Roles of the Organs and Officers of an Incorporated Company

TABLE OF CONTENTS

TABLE OF CASES

TABLE OF STATUTES

Part III of 5th Schedule

TABLE OF ABBREVIATIONS

ABSTRACT

CHAPTER ONE INTRODUCTION
1.1 CONCEPTUAL BACKGROUND OF COMPANY’S ORGANS AND OFFICERS
1.2 LEGAL PERSONALITY OF A COMPANY
1.3 EFFECTS OF INCORPORATION OF A COMPANY
1.4 COMPANY’S FUNCTIONS AS A LEGAL PERSON

CHAPTER TWO ORGANS OF AN INCORPORATED COMPANY
2.1 THE GENERAL MEETING (SHAREHOLDERS): THE ROLES
2.2 BOARD OF DIRECTORS
2.3 COMMON LAW POSITION ON DIRECTORS ROLES
2.4 MODERN CONCEPTUALIZATIONS OF DIRECTORS ROLES
2.5 BOARD OF DIRECTORS: THE ROLES

CHAPTER THREE THE OFFICERS OF AN INCORPORATED COMPANY
3.1 The Managing Director
3.2 The Company Secretary
3.3 The Auditor
3.4 The Legal Practitioner

CHAPTER FOUR THE RELATIONSHIP BETWEEN THE ORGANS AND OFFICERS IN THE CORPORATE GOVERNANCE OF THE COMPANY
4.1 Corporate Governance
4.2 Residual Powers And Functions In The Company’s Corporate Governance
4.3 Checks and Balances Roles In Corporate Governance
4.4 Interdependency of Roles and Functions In Corporate Governance
4.5 The Roles of Audit Committee: In Corporate Governance
4.6 DELEGATIONS OF FUNCTIONS IN THE COMPANY
4.7 SOME EXCEPTIONS ON THE ROLES OF ORGANS AND OFFICERS OF THE COMPANY

CHAPTER FIVE OBSERVATIONS, RECOMMENDATIONS, AND CONCLUSION
5.1 SOME OBSERVATIONS IN THE NIGERIAN CORPORATE SYSTEM
5.2 RECOMMENDATIONS
5.3 CONCLUSION

REFERENCES

TABLE OF CASES

Allen V Hyett (1914) 30 T.L.R. 44

Ashbury Railway Carriage and Iron Co V. Riche (1875) LR7HL.653

Aso Motel Kaduna Ltd V Deyemo (2006 7 NWLR pt 978 at 93

Awa V Daniels and other (Formerly as Deloitte Haskins and Sells, 15 may 1955 Unreported

Baillie V. Oriental. Telephone and Electric Co. Ltd (1915) ICH 503 CA

Bamford V. Bamfor (1969) 1 All ER 969

Barnet, Hoares and Co V South London Tramways (1887) 18 QBD 815

Barron V Porter (1914)1 Ch. 895

Bell Houses Ltd V City Wall Properties Ltd (No. 1) (1966) 2 Q B656

Bernard Longe V F.B.N. PlC (2006) 3 NWLR Pt 967 at 228 CA

Botton (HL) Engineering Coled V TJ Graham and sons Ltd (1957) 1 Q B; (1956) 3 WLR 804, CA

Brady V Brady (1988) B.C.L.C 20 at 40 CA

Bries V Woolley (1954) A.C. 333

Canadian Aero Service V O’ Malley (1973) 40 D.L.R. (3rd ) 371 at 381

Caparao Industrieas PLC V Dickman and Otehrs (1990) All ER 568

Coleman V Myers (1977) 2 NZLR 225 NZCA

Daniel V Aderson (1995) 16 ACSR 607, n 64, 664

Ezekiel Okoli Vmore cab Finance Nig. Ltd (2007) 4-55c at 127

Fajemirokun V U.B.A PLC (2004) 7 W.R.N at 116 – 121

First Bank of Nigeria PLC V Aboko (2007) I NWLR pt 1014 at 137

Foss V Harbottle (1843)2 Hare 461

Getting V Kilner (1972) 1 WLR 337

Henderson V Bank of Australasia (1890) L.R. 45 ch.D. 330, CA

Hospital products Ltd V United States Surgical Corporation (1984) 156 C.L.R. 41 at 96 – 7.

