Partnership 1

Compiled By: Nwosu Isochukwu Michael.
Nature: Partnership Class Note Recording.
LAW OF PARTNERSHIP.
11th July, 2016.
MAJORITY RULE AND MINORITY PROTECTION. DR. OLAWOYIN.
Get Professor Abugu's Book.
MAJORITY RULE:
In terms of implementing the decisions of a company, the majority would prevail. Therefore,
whoever owns the most shares in a company would usually carry the day in terms of
decision making. But there are also minorities in the company that may be unhappy with the
way the company is transacting.
Ordinarily, if you are not happy with the way decisions are being made and you are in the
minority, then you can sell your shares and leave the company.
Company law however recognises that there may be instances where the majority (in the
process of the decision making) may be committing fraud against the company. Like
expropriating its assets. In such a situation, company law draws the line. In some limited
instances where the actions of the majority constitutes a fraud on the minority or a particular
wrongdoing in question enable the minority holder to bring a personal action in his own
right , company law comes in.
After noting that generally speaking, the majority carries the day, except in transactions
where a wrong has been done to the company or a fraud has been committed. Then the
minority can stand up to challenge the majority. Company law therefore provides some kind
of remedy. The textbooks reference the rule in Foss v Harbottle. Now enacted in Section
2991 CAMA (this should always be your starting point). This rule is more of a procedural
device than a substantial rule. The rule just enables the court to determine who has the right
to institute the right. In essence whether the plaintiff has locus standi or he is a mere
busybody The rule is a common law principle. It has two main elements (which can also
be seen in CAMA).
- The first leg is that where a wrong has been done to a company, then the proper plaintiff to
bring an action is the company. i.e. the person that has been wronged has the right to bring
an action.
- The second pillar is (just like a statement of the majority rule) that where the wrong is in
the nature of a mere irregularity that can be regularised by the majority (courts would not
engage in internal management of companies), then the court should not bother themselves
in determining the issue. When all that can be done is for the majority to regularise the
wrong.
There are however exceptions to this rule as it is not absolute. It has various exceptions. Dr
Olawoyin prefers to call this instances where the rule do not apply rather than say there are
exceptions:
1. If the alleged wrong is also a wrong that entitles the shareholder to bring a personal
1 Subject to the provisions of this Act, where an irregularity has been committed in the course
of a company's affairsor any wrong has been done to the company, only the company can sue
to remedy that wrong and only the
company can ratify the irregular conduct.
ATTENTION: THIS NOTE SHOULD SERVE AS A MERE READING GUIDE. PLEASE CONFIRM THE SECTIONS,
CASES AND SPELLINGS. THE FINAL, REVISED VERSION SHALL BE UPLOADED AFTER THE LECTURES HAVE
BEEN CONCLUDED. SORRY FOR THE INCONVENIENCE OR CONFUSION.

action or entitles the shareholders to bring a representative action in their personal

right. (the scenarios can be seen in Section 2992). Going on to Section 300(a-f), you
would see that the instances stated therein are the so-called exceptions to the rule in
Foss v Harbottle. These exceptions have various cases which are also stated in Prof's
book. CAMA recognises the fact that irrespective of the general provision of Section
299 (which provides that the company is the proper plaintiff and can ratify
irregularity) it notes that a member may by injunction or declaration (this means
that he can only sue for injunction or declaration not damages see also Section
301) thus if the company is contemplating the act he can seek an injunction to
restrain.
In essence, Section 300 provides:
Without prejudice to the rights of members under sections 303 to 308 and sections 310 to
312 of this Act or any
other provisions of this Act, the court, on the application of any member, may by
injunction or declaration restrain
the company from the following
(a) entering into any transaction which is illegal or ultra vires; Dr Olawoyin believes that
this would be very easy to establish.
(b) purporting to do by ordinary resolution any act which by its constitution or the Act
requires to be
done by special resolution; For example where they want to alter the article and purport to
pass it by ordinary resolution. This is because the law requires a special majority for
alteration of Articles.
(c) any act or omission affecting the applicant's individual rights as a member; There has
been this argument in company law that what is the individual right of a shareholder? is it
something that must affect you personally? Remember that the memo and the Article is a
binding contract. So let us say for example that the decision that is being sought to be taken
involves a breach of the Articles of Association but the particular article has nothing to do
with the personal rights of the shareholder. Maybe in respect of the fact that there must be a
profit before a co can declare dividend but the majority shareholders are hungry for the
dividend. The question is; whether or not the minority shareholder can bring a personal
action on the basis of a statutory contract to which he is a party to restrain the company
from declaring dividend when it did not make profit. A school posits that he should be able
to bring a personal right. There is however a conservative view that suggests that the action
which the shareholder can bring must be a provision of the article that can affect the
shareholder personally.
(d) committing fraud on either the company or the minority shareholders where the
directors fail to take appropriate action to redress the wrong done; Dr Olawoyin believes
that this provision is the true exception because the CAMA has recognised that although the
wrong has been committed on the company, a shareholder can bring an action
2 Subject to the provisions of this Act, where an irregularity has been committed in the course
of a company's affairsor any wrong has been done to the company, only the company can sue
to remedy that wrong and only the
company can ratify the irregular conduct

