In the last post we have defined who a director is, discussed two criteria used in determining who a director in a company is, and related issues. You can find all that discussion here.
This week we will be moving ahead to the following issues, viz; whither de factoand de jure directors? What is the statutory position in other jurisdictions other than Nigeria’s? What is the best test to determine who a director is? What are the different types of directors Nigerian companies appoint?
What do the judicial decisions say on the definition of a director? In the celebrated case of Bernard Longe v. First Bank of Nigeria Plc.,which is one of the most recent Supreme Court decisions on the definition of directors, the court merely adopted the definition of a director as stated under Section 244(1) of Companies and Allied Matters Act (CAMA) without more. For the purpose of clarity, his Lordship, Oguntade JSC stated that; ‘directors of a company registered under the Act are persons duly appointed by the company to direct and manage the business of the company’.This is a judicial endorsement of the appointment criteria.
Elsewhere the courts have also gone as far as defining a de facto director. An example is in the Nigerian case of Pool House Group (Nigeria) Ltd v. African Continental Bank Ltdwhere the court stated that:
A de facto director is one who has not been validly appointed to the office but who holds and exercises the powers of the office under a claim or colour of an election or appointment. Although his acts are not those of a lawful director, the law upon principles of policy and justice will hold his acts valid so long as they involve the interest of the public and third persons.
In the English case of Re Hydrodan (Corby) Ltd, Millett J. defined a de facto director as follows:
“A de facto director is a person who assumes to act as a director. He is held out as a director by the company, and claims and purports to be a director, although never actually or validly appointed as such. To establish that a person was a de facto director of a company, it is necessary to plead and prove that he undertook functions in relation to the company which could properly be discharged only by a director. It is not sufficient to show that he was concerned in the management of a company’s affairs or undertook tasks in relation to his business which cannot properly be performed by a manager below board level.”
From the above definitions it is clear that de facto directors become directors as a result of the circumstances where it was practically impossible for them to be appointed directors. Sometimes de factodirectors are improperly referred to as shadow directors. This is improper because a de facto director does not become director because the other directors take instructions from him but instead he carries out the duties of a director, though not appointed as such. Sometimes a representative director is referred to as a de facto director. That is true to the extent that the representative director is not appointed by that other company wherein he is functioning as a representative.
On the other hand, a de jure is a director who is formally appointed by a company resolution and registered in the register of directors of the company.
What is the statutory position in other jurisdictions? We will look at the positions in England and New Zealand.
We have pointed out initially that under English Law, the position is that the term “director” is defined so as to include “any person occupying the position of director, by whatever name called”.This definition is similar to the general definition of “director” under Section 567 CAMA. The definition of a director under the New Zealand Companies Act 1993 is both interesting and complex. The interpretation section of the Act does not actually offer a definition, it only refers us to another section. Mainly, Section 126 of the NZ Companies Act defines directors in several ways and the definitions cover for the two tests discussed previously. Firstly, Section 126a defines a director as a person occupying the position of director of the company by whatever name called. This is the same definition as that provided for under Section 250 of the English Companies Actand Section 567 of the CAMA. Section 126biii of the NZ Act then further defines a director as a person who exercises or controls the exercise of powers which, apart from the constitution of the company, would fall to be exercised by the board. The latter definition is a pragmatic one which clearly falls within the ambit of the common law concept of de facto director. The NZ Act also defines a director as a person to whom a power or duty of the board have been delegated by the board to. The definition under the NZ Companies Act is admirably because it is wide enough to accommodate practical circumstances.
In addition to what is provided under Section 244 of CAMA, it is suggested that the definitions under the NZ Companies Act be incorporated into the Nigerian statute as to cover more practical situations.
I’m afraid this is the much we can take on this post. The next post will conclude the discussion as highlighted above.
 (2010) 2-3 MJSC 128; or (2010) 5 NSCR 1.
 Ibid. at pg. 168.
 (1969) NMLR 47.
 See the English case of Revenue and Customs Commissioners v. Holland and Anor. (2010) 1 W.L.R. 2793.
 See Section 250 of the English Companies Act 2006. See also Re Eurostem Maritime Ltd  P.C.C. 190, per Mervyn Davies J. and Re Lo-Line Electric Motors Ltd  B.C.L.C. 698 at 706 per Browne-Wilkinson V. C.