Hotchiss V Fischer (1932) 136 Kan 350, 16P. (2d) 531

Hurley V BGH Nominees Pty (1984) 10 ACLR 197

Imon Okon V Bassey Ubi (2006) All FWLR at 717 – 731

Iwuchukwu V Nwizu (1994) 7NWLR pt 357 at 379

Lennard’s Carrying Co V. Assistic Petroleum ltd (1915) AC 705 at 713

MacDougall V. Gardiner (1975) 1 ch.D 13 at 22

Marchall’s Valve Gear V Meanin, Wardie and Co (1909) 1 ch 267

Mohammed Mustapha Ali Co Ltd V Alhaji Isa Goni (2006) 10 NWLR pt 987 at 92 – 93

N.I.B. Investmetn (West Africa) V Omisore (2006) 4 NWLR pt 969 at 181

Nwaka V The shell petroleum Development coy of Nig. (2003) 19 WRN at 128 – 132

Odutola Holdings Ltd V Ladejobi (2007) 14 WRN at 9 – 10

Omololu-mulele V Ijale properties Co. Ltd and others (2003) 27 WRN at 48

Panorame Developments (Guildford) Ltd V Fidelis Furnishing Fabrics Ltd (1971) 2 QB 711; (1971) 3 WLR 440 CA

Pender V Lushington (1977) L.R. 6ch D. 70 ch.D at 81

Percival V Wrigth (1902) 2 ch. 421

Peskin V Anderson (2001) 1 B.C.L.C 698

Prudential Assurance Co Ltd V Newman Industries Ltd (No.2) (1980 2 All ER 841

Prudential Assurance V Chatterly-Chitfield Collieries 91949) 1 All ER 1094 4

Punjab Distilling Industries Ltd V Registrar of Companies (1963) 33 Comp cas 811

Quin and Axtens Ltd V Salomon (1909) AC 442, HL; Affirming (1902)1 ch

Re A Company (1986) B.C.L.C. 382

Read V Astoria Garage (Streatham) Ltd (1952) ch. 637; (1952)2 All ER

Re Bhutoria Bross (AIR 1957) Cal 593

Re City Equitable Fire Insurance Co (1925) ch. 407

Royal British Bank V Turquand (1856) A.C. 22, 66

Salomon V Salomon and Co (1897) A.C. 22, 66

Strong V. Repide (1909) 213 US 419 at 431

Southern Foundries Ltd V Shirlaw (1940) A.C. 701; (1940) 2 All E.R. 445, H.L.

Universal Trust Bank and Others V Koleoso (2006) 18 NWLR pt 1010 at 8

Woman Lal V Scindia Steam Navigation Co (AIR 1944) Bom 131 at 135

TABLE OF STATUTES

Australian Uniform Companies Act, S 20 (1)

1985 United Kingdom Companies Act 1985, S. 221

1990 Interpretation Act, Cap 192, Laws of the Federation of Nigeria, S. 11 (1)

1990 Bill of Exchange Act, cap 35, Laws of the Federation of Nigeria S.90

1990 Companies and Allied Matters Act (CAMA), Laws of the Federation of Nig. S.650

2004 Companies and Allied Matters Act (CAMA) cap C20, Laws of the Federation of Nigeria

Part III of 5th Schedule

Abbildung in dieser Leseprobe nicht enthalten

TABLE OF ABBREVIATIONS

Abbildung in dieser Leseprobe nicht enthalten

ABSTRACT

This is a research work on the “roles of the organs and officers of an incorporated company”. In it, the organs are identified as the General Meeting (shareholders), and the Board of Directors, while the officers are identified as the directors, secretary, auditor, legal adviser. The company’s organs take the key critical resolutions cum decisions that sway the company for better or worse. And these resolutions cum decision are implemented through corporate management or governance by the officers of the company. As legal personality, the company has a separate existence from the founders. Yet it is operated by human beings. The company functions through its Memorandum and Articles of Association, which can be altered through resolution passed by the majority of the company members at the General Meeting. Similarly, the company’s performance is also regulated by other statutory law, for example the Companies and Allied Matters Act, otherwise known as CAMA. Most of the company’s officers are appointed by the Board of Directors. However, this is subject to confirmation at the General Meeting. Consequently, as a going concern/business, the company is prosperous when there is a healthy relationship between the organs, and officers, and particularly between the General Meeting (Shareholders), and the Board of Directors. Though the General Meeting works by the resolutions passed by the majority members, yet there are exceptions to this when the court enforces an individual member(s) action against the majority’s decisions. This is an exception to the rule in Foss V Harbottle. The aim is to check fraud and ultra vires activities in the company. To be valid, an officer’s acts shall be done in good faith, diligently, and with care; and the company shall hold the officer liable for such acts. Essentially, the common law held the view that company’s officers owed their services to the company only, and not individual shareholders. However, this position has been rejected by the modern company practice and knowledge. Hence, the roles of the contemporary company officers have been enlarged to embrace serving the company which employees them, the individuals shareholders under relevant circumstances, as well as the generality of the public that benefits or is affected by the activities of the company. Fundamentally, company practices in Nigeria are bedeviled by the apathy of the stakeholders in corporate governances, except when there is a selfish economic opportunity to be siphoned from the company. The relevant laws governing corporate matters should be made very effective to promote prosperous going concern/business of companies, and equally deter or sanction dubious company practices.

