Aug 8, 2015

Dismissal of a director who has gone missing by Kayode Omosehin

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Preliminary View
The statutory removal of a director generally is governed by the provision of section 262 of the Companies and Allied Matters Act, Cap C20 LFN 2004 (“CAMA”). In the case of Longe v FBN Plc (2010) 6 NWLR (Pt 1189) SC 1, the Supreme Court held that the provision of section 262 of CAMA also applies to removal of executive and non-executive director alike. However, it appears that different consideration should apply where a director sought to be removed has disappeared or gone missing. Let us consider some of the issues that may play out in the course of removing a director who is missing.

Statutory Procedure for Removing Directors
The procedure in section 262 of CAMA to be adopted in removing an executive director is summarized as follows:

1.     A Special notice of the meeting to remove a director must be issued to all plenary members of the board of directors and a copy of the notice must be served on the director. A special notice according to section 236 of CAMA is a notice of twenty-eight (28) days given before a meeting holds. The notice shall specify the place, date and time of the meeting, and the general nature of the business to be transacted at the meeting (i.e. removal of the director) in sufficient details to enable those to whom it is given decide whether to attend or not. The director (whether or not he is a member of the company) shall be entitled to be heard on the resolution at the meeting. See Section 262 (2) of CAMA. 

1.     Where the special notice mentioned above is given and the director concerned makes a representations in writing to the company in respect of the special notice (not exceeding a reasonable length) and requests their circulation to members of the company, the company shall, unless the representations are received by it too late for it to do so-
 (a) state the fact of the representations having been made by the director in any notice of the resolution issued to members of the company; and
 (b) Send a copy of the representations to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representations by the company); See section 262 (3) CAMA
 (c) If a copy of the representations is not sent out to board members either because it is received too late or because of the company's default, the executive director to be removed may (without prejudice to his right to be heard orally) request that the representations shall be read out at the meeting.
 (d) However, the copies of the representations need not be sent out and the representations need not be read out at the meeting if,
  • on the application either of the company or
  • any other person who claims to be aggrieved,
the court is satisfied that the rights to make representation are being abused to secure needless publicity for defamatory matter and the court may order the company's costs on an application under section 262 to be paid in whole or in part by the director, notwithstanding that he is not a party to the application.

The above means that representations of the director to be removed may not be circulated to plenary members or read at the meeting. However,  in order to prevent the circulation of the director’s representations to board members or from being read at the meeting where the executive director is to be removed, a prior order of court must be obtained by either the company or any other interested person. 

1.     Where the board of directors is of the view that the allegation against the executive director concerned is proved, the board shall pass a simple resolution to remove him. Where there is no proof of the allegations, the procedure ends here. The director should be allowed to continue with his duties. 

1.     The resolution by which the director is removed shall be filed with CAC within fifteen (15) days and where a new director is appointed to fill the vacancy, a CAC Form 7 (Change of Directors and Particulars of Directors) must be filled and filed with CAC. All the correspondence materials of the company should then be corrected to reflect the new changes.

Can the Company Remove a Director by any other means?
Section 262 (6) of CAMA appears to permit a company to deviate from the procedure discussed above in removing a director where a different mode of removal is provided in a binding agreement between the company and the director (e.g. Contract of Service) or where the Articles of Association provides that the company can remove the executive director in any other manner. Section 262 (6) of CAMA provides as follows:

 “Nothing in this section shall be taken as depriving a person removed under it of compensation or damages payable to him in respect of the termination of his appointment as a director or of any appointment terminating with that as director, or as derogating from any power to remove a director which may exist apart from this section.”

 However, the Supreme Court in Longe v. FBN Plc (supra), failed to advert its mind to the clear and unambiguous provision above and held that the procedure for removal of a director in Section 262 (1), (2) and (3) of CAMA is mandatory and that same applies to all directors, both executive and non-executive notwithstanding anything contrary in a contract of service between the company and the director. The sum total of the reasoning of the Court of Appeal in that case, which ought to be the preferred view, was that Mr. Bernard Longe being a managing director of the First Bank Plc employed through a contract of service can be removed by the bank in accordance with the said contract. Sadly, however, the Supreme Court rejected the reasoning holding that the definition of directors in the CAMA does not permit such distinction.
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Where a Director to be removed is missing for seven (7) years or more
In a special circumstance, where a director to be removed is missing, the procedure to be adopted depends on the number of years for which the executive director has gone missing. Under Nigerian law, a person who has gone missing may be presumed dead in accordance with Section 164 (1) of the Evidence Act 2011 if he has been missing without being heard of for seven (7) years by those, if any, who would naturally have heard of him if he had been alive.
Where a director has gone missing for seven (7) or more years, the law presumes the executive director to be dead in accordance with Section 164 (1) of the Evidence Act 2011 if he has been missing without being heard of by those, if any, who would naturally have heard of him if he had been alive. In the said circumstances, the removal of such missing director is automatic by operation of law i.e. the CAMA. This can be inferred from the provisions of Section 249 (1) of CAMA which provides that “The board of directors shall have power to appoint new directors to fill any casual vacancy arising out of death, resignation, retirement or removal.”

It is useful to mention that the onus of proof of the fact that a missing director has been so missing for seven (7) years or more lies squarely on the company which is acting through the board of directors.

Where a Director to be removed is missing for less than seven (7) years
In order to remove a director who has gone missing for less than seven (7) years, the provisions of Section 262 (1), (2) and (3) of CAMA provide for the procedure for removal. It is appreciated however that a missing person may be difficult (or impossible) to be served with a notice of a meeting as required by Section 262 (2) of CAMA. The difficulty can be taken care of by resorting to provisions of Section 220 (1) and (2) of CAMA which provides as follows:

 “(1) A notice may be given by the company to any member either personally or by sending it by post to him or to his registered address, or (if he has no registered address within Nigeria) to the address, if any, supplied by him to the company for the giving of notice to him.
 (2) Where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, pre-paying, and posting a letter containing the notice, and to have been effected in the case of a notice of a meeting at the expiration of seven days after the letter containing the same is posted, and in any other case at the time at which the letter would be delivered in the ordinary course of post.”

Effect of Non-compliance with Removal Procedure
The office of a director is a statutory office regulated by CAMA in terms of appointment, tenure of office and removal procedure. It is trite law that where the employment contract of an employee is regulated by statute, such contract is statutorily flavoured and the employee enjoys a special status over and above an ordinary staff. In matters of discipline or dismissal of the employee, the procedure laid down by law must be strictly followed. Where removal does not follow the procedure, the employee is entitled to be reinstated to the employment.

It is however debatable if the above-stated statutory protection of a director’s office can be extended to a director or managing director whose appointment, powers, duties, remuneration and tenure of office are regulated by his contract of service. It is debatable because the combined reading of section 41 (3), section 262 (1) and (6) of CAMA are to the effect that a director’s removal may be provided otherwise than in CAMA. Therefore, where removal of a director complies with his contract (and not the CAMA), the removal ought to be upheld. Any claim for reinstatement ought to be refused. Unfortunately, the foregoing point was not raised in Longe v. CBN thus, leading the Supreme Court to conclude absolutely that all directors and managing/executive directors of a company can only be removed in line with section 262 of CAMA and that failure to comply with section 262 of CAMA nullifies the removal. That will be an issue for another day.

 By; Kayode Omosehin