Removal of a company director under Nigerian law

In both civil and common law jurisdictions, the concepts of separate legal personality and tenure of the individuals appointed to manage the affairs of a company have remained the subject of intense academic and judicial discourse.

While the artificial corporate personality may endure for a considerable length of time from formation to winding-up/liquidation, the tenure of the natural persons (particularly directors) appointed to manage the company’s affairs are usually specific.

Qualification and duties of directors

A celebrated English case Salomon v Salomon & Co broke the ground in company law with respect to the recognition of a company as separate and distinct from its promoter (s), shareholders and directors.  In strict legal parlance, a company is a ‘separate legal person’;  it can sue and be sued and can also hold land. It also relies on natural persons to control and or direct its affairs.  Under the Companies and Allied Matters Act (CAMA), every company must have at least, two directors.

The law imposes several duties on directors. This includes the duty to act within their powers and in the best interest of the company

Removal of Directors

Generally, a director may be removed at any time, notwithstanding anything in the company’s Articles or agreement, contract of employment or Conditions of Service. This can be done by an ordinary resolution with special notice (21 days). The director must however, be notified and given the right to be heard on the resolution at the meeting.

In Iwuchukwu v Nwizu (1994) 7 NWLR Pt. 357 P. 379,  the appellant, was employed as a Special Assistant to the Managing Director. Later that year, he was appointed to the Board of Directors with additional entitlements. The letter of appointment stated that “The Company in its best interest reserves the right, at all times, to determine the continuity of the directorship of any member of the board”.

He was subsequently appointed as an Executive Director and in the following year appointed as a director of a subsidiary of the company. A paragraph in the formal letter of re-assignment stated:

“As a result of this reassignment, your executive directorship and Board Membership in Dave Engineering Co. Limited are hereby terminated …”

No meeting was held, and no ordinary resolution was passed. Matters deteriorated between the parties and culminated in a letter terminating the Appellant’s employment with the original company. The Appellant commenced an action challenging the validity of his removal as executive director and sought an order mandating the restoration of the entitlements due to him as a (executive) director.

The trial court upheld the claim, that his removal did not follow the procedure set out in Section  175 of the Companies Decree 1968. On appeal, the Court of Appeal upheld the Respondents appeal. The Supreme Court, however, reversed this decision and held that while the appointment of the Appellant as a Special Assistant could be lawfully terminated in the manner stated in his contract of employment, same cannot extend to his appointment as a director and held that removal from office of a director is governed by a procedure and the Respondents were unable to substantiate that a special meeting was held as there was no proof that a notice of the meeting was issued and served on the Appellant.

See also Omenka v Morison Industries Plc where the Lagos High Court reached a similar decision. In Longe v First Bank Plc (2010) 6 NWLR Pt. 1189 P. 1 the Respondent (First Bank) contended that the director was validly removed because  he had already been suspended. Oguntade JSC speaking for the majority, held as follows:

“The  removal of the plaintiff as Managing Director/Chief Executive of the defendant without a notice to him to attend the meeting at which the decision was taken is a clear violation of Section 266 (1) and (2) of the Companies and Allied Matters Act; … I declare that the removal of the plaintiff is not in accordance with law. The plaintiff must be deemed to be still the Managing Director/Chief Executive of the defendant.”

In the decision of the Court of Appeal in Cadbury Nigeria Plc v Oni (2012) LPELR – 19821 (CA), Mr. Oni was at the material time the Managing Director and CEO of Cadbury Nigeria Plc (‘Cadbury’). By a letter of December 11, 2006,  Mr. Oni was summarily dismissed on account of a judgment exercised by the management of the company in the face of a design and production crisis which challenged the company between 2002 and 2003.

Mr. Oni challenged his dismissal. According to him, no valid meeting of the Directors of Cadbury was held at which the decision contained in the letter referred to above was taken and he did not receive notice of the relevant Board Meeting.

He sought several reliefs, including that his dismissal be declared as wrongful, unlawful and a repudiatory breach of his contract of employment. The learned trial judge (Phillips J. later CJ) granted the relief. Cadbury appealed the decision.

The Court of Appeal held that Cadbury was in breach of its Articles of Association with respect to removal of directors, the contents of which are impari materia with the provisions of S. 262 of CAMA.

The Court held further that it is not the requirement of the law that such director about to be removed must be present at the meeting as he may receive the notice and refuse to show up at the meeting. What the law punishes is the failure to give such notice.

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