CHAPTER ONE INTRODUCTION

1.1 CONCEPTUAL BACKGROUND OF COMPANY’S ORGANS AND OFFICERS

The organs and officers of an incorporated company are the human beings through which the company operates. There are two organs of an incorporated company.^[1] And they are the General Meeting (Shareholders) and the Board of Directors. On the hand, the Black’s Law Dictionary defines a company officer as a person elected or appointed by the board of directors to manage the daily operations of a company (corporation). Such persons are the chief executive officer, president, secretary or treasurer.^[2] The Sections 63 (1) and (2) of the Companies And Allied Matters Act commonly known as CAMA^[3] divide power between the general meeting and board of directors.

The General Meeting: Essentially, the General meeting is constituted by the founders of the company, investors in the company, and shareholders of the company as members. Member here is provided in the Section 46 (12) of the Company and Allied Matter Act (CAMA) 1990 and as amended 2004^[4] which is commonly referred to as CAMA. In the section “member” is defined as any person that is financially interested in the company. By implication, members include the company’s founders, investors, and shareholders, and the Section 302 of CAMA^[5] adds deceased members’ representatives. Consequently, these first members automatically become members of the General Meeting as an organ of the company.

The first members of the company’s organ must derive the company’s memorandum of association, which contains the company’s charter of operation, the company’s name and registered office, its business object, status, authorized share capital, and the extent of the members’ interests in the company. These first members of the company’s organ also derive the company’s article of association, which contains the classes of shares, alteration of share capital, meeting procedures, seal, notices, etc. On incorporation, the company acquires a life of its own separate and distinct from its shareholders.^[6] Ironically, in practice various company laws tend to usurp the presumed powers of the shareholders or the company members or the general meeting.^[7] This situation was well reflected in the decision of Neville, J. in the case of Marshall’s Valve Gear Vs Manning, Wardie and Co , ^[8] where the learned judge said: “… the majority of the shareholders within the company at a general meeting have a right to control the actions of the directors so long as they do not affect the control in a direction contrary to any of the provision of the articles which bind the company …. The law established to the effect that the majority of shareholders, in the absence of a contract to the contrary, had the ultimate control of the affairs of the company and could assert their rights in general meeting,^[9] and are entitled to decide whether or not an action in the name of the company shall proceed…”^[10]

Basically, the majority shareholders possess the supreme or the superior right to conduct the affairs of the company. And an individual or minority shareholders cannot usurp or question the resolutions of the majority shareholders as decided in Foss Vs Harbottle . ^[11] However, the law in Sections 299 – 309 (Part X)^[12] has given some rights and protections to individual as well as minority shareholders against illegal and oppressive treatments in the conducts of the company affairs. The summary of those sections has been captured in the court’s decision per Aderemi JCA in the case of Omololu-Mulele Vs Ijale Properties Co Ltd and Others. ^[13] The learned Justice stated:

“By way of some little contribution, I wish to say that the rule in Foss Vs Harbottle^[14] should not be adhered to too rigidly otherwise injustice to other persons, who have settled interest in the affairs of a limited liability company or even illegality will be unwittingly enthroned. I think the demand of justice dictates that a shareholder must possess a general right and duty to have the affairs of a company conducted in accordance with the Article of Association. Thus any breach by the company of the Articles would be a breach of the shareholders’ personal rights”.

The Board of Directors: A company’s directors according to the Section 244 of the Companies and Allied Matters Act are persons duly appointed by the company to direct and manage the business of the company.^[15] An incorporated company must have at least two directors.^[16] By the provision of the Section 63 (3) of the Companies and Allied Matters Act^[17] the business of the company is managed by the board of directors. Whenever necessary, the court intervenes to correct the excesses of the board of directors, when it is proved in an action before it that the board of directors has acted outside the mandated conferred upon it by the company’s articles. As such, in the case of Odutola Holdings Ltd Vs Ladegjobi,^[18] an action was instituted to nullify the shareholders’ meeting and to nullify the removal of the company’s directors. In delivering judgement, the court emphasized per Ejiwunmi JSC^[19] that the board of directors shall take actions necessary to protect the business of the company, unless the contrary is proved. Again, the members in general meeting in order to protect the company’s business can deprive directors of the power to act. The company directors are appointed, re-elected or rejected by the company members at the general meetings. In the N.I.B. Investment (West Africa) Vs Omisore ^[20], a company was established for insurance business. A restructuring in the company redistributed the shares allotments. Thus, the capacity to appoint directors was also affected. This gave rise to abuse of powers that necessitated this suit. The courts, on resolving where power to appoint directors of company resides, referred to the Section 248 of the Companies and Allied Matters Act^[21] that company members at the general meeting shall appoint directors. And by the Section 249 of the companies and Allied Matters Act ^[22] empowers the board of directors to fill up casual vacancy.

