 2 million or such amount as may be fixed by the Commission;(c) its net assets value is not more than 1 million or such amount as may be fixed by the Commission;(d) none of its members is an alien;(e) none of its members is a Government or a Government corporation or agency or its nominee, and(f) the directors between them hold not less than 51 per cent of its equity share capital.
    Section 351 does not portray a true representation of what could be regarded as the features of a small company in Nigeria especially with regards to the annual turnover. But if there would be a break from the one size fits all Statutory provisions on directors generally, it is important that features of a small company and that of a large one be set out and made to reflect the present economic situation in Nigeria. Afterwards the minimum number of directors required for companies tagged as small can be stated and the minimum for large can also be stated.

    It is important to note that going by the present provision of CAMA on the features of a private company in Nigeria, private companies in Nigeria can in reality be divided into three types; private-small, private-medium and private-large. As such, an amendment in terms of private and public company would only cater for the private- small and leave the two remaining categories in the limbo.

  2. Omofagsec1990 says:

    Where a man gets his wife to subscribe as the second Director of a company, unless he engages in unethical conduct, her involvement cannot be limited to the incorporation period. Annual returns need to be filed subsequent to the approval of the relevant Audited Accounts by the members in General Meeting. The Balance Sheet must be signed by two Directors. Also all major statutory changes such as a change of name and the alteration of the Memorandum and Articles of Association need to be backed by members’ resolutions. These issues must therefore come to the attention of a spouse, if due process is to be observed.
    On the issue of a one-man Board, I feel it negates the principle of perpetuity. If the single Director dies, the company may cease to exist as there will be no one to convene a Meeting of the Board of the enterprise. There may be other shareholders, but if the management of the company is left solely in the hands of one individual, collective wisdom could be sacrificed. A crisis situation in which the other or other shareholders would hurriedly have to convene, to compose another Board in the event of the demise of a sole Director appears undesirable. This is particularly so from the point of view of creditor-confidence. Finally, allowance must be made for the fact that Nigeria is a developing country. It therefore does not boast of as efficient a regulatory system as the United Kingdom or Australia.

  3. Lynda Onefeli says:

    I agree that it has long become necessary to amend the CAMA, not just in relation to the topic in question, but in relation to a host of other provisions.

    Though the one man board is desireable, I align with the earlier commentator and state that in the case of the one man board, a one size fits all approach should not be taken with regard to private companies, but that the said private companies should be identified along the lines of ‘small’ and ‘large’ private companies and same should be properly defined by the CAMA based on their share capital and turnover.

    Being that the governance needs of small companies are not as much as those of the large ones and there are not as much formalities as in the larger ones, they can be effectively run by 1 director unlike the larger companies to which the knowledge and expertise of multiple directors will definitely be relevant for more effective corporate governance.

  4. Nat OFO says:

    The Isle of Man Treasury has published for consultation a draft Companies Bill 2013. Interestingly, one of the proposals in the draft Companies Bill 2013 is that the “minimum number of directors for private companies is now one. Public companies must still have two directors appointed.” Is the one-man board for private company the current trend? I guess, it just a matter of time and we’ll find out!

  5. Ade87 says:

    Two heads are better than one! That is why the duty of a tresurer is different from that of a financial secretary. So, why would one man want to be the only director of a public or private company? Since no man is an Island, I do not think the provision of the CAMA needs a reform on that because it is unnecessary and not transparent to enact such laws.

Leave a Reply