Companies and Allied Matters Act: Who can be a company director?

The Companies and Allied Matters Act, Cap. C20, Laws of the Federation of Nigeria 2004 (CAMA) has elaborate provisions regarding the administration of companies in Nigeria. A key player in the management of companies is a director. Interestingly, the CAMA has copious provisions on company directors. Nevertheless, it is not clear from the provisions of the CAMA the qualifications a person must possess to be appointed a director. Could this have been deliberate or it is a case of some oversight on the part of the makers of the statute? Are there lessons to be learnt from other jurisdictions on the matter? These questions are some of the issues we shall discuss in this article.

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Definition of director

Section 567 of CAMA defines a director as including any person occupying the position of a director by whatever name called. While this nebulous definition might have its advantages, and is consistent with other provisions of the statute, the definition does not address the fundamental question: who can be a director of a company under the CAMA?

Who may not be appointed as directors?

The issue of the qualification for directors of company appears to have been glossed over by the CAMA. This conclusion is predicated on the fact that no attempt was made at prescribing a qualification for directors of companies under the CAMA. The CAMA merely lists those persons who may not be appointed as directors. Accordingly, section 257 of the CAMA provides that the following persons are disqualified from being appointed as directors of companies; namely:

  • a director who fails to obtain his shareholding qualification within two months from the date of his appointment as director, where the Articles of Association of the company provides for shareholding qualification for directors
  • an infant (that is to say, a person below the age of 18 years)
  • a lunatic or a person of unsound mind
  • a person disqualified under sections 253 (insolvent persons), 254 *fraudulent persons) and 258 (vacation of office of a director) of the CAMA
  • a corporation other than its qualified representative appointed by its board for a definite period of time.

While section 257 is definite on those who are disqualified from being appointed as directors of companies, it is silent on the quality of those who should be appointed as directors. It may ridiculously be contended that from the provision of section 257, the positive qualities of directors may be gleaned. For example, a director must be an adult; he must be a sane person; a director must be a person who is financially buoyant; he must not have been convicted of an offence involving fraud; and must not have vacated the office.

In view of increasing awareness regarding directors’ liability and the prominent position corporate governance issues are occupy in modern times, there have been suggestions that there should be some minimum qualifications that directors must possess to be qualified to be appointed directors. It seems ridiculous and ironic that in a company where there exists some personnel specification (including academic qualifications) even for the lowest job in the organisation, there is no qualification prescribed for those who are the directing mind and hands of the company!

Lessons from other jurisdictions

In some jurisdictions, some bodies (notably, the Institute of Directors) have taken up the task by providing for chartered directors certification. This is the case in the United Kingdom and Australia. The Institute of Directors Nigeria under the present leadership has also muted such idea in Nigeria; but it does not seem to have taken off yet. In Pakistan, a more radical approach has been adopted. In section 35(xi) of the Code of Corporate Governance of Pakistan 2012 which is part of the Listing Regulations of the Stock Exchanges of the country it is provided that it shall be mandatory for all the directors of the listed companies to have certification under any directors’ training programme offered by institutions – local or foreign – that meet the criteria specified by the Securities and Exchange Commission of Pakistan; provided that from June 30, 2012 to June 30, 2016 every year, a minimum of one director on the board shall acquire the said certification under this programme each year and thereafter all directors shall obtain it.

It is important that those who run companies, particularly public and/or quoted companies, are adequately trained for the position of a director. Poor management of companies could occasion disastrous consequences for shareholders of the company. The adverse impact of such maladministration could affect other stakeholders of the company, such as creditors, customers, suppliers and even the government and the economy. It is about time that the directorship of companies, particularly public and/or quoted companies, is occupied by those who are really and truly qualified for such positions, who understand the enormous responsibilities which such directorship entails, and are willing and able to dutifully and diligently discharge such responsibilities.