Officers: The company’s officers are the human persons through which the company acts. The act of an individual is binding on the company if it holds such an individual out as an officer.^[23] Consequently, in M.M. Ali Co. Ltd. Vs Goni,^[24] there was a transaction for the use of two petrol filling stations, facilities, and staff to sell petroleum products. The transaction conditions were breached for three years necessitating the suit. Giving explanation on the liabilities of the company’s officers, the court quoted the Section 66(1) (a) of the Companies and Allied Matters Act^[25] to emphasize that the acts of a company’s officer or agents are not those of the company. This is unless the company acts through its members in the general meeting, board of directors, or managing directors. And the company shall expressly or impliedly authorize such officer or agent to act in the matter.

1.2 LEGAL PERSONALITY OF A COMPANY

Legal personality has been defined by George Whitecross Paton^[26] and quoted in the Black’s Law Dictionary (Supra) as:

“Legal personality… refers to the particular device by which the law creates or recognizes units to which it ascribes certain powers and capacities”.

In the above definition, a unit is synonymous with a company. So that by acquiring a legal personality, the company becomes a legal entity distinct from its members. The company, therefore enjoys rights, as well as discharges duties which are not available to the company’s members. By extension, the company is capable of suing and being sued in its corporate name and activities. Consequently, legal personality creates in the company as “artificial person” as opposed to a “natural person”.

Being an artificial person, the company is therefore made an abstract entity that unfortunately cannot by itself organize and conduct its own affairs and business. On this, the company seeks assistance through the law of agency principles. Thus, through the human agencies the company’s polity and policies are formulated, and decisions made or taken on the behalf of the company by human beings. These individuals essentially stand in a fiduciary and agency relationships with the company. Similarly, the individuals are the alter ego through which the “mind” and “will” of the company are carried out or directed. This analogy and explanation were clearly brought by the court per Lord Haldane in the case of Lennard’s Carrying Co Vs Asiatic Petroleum Ltd ^[27] as

“…a corporation is an abstraction. It has no mind of its own any more that it has a body of its own; its active and directing will must consequent be sought in the person or somebody who for some purposes may be called an agent but who is really the directing mind and will of the corporation the very ego and centre of the personality of the corporation….”^[28]

As a result of this agency relationship that exists between the company and its human operators, the Section 65 of the Companies and Allied Matters Act^[29] therefore makes certain presumptions very clear. They are that any act of the members in general meeting, board of directors, or of a managing director while carrying on in the usual way the business of the company shall be treated as the act of the company itself. And that the company shall be criminally and civilly liable thereafter to the same extent as if it were a natural person.

The implication of the above section is that as a legal personality, the company is deemed to have human personality through its officers and agents. It is therefore in these individuals cum human personalities that the company’s powers are vested. Therefore, in the Section 63(1) of the Companies and Allied matters Acts,^[30] it is provided thus:

“A company shall act through its members in general meeting or its board of directors or through officers or agents, appointed by or under authority derived from the members in general meeting or the board of directors”.

The company needs people to shape its course of existence, affairs, or activities positively or negatively. A company is at law completely a different person from the subscribers to the memorandum. This is inspite of the fact that after incorporation the business remains the same as it was before, and the same persons are the officers and shareholders. Yet the company is not in law the agents of the subscribers or trustee for these officers and shareholders. Again, the members of the company (subscribers) are not liable to the company’s actions, except to the extent and in the manner provided by the law. Since a company is not an agent of its shareholders, even a state-owned company could not be an agency of the government establishing it, though its shares were wholly owned by the government. Therefore, in Aso Motel Kaduna Ltd Vs Deyemo ^[31] a company wholly owned by the Federal Capital Development Authority (FCDA) of Nigeria was sued for a breach of transactions. The court held that having a controlling number of shares in a company is not synonymous with its ownership, once it is incorporated as an entity of its own, having its own separate legal existence.

Being a legal personality entails the company only can sue to redress a wrong done to it. The court does not usually entertain an action brought by shareholder(s) on behalf of the company. A company member can however sue against the company in certain circumstances. A member can seek redress against the company for the infringement of his right. As a legal personality, the properties and funds of the company are not that of the company members. Consequently, directors or shareholders cannot sue in their names with respect to what belongs to the company. Therefore, the Memorandum and Articles of Associations of the company constitute a contract between the company and every individual.^[32] Nevertheless, these memorandum and articles of association for them to be enforceable shall not be ultra vires the Companies and Allied Matters Act (CAMA), and the Constitution of the Federal Republic of Nigeria.