(e) where a company meeting cannot be called in time to be of practical use in redressing
a wrongdone to the company or to minority shareholders; and
(f) where the directors are likely to derive a profit or benefit, or have profited or benefited
from
their negligence or from their breach of duty.
Section 301 restates that the minority shareholder can bring different kinds of action to
enforce the right. Maybe a personal action members can institute a representative action
on behalf of themselves and other minority shareholders.
IT may also be a DERIVATIVE Action. This is one of the most controversial. IT arises
where a wrong has clearly been done to a company and the so called wrongdoers are in
control of the company. Therefore it is logical that a wrongdoer cannot pass a resolution that
the company should sue him for the wrong perpetuated. We then have a situation where the
wrongdoers are in control of the company and allow wrongs to go unpunished. The
DERIVATIVE action allows the minority shareholders to institute an action against the
wrongdoers for the wrong done against the company. The minority would be the plaintiff,
the Majority wrongdoer would be the defendant and the company would be joined to the
suit. In the context of a derivative action, we can see that he is instituting an action in the
interest of the company as the wrongdoers would never sue themselves. This is a good tool
in the hands of the minority shareholders to fight corporate maladministration.
Section 3033 CAMA provides a blanket provision. Looking at Section 3094, it tells us
who/what an applicant is: a former shareholder, a director/officer or former director/officer,
the CAC, any person who in the discretion of the court is a proper person quote it.
Dr Olawoyin has tried to use Section 309(d) to institute on behalf of certain parties. In a
3 (1) Subject to the provisions of subsection (2) of this section, an applicant may apply to the
court for leave to bringan action in the name or on behalf of a company, or to intervene in an
action to which the company is a party, for
the purpose of prosecuting, defending or discontinuing the action on behalf of the company.
(2) No action may be brought and no intervention may be made under subsection (1) of this
section, unless the
court is satisfied that
(a) the wrongdoers are the directors who are in control, and will not take necessary action;
(b) the applicant has given reasonable notice to the directors of the company of his intention to
apply to the court under subsection (1) of this section if the directors of the company do not
bring, diligently
prosecute or defend or discontinue the action;
(c) the applicant is acting in good faith; and
(d) it appears to be in the best interest of the company that the action be brought, prosecuted,
defended or discontinued.
4 In sections 303 to 308 of this Act, "applicant" means(a) a registered holder or a beneficial
owner and a former registered holder or beneficial owner, of a
security of a company;
(b) a director or an officer or a former director or officer of a company;
(c) the Commission; or
(d) any other person who in the discretion of the court, IS a proper person to make an
application
under section 303 of this Act.

