Introduction
From our understanding as company secretary of various companies in Nigeria, the meetings, proceedings and decision-making process of directors are largely in accordance with the provisions of their company’s articles of association. This means that business men in Nigeria have a chance to decide how they wish to govern their business affairs.
However, where no such provision is made in the company’s articles of association, a resort must be had to Sections 289, 290, 291 and 292 of CAMA which provide for the regulation of directors’ meetings and proceedings.
Please note that the directors of a company may act as a board or through committees, set up by the board.
1. When must the first board meeting hold?
Please note that the first meeting of directors must be held within six (6) months after the incorporation of company. Thereafter, a director may (and the company secretary, on the requisition of a director, shall) at any time summon a meeting of the directors.
The directors may meet together physically or virtually for the dispatch of the company’s business, adjourn their meetings and regulate their meetings as they deem fit.
2. Who is entitled to receive a notice of directors’ meetings and how is it served?
In accordance with Section 292 of CAMA, every director is entitled to receive notice of all board meetings unless he is disqualified from continuing in the office of a director by any of the reasons provided in CAMA.
A notice of board meeting shall be in writing, not less than fourteen (14) days and served by the company secretary on all directors unless any director that has travelled overseas.
Please note that if a director overseas has given an address in Nigeria, the notice of board meeting shall be sent to such address. The foregoing may also include service of notice by email address.
3. How to elect the board chairman?
At the board meeting, the directors may elect a chairman of their meetings and determine the period for which he is to hold office as chairman.
However, where no such chairman is elected (or if any board meeting the elected chairman is not present within 15 minutes after the time scheduled for a board meeting), the directors present may choose one of them to be chairman of the meeting.
4. Who presides when elected chairman arrives after appointment of adhoc chairman?
The law is silent on what happens if the elected chairman arrives while the meeting is ongoing and presided over by the adhoc chairman. But from the wording of Section 289 (4) of CAMA, it is our view that the adhoc chairman should continue the directors’ proceedings, notwithstanding the presence of the elected chairman, unless the directors otherwise decide.
Where a question of removal or discipline against the elected chairman is to be decided at the proceedings of a board of directors, it is proper for the elected chairman to recuse himself and allow an adhoc chairman to preside.
5. What is the quorum of directors’ meeting?
Unless a company’s articles of association provide otherwise, the quorum for directors’ meeting is minimum of two (2) directors, where there are not more than six (6) directors.
But where there are more than six (6) directors, the quorum is one-third of the number of directors, and when the number is not a multiple of three (3), then the quorum is one-third to the nearest number.
Where the board is unable to act because a quorum cannot be formed, then, the shareholders at a general meeting may act in place of the board.
6. What is the quorum and mode of appoint the chairman of the meetings of board committees?
The quorum of a committee meeting shall be fixed by the board of directors. But where the board fails to fix the quorum, then, the whole committee shall meet and act by a majority.
What the foregoing means is that the entire membership of a committee constitutes its quorum whilst committee decisions are by a simple majority.
A committee may at its first meeting elect its chairman who proceed on all committee meetings. However, if the elected chairman is absent at a scheduled meeting for five (5) minutes after the time appointed for the meeting, the members present shall elect one of them to preside over the meeting.
All decisions of the committee presumed to be properly made. Where a committee is unable to act because a quorum cannot be formed, the board may act in place of the committee.
7. How does a board of directors or a board committee take its decisions?
The decisions of directors or board committees are made by voting (i.e. a simple majority votes) unless otherwise provided in the company’s articles of association (in the case of the board of directors) or by the board of directors (in the case of the board committees).
However, where there is equality of votes between the two sides, then, the board chairman or committee chairman (as the case may be) has a second or casting vote. Whichever side in whose favour the chairman votes prevails as the majority votes of the meeting.
8. What are the essential matters to consider at the first board meeting?
The inaugural board meeting is an essential meeting and, as such, should be properly guided by the company secretary. The following are the key matters which should be in the agenda for a first directors’ meeting:
i. Inauguration of the board with the appointment of the chairman, appointment of the managing director or group managing director (if it is a group company), appointment of additional directors, appointment of the company secretary, the chief executive officer (CEO) other and key management officers.
ii. Appointment of external auditor for the company. It is advisable that two or more auditing firms should have been contacted and invited to make presentation to the board. The interview of the external auditor to be appointed may be delegated to the relevant board committee.
iii. Determination of the financial year of the company. Section 377(4) of CAMA provides that “The directors shall, at their first meeting after incorporation of the company, determine what date in each year financial statements is made up, and they shall give notice of the date to the Commission within 14 days of the determination”. Also, Subsection (5) of Section 377 (5) of CAMA provides that “In the case of a holding company, the directors shall ensure that, except where in their opinion there are good reasons against it, the year of each subsidiaries shall coincide with the year of the company.“
iv. Consideration of the board’s duties and responsibilities;
v. Review and adoption of internal processes of the company. These processes include the Staff Policy, the ABC Policy, the HSE policy, etc.
vi. Determination of the company’s bankers, bank accounts and signatories.
vii. Consideration of the Management Report.
viii. Any other business (AOB).
9. Can directors delegate their powers?
Yes. The directors may delegate any of their powers to a managing director of the company or to committees consisting of such member or members of the board as the directors may deem fit.
The managing director or committee(s) so formed must, in the exercise of the delegated powers, conform to any regulations that may be made by the directors.
The Board may delegate any of its powers to its committees, except that it should not delegate the powers to fill Board vacancies, remove a director, change the membership or fill vacancies in a Board Committee, or remove or appoint officers who are appointed by the Board.
Please note that the delegation of powers does not excuse the directors from personal liability for any act or omission made on behalf of the directors by the managing director or the committee(s).
10. What are the essential board committees that a board of directors ought to have?
In order to ensure proper corporate governance, a board of directors must have the following board committees, to assist the board and perform delegated powers:
i. The Audit Committee, which should be composed of chartered accountants, auditors, tax professionals and lawyers;
ii. The Compensation, Nominating and Governance Committee, which should have Human Resources professionals, lawyers, accountants, amongst its key members. This committee determines and recommend to the board the salaries, allowances other benefits as well determine staff employment conditions and general welfare.
iii. The Health, Safety and Environmental (HSE) Committee;
iv. The Anti-Bribery & Corruption (ABC) Committee; and
v. The Corporate Social Responsibility (or “CSR”) Committee. This is not mandatory but it is recommended.
The Board may, from time to time, establish or maintain additional committees or subcommittees as it deems necessary.
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Koriat & Co. is a full-service law firm in Lagos and Abuja advising and assisting corporate and individual clients on company incorporation, regulatory licences and regulatory compliance. We also provide company secretarial services to our corporate clients across Nigeria.
The above information is not intended as legal advice for any particular reader. If you have any questions, please contact us via admin@koriatlaw.com or 09067842241.