As a legal personality, the company is an artificial person, and employees are not answerable personally for its wrongs. Therefore, in the case of F.B.N. PLC Vs Aboko ^[33] the company’s employee was suspended from duty for malfeasance. The suspension was subsequently published, and the employee sued the company. On nature of the company, the court stated that the company is an artificial person. It exists in the eyes of the law. And it can only operate by means of human beings. The court also said that the company is the only plaintiff or defendant in an action for wrong done to it, through its accredited employee. Similarly, in the case of Okon Vs Ubi ^[34] the appellants entered into agreement with a co-operative society to build a block of shops, the rent to be paid for them (shops), and duration of the lease. The respondent sued to restrain the appellant from further holding over the land and building. Deciding on the best evidence as to the juristic personality of a company, the court had this to say:

“In case of partnership, companies, trade union, sole proprietorship or corporation sole or aggregate, the best evidence in the event of a dispute as to their juristic personalities or their rights to sue or be sued eo nominee is the production of their certificate or registration or incorporation under the relevant laws”.^[35]

1.3 EFFECTS OF INCORPORATION OF A COMPANY

A company upon incorporation becomes a separate legal person cum entity quite distinct from its investors, founders, or shareholders. This company’s new status is a requisite criterion for determining the company’s rights, duties, liabilities, and other responsibilities of the company itself, in addition to those of its organs, officers, and agents. On incorporation the life of the company becomes clearly created by law and can only be terminated by that law.

This separation of ownership from the company, and vice versa has long been settled in the case of Salomon Vs Salomon ^[36] . In that, Mr Salomon founded a prosperous leather merchant business. The company was later incorporated (registered) as “Salomon and Co. Ltd”, with Salomon holding the majority shares. The company later went into liquidation and only debenture holders were successfully settled. The liquidator instituted the instant case against Mr. Salomon on behalf of unsettled creditors. The court held that Mr. Salomon was completely separate from the company’s life and existence. And that Mr. Salomon was only an agent through which the company operates. This case and the court’s decision cum judgment confirm or tally with the provision of Section 37 of the Companies and Allied Matters Act.^[37] The section provides that a company becomes incorporated on its registration with Corporate Affairs Commission (CAC), who issues the company with a certification of incorporation (registration). Upon the issuance of such certificate, the company becomes a body corporate with the power to hold land, have a perpetual succession, a common seal, and such liability on the part of the members to contribute to the assets of the company in the event of its liquidation.

On corporate liability, this cannot be equated with member’s liability, nor can it be transferred to members of the company. This was well brought out clearly in the case of Ezekiel Okoh Vs Morecab Finance (Nig) Ltd where the court stated:

“It is elementary that ‘a company’ is different from its members and its liabilities are not ordinarily transferred to … a director.”^[38]

A company is expected to harmonize and submit its business objects or any other organisational object for establishing the company.^[39] The submission should be made to the Corporate Affairs Commission. The company’s objects should contain the main, incidental, and ancillary objects. The certificate of incorporation is necessary to enable the company commence its business activities. A new certification is necessary every time a company alters its memorandum, or adds a new object to its already existing objects. The most important requirement for the issuance of a certificate to a company is that the intended business of the company must have been approved by a special resolution of the company at a general meeting.^[40]

Petitions for the alterations of the company’s objects are rarely opposed by the shareholders or creditors, in so far as it will project forward the business benefits of the company. Often, the Registrars of companies do make efforts to oppose petitions for courts’ confirmation for expansion of a company’s objects. This opposition is even more serious when a company proposes to adopt a totally new business dimension. Occasionally, the court seems very helpful to company to overcome the harsh and retarding consequences of the ultra vires principle. Therefore, Avtar Singh noted as follows:

“The Registrar’s efforts have not met with much success. In most cases where he puts up appearance his objections were overruled. Thus, for example, in Juggilal Kamlapa Jute Mills Vs Registrar of companies, despite the Registrar’s objections a company, originally formed for “business in Jute” was allowed to include “business in Rubber”, and in Re Modi Spinning and Weaving Mills Co, a “spinning and weaving” company was allowed to manufacture “industrial and power alcohol”. ^[41]

Still in the Re Bhutoria Bross,^[42] a company’s alteration was rejected on the ground that the intended new business could not be advantageously combined with the existing business. Just as the court refused to confirm the company’s alteration of its constitution, since the “proposed new business had nothing to do even remotely with the existing business”, as was held in the case of Punjab Distilling Industries Ltd Vs Registrar of Companies. ^[43] All in all, the court is moderating the iron hammer of the application and operation of the ultra vires rules. The court of Appeal, Lagos Division, decided on the consequences of incorporation in the case of Fajemirokun Vs U.B.A.^[44] In the case, the court was prayed to declare that the plaintiff (company) is entitled to exercise the right of possession and control, as well as management in an unfettered manner over all its assets and properties. Thus, its agents or officers cannot stop this possession. The court reiterated that the consequence of incorporation is the separate legal personality which the company acquires upon incorporation. And that the complete separation of the company and its members has never been doubted. Therefore, a company’s member is not as such liable for its debts.

