Is it correct to say that because a person is called a director in a company then such a person is actually a director? And vice-versa, does the fact that an officer is not nominally recognised as a director go to show that (s)he is not? Is appointment of a person prima facieevidence that the person is a director and can be dealt with as such under Nigerian company law? Is there a distinction between de facto and de juredirectors? What is the best test of determining who a director is – the appointment test or the holding out test? Do you think theoretically it is the appointment test, but practically it is the holding out test? What is the implication of the rebuttable presumption under Section 244(2) CAMA? How far does a director’s acts bind the company? What are the types of directors companies usually appoint either through a general meeting or through the Board?
The above and closely related issues will be the focal point of discussion anon.
The Companies and Allied Matters Act[1] (“CAMA” or “the Act”) is the principal law that regulates officers of a company in Nigeria.[2] The whole Chapter One of Part IX of the CAMA deals with directors but we will be focusing the gravamen of our discussion on the sections relevant to the topic. Directors under company law are identified in two ways either they are appointed by the company or they are held out by the company as directors. The former is the appointment criterion while the latter is the holding out criterion. The appointment criterion says that a person is a director of a company as long as he is appointed by the company as such and nothing more. While the holding out criterion is to the fact that, a person need not be appointed before he is recognised as a director; however a person can be regarded as a director if he is so held out by the company. 
Under Nigerian company law, a director has been statutorily defined following one of these criteria. Section 244 (1) of CAMAdefines directors of a company as “persons who are duly appointed by the company to direct and manage the affairs of the company”. The operative words here are “appointed” and “to direct and manage”. Two things are distillable form this definition. One is that, the Act provides for the appointment criteria as the means of identifying a director. That is a person is a director as long as he is appointed as such. Second, is the fact that no matter what name the person is called, whether President or Governor, etc., as long as he is appointed to direct and manage the affairs of the company, he is a director. 
Thus under Nigerian  law, an officer of a company is still a director even if he is not nominally referred to as such, as long as he is appointed by the company to direct and manage the affairs of the company. This means that appointment is prima facie evidence that a person is director of a company and can be dealt with as such. Under English Law this is the position as well as the term “director” is defined so as to include “any person occupying the position of director, by whatever name called”.[3]
Does this mean that Nigerian company law does not recognise the existence of the holding out criteria as a means of recognising who a director is in a company?

I think it does. Section 244 (4) CAMA lends credence to this position. That subsection provides that if a company holds a person out as a director of a company, it is liable to a fine[4] if it turns out that such a person is not duly appointed. Also there is a rebuttable presumption under Section 244 (2) in favour of all persons dealing with the company that any person who is described (or held out)[5] as a director of the company is duly appointed as such.[6] Meaning that the CAMA recognises that sometimes a company may hold a person out as a director. The trouble is that, the person must be duly appointed else the company will be straying into turbulent waters. What if a person is held out as a director and such a person is actually not, and an unsuspecting third party has dealings with such a person, where would liability lie? The company, the ‘director’ or the unsuspecting third party would have to bear his brunt. This will depend on the circumstance. If the person is held out by the company, then the company is liable. If the person holds himself out, then he is liable personally.[7] The unsuspecting third party who acts bonafide cannot be held liable. 

That’s all we’ve got time for in this post. In the next post, I will be looking at the following issues. What do the Nigerian judicial decisions say on the issue? What is the position in other jurisdictions? What is the best test of determining who a director is-the appointment test or the holding out test? What are the different types of directors Nigerian companies appoint? And a few more issues that we will be discussing in the next post.

[1] Cap. C20 Laws of the Federation of Nigeria, 2004.
[2] Resort is sometimes had to the Corporate Governance Code for Public Companies in Nigeria, 2003and 2011 and statutes of regulatory bodies. In this article heavy reliance would be placed on CAMA.
[3] See Section 250 of the English Companies Act 2006.  See also Re Eurostem Maritime Ltd [1987] P.C.C. 190, per Mervyn Davies J. and Re Lo-Line Electric Motors Ltd [1988] B.C.L.C. 698 at 706 per Browne-Wilkinson V. C.
[4] Fine of N1000 every day it holds such person out.
[5] Words in parenthesis are mine.
[6] This is the reason for the penalty under subsection 4.
[7] This is the implication of Sections 244 (3) and (4); and 250 of CAMA.

About the author

Nigerian Law Today

NLT’s mission is to take legal-content writing to the next level in Nigeria by leveraging legal expertise and technology. We publish fresh, original, and insightful articles on areas of law we cover.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.