DIRECTORS: Status, Appointment and Removal

An incorporated company is an artificial entity. Invisible, intangible and existing only in

contemplation of law. It has neither a mind nor a body of its own – Hadane LC in Lennard’s
Carrying Co v. Asiatic Petroleum Co. 1915 AC 705 at p. 713. It must act through living
persons. This makes it necessary that the company’s business should be entrusted to some
human agents. Hence the need to have directors.
Section 271 (1) requires that every company, not being a small company shall have at least
two directors.
Position of Directors
The directors have been variously described as professionals charged with the responsibility
of directing the affairs of the company. They are regarded as officers and not servants of the
company. “A director is not a servant of any master. He cannot be described as a servant of
the company or of anyone” – Moriarty v. Regent’s Garage & Engg Co. [1921] 1 KB 423 at
431, per Lush J.
Under interpretation, Section 868, “director” includes any person occupying the position of
director by whatever name called; and includes any person in accordance with whose
directions or instructions the directors of the company are accustomed to act.
Furthermore, the Act provides that directors of a company are persons duly appointed by the
company to direct and manage the business of the company.
Directors have been described sometimes as agent, trustees and managing partners. See –
Imperial Hydropathic Hotel Co. v, Hampson (1882) 23 Ch. D 1;
Forest of Dean Coal Mining Co, Re, (1878) 10 Ch D 450 at pp. 451-452, per Jessel, MR.
For the application of agency, see:
Ferguson v, Wison (1866) 2 Ch.App 77
Allen v. Hyatt (1914) 39 TLR 444
As trustees, see:
York & North Midland Rly Co v. Hudson 22 LJ Ch 529
Note that they are not trustee in the real sense of it. A trustee is the legal owner of the trust
property and contracts in his own name. A director, on the other hand, is a paid agent or
officer of the company and contracts for the company. Directors are trustees of the company
and not of individual shareholders. Percival v. Wright [1902] 2 Ch 421
As organ:
The organic theory of corporate life is a theory which treats certain officials as organs of the
company, for whose action the company is to be held liable just a natural person is for the
action of his limbs. This notion captures a director beyond the concepts of agency and
trusteeship. The range of corporate responsibility now corresponds with that of an individual,
even, where mental element is required. Thus, “the offending corporation cannot escape from
the consequences which would follow in the case of an individual by saying that they are a
corporation” –R v Tyler [1891] 2 QB 588 at 594 per Bowen LJ
The board is recognized to be a primary organ of the company.
Bath v. Standard Land Co [1910] 2 Ch 408 at 416, per Neville J – Here it was observed that
“the board of directors are the brain and the only brain of the company, which is the body and
the company can and does act only through them”.
Similarly, Greer LJ observed in Fanton v. Denville [1932] 2 KB 309 at p. 329, that “a general
manager of the business is regarded as the alter ego of the company, and it would be
responsible for his personal negligence”