1.4 COMPANY’S FUNCTIONS AS A LEGAL PERSON

Basically, the company as a legal person is formed by two or more persons in compliance with the Sections 18^[45] and 19^[46] of the Companies and Allied Matters Act. The formation of the company is for the purpose of carrying on business for profit or gain. The exception is a company limited by guarantee. It is provided in the Section 26(4) of the Companies and Allied Matters Act^[47] that a company limited by guarantee shall not be incorporated with object of carrying on business for the purpose of making profit for distribution to members. Once a company is limited by guarantee, it shall not be registered with a share capital, nor divide the company’s undertakings into shares or interests: It is a voided act to do so.^[48] It can be for charity or other purposes not driven by economic considerations or benefits. On formation, a company becomes an employer of labour of its officers. The company is also expected to discharge certain social responsibilities to the community or society at large. Only the company can ratify or sue for irregularities.^[49]

The company’s constitution would seem to be the main source of the rights for the shareholders against the company. It is however not the exclusive source of such rights. A shareholder may have rights derived from the general law as was the case in Prudential Assurance Vs Chatterly-Whitefield Collieries.^[50] In that case the shareholder asserted that the directors were liable in the tort of conspiracy as against the members of the company, as well as the company itself. A company is therefore required to act in accordance with its Articles. And a member has a personal right to require the company to act accordingly. In the performance of its duties as an incorporated company, if the duty performance seems as a breach of the Articles, and if the breach dovetails into an abuse of the power conferred by the Article, the court can entertain an action brought by a member to have the breach corrected.

Every public company shall within a period of six months from the date of its incorporation hold a general meeting of its members.^[51] And the company (or not less than two directors, or a director and the secretary) shall certify the statutory report derived from such company meeting.^[52] On further responsibilities of the company to hold its general meeting, the Section 213 of the Companies and Allied Matters Act provided that:

“(1) Every company shall in each year hold a general meeting as its annual general meeting in addition to any other meetings in that year, and shall specify the meeting as such in the notices calling it; and not more than 15 months shall elapse between the date of one annual general meeting of a company and that of the next- provided that – (a) so long as a company holds its first annual general meeting within eighteen months of its incorporation it needs not hold it in that year or in the following year; (b) except for the first annual general meeting, the commission shall have the power to extend the time within which any annual general shall be held, by a period not exceeding three months.”^[53]

The company can through its extraordinary general meeting, whether court-ordered or otherwise discusses essential matters that are very critical to the company’s existence. Through a special resolution at the extraordinary general meeting companies take merger and takeover decisions. A company must ensure that it is going business/concern. It should endeavour to avoid winding up. It must not act ultra vires by acting in contrary with its constitutions (memorandum and article of associations), as well acting beyond its objects as contained in the constitution. Thus, in Ashbury Railway Carriage and Iron Co. Vs Riche,^[54] the court declared null and void the company’s contract that is ultra vires the directors’ power, the company’s constitution, and its object. Through this decision, the court has mandated the company to conserve corporate capital. A company is empowered to alter its constitution in order to modify or enlarge its objects. If this is done, a new resubmission must be done with the Corporate Affairs Commission for recognition. In the same vein concerning individual’s employment, a company is empowered to “appoint” or “remove”, as well as “hire” or “fire” in line with the Section 11 (1) of the Interpretation Act.^[55] This includes the power to “suspend” a company’s employee or officer.

CHAPTER TWO ORGANS OF AN INCORPORATED COMPANY

Organs of an incorporated company are bodies of the company who make or take the major decisive decisions concerning the corporate governance of the company. For this reason, the organs of the company are often referred to as the General Meeting (Shareholders) and the Board of Directors. These two bodies known as the Primary Organs are the directing “mind” and “will” of the company.^[56] Lord Haldane stated this clearly in the case of Lennard’s Carrying Co Vs Asiatic Petroleum ^[57] where he said:

“… a corporation is an abstraction. It has no mind of its own any more that it has a body of its own; its active and directing will must consequently be sought in the person or somebody who some purposes… is really the directing mind and will of the corporation, the very ego, and centre of the personality of the corporation.”^[58]

2.1 THE GENERAL MEETING (SHAREHOLDERS): THE ROLES

Essentially, the General Meeting consists of the shareholders. The shareholders can be institutions or private individuals, and execute the following roles:

(1) Maintenance of Quality Management: This involves the establishment of high standard in corporate performance. The Institutional Shareholders’ Committee (in Britain)^[59] published a statement titled “The Responsibilities of Institutional Shareholders in the UK”, which recommended several principles of good practice for shareholders. These principles inter alia include that shareholders should encourage regular systematic contact with the company at senior executive level to exchange views and information on strategy, performance, and board membership. Again, investors should take a positive interest in the composition of boards of directors. Adequate and appropriate use of shareholders’ voting rights is effective checks and balances on the corporate activities of the directors and other officers of an incorporated company.

