Wednesday, 17 October 2018

QUALIFICATIONS OF A DIRECTOR

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In one of our previous articles, A Company Director: Powers & Responsibilities, we discussed who a director is and the duties and responsibilities he owes the company. These duties and responsibilities demand that only a person who meets certain legal requirements may be chosen to be a director. This article shall discuss those requirements.

The Company and Allied Matters Act (CAMA) which regulates company affairs in Nigeria, does not expressly provide what the qualifications of a person to be appointed director should be.
It, however, goes on to list out the factors that would disqualify one from being appointed as a director.
These disqualifying factors are:

1. An Infant - A person below 18 years as at the date of the appointment cannot be appointed as a director. 
There is, however, no age limit for being appointed a director as long as the individual is of sound mind.  It should be noted that for a person of 70 years and above to be appointed as a director in a public company, such person must disclose his age to the shareholders at the general meeting of the company.
 
2. A Lunatic or Person of Unsound Mind – A lunatic or person of unsound mind cannot be appointed as a company director. A person with a certified mental illness or disease cannot be appointed a director of a company. A director must be able to understand his actions and bear the legal consequences of those actions. 

3. A Bankrupt or Insolvent Person - A person who is declared by a court to be in debt and unable to meet his financial obligations or makes any arrangement or composition with his creditors is not qualified to be a director of a company. 

4. Fraudulent Persons – Any person who has been guilty of any offence related to fraud for which he is liable, whether convicted or not, involving the promotion, formation, management or winding up of a company shall be disqualified by the courts from being a director or in any way involved in the management of another company for a specified period not exceeding ten years. 

5. A Corporation - A registered company cannot be appointed director of another company. Only its representative may be appointed to the board of another company for a given term. 
What this means is that the only way registered Company A can sit as a director in registered Company B is for Company A to choose a qualified person to be appointed a director and represent it in Company B.
 
Where the Articles of Association of a company requires its directors to hold a specified share qualification, a person who does not hold the specified share qualification is disqualified from being a director. 
It is the duty of a director already appointed who is not already qualified under the Articles to obtain the specified share qualification within two months from the date of his appointment.
 
For example, if Company X has a clause in its Articles of Association that only a person holding at least 100,000 of the company’s ordinary shares is qualified to be appointed a director, Mr Y who holds only 80,000 of the company’s ordinary shares, is not qualified to be a director of the company. And if for some reason, Mr Y was already appointed a director of the company, he must obtain at least 20,000 more shares of the company within two months of his appointment to remain a director or he shall be removed from the Board.
 
A person may not have been in the category of the above persons before being appointed a director. If, however after his appointment and before his tenure as a director ends, he falls within any of the above categories, his office as a director is automatically vacated. At this point he can either be asked to resign or be removed by an order of the court if he is unwilling to leave.
In the case of a director becoming bankrupt or a lunatic, only an order of court can remove them from office as the court has the final word on whether such director is truly bankrupt or a lunatic.
In summary, the affirmative qualities of a director, though not expressly listed by CAMA, are:
  1. A director must be an adult.
  2. He must be sane and of sound mind.
  3. He must be financially sound and stable and must not have been convicted of fraud.
  4. He must meet the conditions required of a member of the board of directors of the company.

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