Appointment of Directors
It is imperative for the management of companies to be in proper hands. The first directors of
a company are to be appointed by the subscribers of the memorandum of association or be
named in the articles - Section 272. The first directors hold office only up to the date of the
first annual general meeting of the company – Section 273 (1).
A casual vacancy occurs when the term office of a director comes to an end otherwise than
by regular expiration, arising out of death, resignation, retirement or removal. The Board of
directors may appoint new director to fill such vacancy – Section 274 (1). The person so
appointed may be approved at the next annual general meeting, and if not, shall cease to be a
director. The general meeting may also determine in what rotation the directors shall retire.
Section 275 (1) provides that a public shall have at least three independent directors.
“Independent director” means a director of the company who, or whose relatives either
separately or together with him or each other, during the two years preceding the time in
question – (a) was not an employee of the company; (b) did not – (i) make or receive from
the company payments of more than N20,000,000, or (ii) own more than a 30% share or
other ownership interest in an entity that made to or received from the company payments
more than N20,000,000; (c) died not own directly or indirectly more than 30% of the shares
of any type or class of the company; and (d) was not engaged directly or indirectly as an
auditor for the company.
On the strength of the application of the law of agency, where a person not duly appointed as
a director acts as such on behalf of the company, his acts does not bind the company and
deemed to assume personal responsibility. However, where he is held out as having such
authority, the company will be liable. Section 276.
The articles of a company may provide that a certain number of shares will have to be held by
each director. Such shares are called qualification shares. A director must, within two months
of his appointment, obtain the required number. A director who fails to acquire his
qualification shares within the prescribed period will have to vacate the office and also
becomes liable to a penalty as may be stated in the regulation of the Commission, if he
continues to act as a director. Section 277.
The Act requires a person who is 70 or more years old to disclose this fact, where he
appointed or proposed to be appointed director of public company – Section 278 (1). There is
the need for full disclosure of any position being held in any other public company by a
person to be appointed a director of a public company – Section 278 (2).
It is prohibited for an insolvent person to act as a director or be involved in the management
of any company – Section 279.
A person who has been convicted of any offence in connection with the promotion, formation
or management of a company, or in the course of winding-up, has been guilty of any offence
under sections 668-670 (relating to fraudulent activities and falsification of books of
companies being wound up), or has been guilty of any offence involving fraud, the court shall
make an order that the person shall not be a director of or in any way be concerned with the
management of a company for a period of time not exceeding 10 years – Section 280 (1).
The Act permits the appointment of a person as a director for life – Section 281. It also
permits the appointment of a person that is 70 years or more of age as a director of a public
company – Section 282.
The Act disqualifies the following categories of persons from being appointed as a director –
(a) a person under the age of 18 years; (b) a lunatic or a person of unsound mind; (c) a person
suspended or removed as a director; (d) an insolvent, or person convicted for offences in
connection with the management of the company or being guilty of any offence involving
fraud of falsification of books or made to vacate office of a director; and (d) a corporation
other than its representative appointed to the board for a given term – Section 283.
The office of a director shall be vacated if the director – (a) refuses to take up his
qualification shares; (b) becomes bankrupt or makes arrangement or composition with his
creditors; (c) becomes prohibited from being a director by reason of any order made relating
to his involvement in fraudulent activities or falsification of books of books; (d) becomes of
unsound mind; or (e) resigns his office by notice in writing to the company – Section 284.
The offices of the directors are liable to determination by rotation. Thus, unless the articles
provide otherwise, at the first annual general meeting of the company all the directors shall
retire from office, and at the annual general meeting in every subsequent year one third of the
directors shall go out. In the first place those directors will retire who have been longest in
office since their last appointment. Section 285. This provision is designed to eradicate the
mischief caused by self-perpetuating management.
Any defect in the appointment or qualification of a director discovered thereafter will not the
validity of his acts as a director, manager or secretary – Section 286.
The appointment of every director is required to be made by voting at the general meeting.
The candidates cannot be put to vote en bloc. Each candidate has to be voted on individually.
If two or more persons are appointed directors by a single resolution, the same is void and
non-existent in the eyes of the law. If a meeting has unanimously so resolved, more than one
person may be elected by a single resolution. Section 287.

Removal of directors
The Act provides that a company may by ordinary resolution remove a director before the
expiration of his period of office, notwithstanding anything in its articles or in any agreement
between the company and him – Section 288. The section is intended to do away with
arrangements under which directors were either irremovable or removable only by
extraordinary resolutions. A special notice of a resolution to remove a director is required,
that is, notice of the intention to move the resolution should be given to the company not less
than 14 days before the meeting. This is to enable the company to inform members
beforehand. As soon as the company receives the notice, it must furnish a copy of it to the
director concerned who will have the right to make a representation against the resolution and
to be represented at the meeting. If the director submits a representation and requests the
company to circulate it among the members, the company should, if there is time enough to
do so, send a copy of the representation to every member of the company to whom notice of
the meeting is sent. If this is not possible, the representation may be read out to the members
at the meeting. Section 288.