This is the concluding part of our series on who a company director is.
What is the best test of determine who a director is-the appointment test or the holding out test? The answer to this, in my view, would depend on the circumstance. It is my view that theoretically, the best test is the appointment test. As it shows some measure of certainty and consistency. That is, a person is a director, only if he is appointed as such. But in practice, the unsuspecting third party may not immediately be able to ascertain whether a person has been duly appointed or not as a director of a company. So the unsuspecting third party would rely on who the company says the officer is, to determine whether the officer should be dealt with as a director or not. This means that the best test in such a situation would be the holding out test- i.e. a person is a director of a company, if he is held out as such.
What are the different types of directors Nigerian companies appoint?
The first we will be talking about are executive directors. Executive Directorsare directors appointed to take charge of daily activities of the company. They are usually in charge of some particular aspects of the company. This position is usually created in practice for administrative convenience and effective administration of the company’s business. They occupy a dual position an alter egoand an employee of the company.He is appointed by a resolution and he also has a service contract.
Non-Executive Directors are appointed by the company. They do not have administrative roles assigned to them but they operate as alter ego of the company. They attend Board meetings. It is usually from the non-executive directors that the Chairman of the Board is elected.
Managing Directors (MD) are statutorily recognised under Section 64 (b) CAMA. That Section provides as follows; “Unless otherwise provided in the Act or in the articles, the board may- (b) from time to time, appoint one or more of their body to the office of managing director and may delegate all or any of their powers to such managing director”. They are usually appointed as the Chief Executive Officer (“CEO”) and they take full responsibility for the activities of the company. They generally exercise powers delegated to them by the Board. They, like executive directors, are both alter ego and employees of the company. They must also possess a service contract which spells out the terms and conditions of their employment. Some companies appoint the MD as Chairman also. Thereby making him, Chairman and CEO. This practice has been abolished in Banks and public companies.
The Chairman of the company is usually appointed from one of the non-executive directors in the company. He is the chief policy maker of the company. He presides over company general meetings and board meetings of the directors. He is the Chief alter ego but he is not an employee of the company except his position is combined as stated above.
Shadow directors are not directors per se. They are influential persons whose advice and directors the other directors are accustomed to follow. They are not appointed by the company for this purpose. It is only a matter of custom that the other directors are accustomed to acting on their advice. They do not attend board meetings. In other words they hide in the ‘shadows’. Many company statutes contain definition of directors that in reality rather defines shadow directors. For example Section 567 of CAMA defines a director to include any person in accordance with whose directions or instructions the directors of a company are accustomed to act. Section 251 of the English Companies Actand Section 126bi of the NZ Companies Act contain similar definitions, except that the English Act specifically refers to them as shadow directors. From the several statutes the test for a shadow director is that the other directors are accustomed to acting on his directions or instructions. Neither Nigerian CAMA nor the statutes above, clearly specify whether it is all or some of the directors that should be accustomed to taking directions or instructions from him. It is my view that it would be preposterous to say that a person is shadow director if only one of the directors is accustomed to taking instructions from him. It also need not be all (especially in large companies), it is sufficient if only a substantial amount of the directors take his instructions and directions.
A shadow director is not a person who advises the company in a professional capacity. For example; solicitors and accountants who regularly advise the directors of a company are not shadow directors. This is because professional advice is usually given for the sake of receiving remuneration.
Alternate Directors are persons appointed in place of another director in the case of their absence. This is commonly done for directors who are foreign nationals. It is the director that nominates his alternate and is then approved by the general meeting resolution.
Life Directors are directors of a company who are not subject to rotation and retirement of directors. They are not directors for life per se. they can be removed via a special procedure and they can also vacate their office.
It is worthy of note that a company can also be a director in another company. But it must appoint a Representative Director to represent it in that stead.They are sometimes referred to as Nominee Director. 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 director.
It’s been an interesting series discussing a usually overlooked topic but a very relevant issue in company law today. Because more than ever, companies need more and more directors to man their affairs yet general meetings are not so frequent, so righteously following appointment procedures in statutes and some company Articles may prove impracticable. Hence the need to understand that the law, even Nigerian company law recognises company directors in different ways. This we have shown in this series. To get a full understanding you need to read the series.
 The definitions of a director under the New Zealand Companies Act support my view.
 Alter ego is a Latin word meaning “other self”.
 Ogbuanya N. C., Essentials of Corporate Law Practice in Nigeria, 2010, Novena Publishers (Lagos), pg. 324.
 Due to banking reforms and Corporate Governance Code respectively.
 See Section 259 of CAMA.
 Section 257 (1d) of CAMA.