(2) Enquiring Role: The shareholders have it as their role to investigate the activities of the officers of the company. It is through such enquiring roles that relevant information can be acquired and appropriate actions taken by the shareholders accordingly. Thus, in Briess Vs Woolley ^[60], some shareholders mandated the managing director of a company to negotiate for the sale of the shareholders’ shares. The managing director made some fraudulent misrepresentation, and the shareholders were held liable for the malfeasance of the managing director. This was even when the shareholders had no knowledge of the facts or the fraudulent misrepresentation.

(3) Ratification Role: Where there are irregularities as regards the internal management of the company, it is the role of the shareholders, particularly the majority shareholders, to correct the irregularities. The irregularities should be seen as a wrong to the company mainly. This position has been well brought out per James L.J., in the case of Macdougall Vs Gardiner , where he said:

“ Everything in this bill, so far as I can see, if it is a wrong it is a wrong to the company, because every meeting that is called must be for some purpose or other”^[61]

However, the rights of individual member/shareholder of the company are not swept under the carpet. The memorandum and articles of associations establish a contractual relationship between a member and the company by conferring rights or obligations on the member in his capacity as member. While referring to Quin and Axten Ltd Vs Salmon ^[62] and the court’s decision therein, Professor Wedderburn emphasized that it is the role cum function of an individual shareholder to use his position as a company’s member to see: “that a member can compel the company not to depart from the contract with him under the articles even if that means directly the enforcement of ‘outsider’ rights vested either in third parties or himself, so long as, but only so long as he sues qua member and not qua ‘outside.” ^[63]

Actually, the majority shareholders have a greater and determining role to play as regards ratification of irregularities in a company, when these are procedural irregularities. Hence, there is a majority control of the procedural requirements governing company meetings, in which the vote (decision) of the majority at general meetings binds both dissentient and absent shareholders, as was the principle argued in Foss Vs Harbottle.^[64]

(4) Enforcement cum Protection of Article of Association: When a personal right deriving from the articles is infringed, a member has right to bring an action against the majority shareholders or their decisions. By this Jessel, M.R. of the court of Appeal stated in the case of Pender Vs Lushington that a shareholder: “Whether he votes with the majority or the minority, he is entitled to have his vote recorded-an individual right in respect of which he has a right to sure.” ^[65]

Basically, the vote of the majority at a general meeting essentially must be a vote given with the utmost good faith and fairness. In the course of protecting and enforcing their rights, individual shareholders, end up protecting and enforcing some other substantive shareholders’ rights of theirs. As the individual shareholders enforce these rights, they (individual shareholders) discharge the roles of constraining other shareholders, especially the majority shareholders, from acting ultra vires the article of association, or intra vires the general meeting’s procedures. In the enforcement of their rights, individual shareholders as well significantly enforce and protect the company’s article of association by playing the following roles as observed by Wedderburn (supra) – As regards individual shareholders’ roles:

“…They have recognized not merely the member’s contractual rights in general terms under the articles, and the right to enforce his rights as a member, but in particular, personal rights obtained from the articles to transfer shares and to vote; to protect preferential rights and class interests such as the right to have shares offered to him to be registered and to enforce delivery of a share certificate in accordance with the articles; to enforce a declared dividend as a legal debts, and if none is declared, at least to prevent dividends from being distributed otherwise than in accordance with the articles; to prevent an irregular forfeiture; to prevent directors holding office in breach of the articles and other procedural irregularities. Similarly, a member has a personal right to prevent alterations in the articles which would constitute a fraud on the minority; and probably has a similar right to enforce proper notice of meetings and business to be conducted at them.”^[66]

[...]

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^[1] A.R. Agom, The Place of Company Meetings in Corporate Governance . Modus International: Law And

Business Quarterly, Vol. 5, No. 4, December 2000, at P. 14.

^[2] Black’s Law Dictionary, 8th Edition, Thomson West, 2004.