Concluding remarks

The big question is: should such requirements be stipulated in the CAMA? That would not be advised, suggested or recommended for numerous good reasons. First, as is very well known amending the CAMA through the legislative process is truly a herculean task. Anything provided for in the CAMA is nearly almost cast in bronze as an amendment of such provision is nearly almost imaginary! Secondly, such practice does not seem to be best practice. The general practice is to have the statutory framework for company formation and administration to be silent on such matter. Thirdly, providing for such issues in corporate governance codes is advised in view of the relative ease with which corporate governance codes can be updated when the need arises. Besides, this approach has been practised elsewhere, as was mentioned earlier.

It is granted that it may be difficult to comprehensively itemise the qualifications of directors that would be generally applicable to all companies. This is particularly so in view of the changing requirements for company management and the need to balance numerous interests in the composition of the boards of companies. This situation has become even more pronounced on account of the striking difference in the nature, history, size and culture of companies. These have made board diversity a must-do for companies. In the course of satisfying the various interests, strict compliance with academic qualification for all directors may be unfeasible. Nevertheless, as a result of increasing awareness of investors, the increasing alertness of the regulators, and the increasing ease and affordability of modern communication gadgets greatly enhanced by advancement in technology, it is no longer business as usual in terms of the running of companies. That directors are to be knowledgeable cannot be underplayed. If no other lesson is learnt from the Centro case, that must be the only lesson learnt.

Next week, we shall appraise another provision of the CAMA regarding directors of companies. Meanwhile, should you have any comments on the issues raised in this article, kindly share them using 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.

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4 comments on “Companies and Allied Matters Act: Who can be a company director?
  1. babelahawt says:

    As stated in the CAMA, any person can be appointed a director of a company as long as he is not disqualified under section 257. It is however important to use discretion when appointing a director because the mere fact that the person is not disqualified by the Act does not entirely make him a reasonable person and a person who has the interest of the company at heart. There should also be no sentiments attached to the appointment of a director just because he is so qualified. Amending the Act to provide for qualifications is a vigorous task and will take a lot of time to be implemented. Before a director is appointed, there should be a background check on him.

    • azud says:

      The Nigerian situation is one which will employ or appoint an individual as a Director based on his powerful and important connections needed by the company, hence the open ended provision of who may be a Director sort of serve as an omnibus clause. That provision allows companies appoint anybody whom they company deem fit for their purposes and goals which could be either scholastic, professional or otherwise. It is my opinion therefore that as far as the Directors are able to deliver and keep smiles on the faces of the shareholders, there should be no problem because we cannot yet compare our society with the Westerners or Europeans, also our situation is way different from theirs; thus our approach to our challenges will also be different from theirs. I recommend that since the provision in CAMA is open-ended, the onus lies on the companies in their Articles of Association to make sure that the appointees are persons who can carry out the task needed.

    • linda says:

      Who is a company director?
      A company director is one who controls and direct a company in the interests of its owners (known as members). They also have particular responsibilities under the law and the company’s constitution. A company must have at least two directors. These act together on a board of directors.
      Who can be a company director?
      People do not need any particular qualifications or experience to be directors. Although the Act is silent on those qualified to be a company director, however there are provisions set out in section 257 of CAMA for disqualification of directors. It is assumed that if you are not disqualified, then you are qualified. The following are some exceptions that makes for disqualification:

      1. Company directors will often not work for the company in question or own shares in it.
      2. To protect the public, some people cannot be directors at certain times. These include bankrupts, persons whom a court has found guilty of fraud or serious misconduct may also be disqualifi from acting as directors for a certain period. If a person is found by a court to have acted dishonestly or irresponsibly in a company that failed to pay its debts, the court may restrict him from being a director. A restricted director can only act as a director in certain companies in which the members have invested a significant amount of money. Restrictions are normally for five years.

  2. halimat says:

    A director is a person duly appointed by a company to direct and manage the business of the company. Under the act it is a requirement that directors are appointed by shareholders of the company. The act is silent on who and what qualifications a person should possess before being appointed as a director. It only gives provision under section 257 (the classes of poeple that are disqualified from being a director). It gives the company a freewill to appoint whom they deem fit to carry out the duties of directing and managing the company. It is my opinion that trying to ammend CAMA to make a provision for persons who can be appointed company directors is a vigorous task and would take time; rather companies should provide in their articles of association classes of persons that can be appointed as a director.

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