^[3] Section 63 (1) and (2) of the Companies and Allied Matters Act, Otherwise known as CAMA 1990 and

2004. The 2004 version is used throughout the text

^[4] Section 46 (12 ) Companies and Allied Matters Act, 1990 and as amended 2004. Note the 2004

amendment has been used throughout this text, and has been commonly referred to as CAMA.

^[5] Section 302 CAMA

^[6] Section 37 CAMA

^[7] Sections 63 (3), (4), and (6) CAMA

^[8] Marchall’s Valve Gear Vs Mannings, Wardie and Co (1990) 1 Ch 267

^[9] Ibid at P. 267

^[10] Ibid at 272

^[11] Foss Vs Harbottle (1843) 2 Here 461

^[12] Section 299 – 309 (Part X ) CAMA

^[13] Omololu-Mulele Vs Ijale Properties Co. Ltd and Others (2003) W.R.N. at 48

^[14] Opcrt

^[15] Section 244 CAMA

^[16] Section 246 CAMA

^[17] Section 63(3) CAMA

^[18] Odutola Holdings Ltd Vs Ladejobi (2007) 14 WRN at 9 - 10

^[19] Ibid

^[20] NIB Investment (West Africa) Vs Omisore (2006) 4 NWLR Pt 969 at 181

^[21] Ibid; See also section 248 CAMA

^[22] Ibid; see also section 249 CAMA

^[23] Section 250 CAMA

^[24] Mohammed Muslapha Ali Co. Ltd Vs. Alhaji Isa Goni (2006) 10 NWLR part 987 at 92 - 93

^[25] Section 66 (1) (a ) CAMA

^[26] G.W. Paton, and D.P. Derham eds, A Text Book Of Jurisprudence, 4th ed, 1972,393.

^[27] Lennard’s Carrying Co Vs Asiatic Petroleum Ltd(1915)AC 705,at 713

^[28] Ibid

^[29] Section 65 CAMA

^[30] Section 63(1) CAMA

^[31] Aso Motel Kaduna Ltd Vs Deyemo (2006) 7NWLR pt 978 at 93

^[32] NIB Investment opcit

^[33] First Bank of Nigeria Plc. Vs Aboko (2007) I NWLR Pt 1014 at 137

^[34] Imon Okon Vs Bassey Ubi (2006) All FWLR at 717 – 731

^[35] Ibid

^[36] Salomon Vs Salomon and Co (1897) A.C. 22, 66

^[37] Section 37 CAMA

^[38] Ezekiel Okoli Vs Morecab Finance (Nig) Ltd (2007) 4 – 5 S.C at 127

^[39] Section 27 (1) (C) CAMA

^[40] Chapter 2 (Section 50 – 53) CAMA

^[41] Avtar Singh, In Defence Of Ultra Vires, Constitutional Law, (1971) 25C (Jour) 25; see also Avtar Singh:

Indian Company law, 3rd Ed, 1971, pp. 56-58

^[42] Re Bhutoria Bross (AIR 1957 Cal 593)

^[43] Punjab Distilling Industries Ltd Vs Registrar of Companies (1963) 33 Camp Cas 811.

^[44] Fajemirokun Vs United Bank for Africa PLC (2004) 7 W.R.N. at 116 - 121

^[45] Section 18 CAMA

^[46] Section 19 CAMA

^[47] Section 26 (4) CAMA

^[48] Sections 26 (2) and (3) CAMA

^[49] Section 299 CAMA

^[50] Prudential Assurance Vs Chatterly-Whilfield Colleeries (1949) 1 All ER 1094 H.L

^[51] Section 211 (1) CAMA

^[52] Section 211 (3) CAMA

^[53] Section 213 CAMA

^[54] Ashbury Railway Carriage and Iron Co. Vs Riche(1875) LR 7 Hl 653

^[55] Section (11) 1 of the Interpretation Act, Cap. 192, 1990 Laws of the Federation of Nigeria

^[56] Botton (HL) Engineering Co Ltd Vs TJ Graham & Sons Ltd (1957) 108, (1956) 3 WLR 80A.

^[57] Opcit

^[58] Ibid

^[59] Institutional Shareholders’ Committee statement: “The Responsibilities Of Institutional Shareholders In The Uk.

^[60] Briess Vs Woolley (1954) A.C. 333

^[61] MacDougall Vs Gardiner (1875) 1 Chool. 13 at page 22

^[62] Quin and Axtens Ltd Vs Salmon (1909) A.C. 442, HL; affiming (1902) 1ch.

^[63] K.W. Wedderbum, “Shareholders’ Right And The Rule In Foss Vs Harbottle (1957)” Clj 194. pp. 214- 215

^[64] Opcit

^[65] Pender Vs Lushington (1877) L.R. 6 ch.D 70 ch D. at p. 81

^[66] K.W. Wedderburn Opcit P 210 – 211