case where a very rich man structured his estate by putting all his personal assets in a
company but made his two children directors giving them 1,1 percent and taking 98 percent.
The man dies without a will. The two eldest children then modified the shareholding
structure in their interest relegating the man's estate. The problem was how to stop the sons
so that beneficiaries (about 30something of his other children from about 9-10 wives) would
not be prejudiced. The beneficiaries are not shareholders in the company and letter of
administration had not been obtained and the two sons have been frustrating the process of
obtaining the letters of administration. He brought an action in their names on the premise
that the beneficiaries are the proper persons. The case is still in court as at July, 2016.
Section 3035 talks about what must be done before a minority shareholder can commence a
derivative action. GET THE CASE REPORT TO BE GIVEN IN THE CLASS.
The intention behind Section 303 (in Dr Olawoyin's view) is that in such a situation (that the
applicant goes before the court to seek leave), it is how the applicant is able to persuade the
court that would determine whether or not the court would grant leave. The applicant
saying; court, this is the reason why you should give me leave. Then you serve the
process on the wrongdoers who would come to defend the action. But this is not the case
because of a subsidiary legislation. Read the case of Agip Nigeria v Agip Petroleum where
this provision was cited This case is a Supreme Court Decision. A must read. The regulation
requires that before obtaining the leave of court, the wrongdoers should be put on notice..
Dr Olawoyin believes that this provision gives the wrongdoers to more time to frustrate
everything. This leads to time wastage where the parties are appealing against the granting
of a leave the cause of action may even outlive the parties. Dr Olawoyin believes that this
provision has killed the issue of derivative action. Thankfully, there are other avenues by
which shareholders can enforce/bring wrongdoers to book. This takes us to the remedy of
winding up under the just and equitable ground it means that you want to shut down the
company because it is just and equitable to do so. But as you would see, sometimes this
remedy may be one that is using a sledge hammer to kill a fly because sometimes winding
up may not only be inappropriate but unreasonable. The court usually has no option but to
wind up the company where it is proved that it is just and equitable. Ebrahimi v
Westbourne Galleries Ltd. (CONFIRM THE SPELLING) Which is a classic example of
where the remedy may turn out to be an unreasonable remedy. In this case, Ebrahimi and
5 (1) Subject to the provisions of subsection (2) of this section, an applicant may apply to the
court for leave to bringan action in the name or on behalf of a company, or to intervene in an
action to which the company is a party, for
the purpose of prosecuting, defending or discontinuing the action on behalf of the company.
(2) No action may be brought and no intervention may be made under subsection (1) of this
section, unless the
court is satisfied that
(a) the wrongdoers are the directors who are in control, and will not take necessary action;
(b) the applicant has given reasonable notice to the directors of the company of his intention to
apply to the court under subsection (1) of this section if the directors of the company do not
bring, diligently
prosecute or defend or discontinue the action;
(c) the applicant is acting in good faith; and
(d) it appears to be in the best interest of the company that the action be brought, prosecuted,
defended or discontinued

two others were the shareholders in Westbourne galleries. It was a small private company
the unwritten understanding was that all three of them were to be running the company
together. It got to a point where 2 were not happy with one. The two came together and
removed Mr Ebrahimi. Perfect 2/3 majority. Aggrieved, Mr Ebrahimi went to court and
brought a petition to wind up Westbourne Galleries on the just and equitable grounds. He
lost at the High Court and the Court of Appeal because the company was doing very well.
However, at the House of Lords, it was noted that there are certain situations where
equitable consideration would override any legitimate exercise of corporate powers.
Although the exercise of removing Mr Ebrahimi was in accordance with the law, Mr
Ebrahimi had a legitimate expectation to be a member of the co. Therefore it would be just
and equitable to wind up the company. The result was a disproportionate one to what had
happened there could have been other remedies like overturning the removal of Mr
Ebrahimi and reinstating him or ask them to buy him out at a premium. Again, their hands
were tied. Because of this, English court came up with the remedy of:
UNFAIRLY PREJUDICIAL CONDUCT: to untie the hands of the court. This remedy is
becoming very popular in England. We have this in Sc 310 to 3126 of CAMA. This remedy
6 (1) If the court is satisfied that a petition under sections 310 and 311 of this Act is well
founded, itmay make such order or orders as it thinks fit for giving relief in respect of the
matter complained of.
(2) Without prejudice to the generality of subsection (1) of this section, the court may make
one or
more of the following orders that is, an order
(a) that the company be wound up;
(b) for regulating the conduct of the affairs of the company in future;
(c) for the purchase of the shares of any member by other members of the company;
(d) for the purchase of the shares of any member by the company and for the reduction
accordingly of the
companys capital;
(e ) directing the company to institute, prosecute, defend or discontinue specific proceedings,
or authorising a
member or the company to institute, prosecute, defend or discontinue specific proceedings in
the name or on
behalf of the company;
(f ) varying or setting aside a transaction or contract to which the company is a party and
compensating the
company or any other party to the transaction or contract;
(g) directing an investigation to be made by the Commission;
(h) appointing a receiver or a receiver and manager of property of the company;
(i) restraining a person from engaging in specific conduct or from doing a specific act or thing;
(j) requiring a person to do a specific act or thing.
(3) Where an order that a company be wound up is made under this section, the provisions of
this
Act relating to winding up of companies shall apply, with such adaptations as are necessary, as
if the order had
been made upon an application duly filed in the court by the company.
(4) Where an order under this section makes any alteration or addition to the memorandum or
articles of a
company, then, notwithstanding anything in any other provision of this Act but subject to the
provisions of the
order, the company shall not have power, without the leave of the court, to make any further
alteration or
addition to the memorandum and articles inconsistent with the provisions of the order but,
subject to the

allows minority shareholders to still be able to bring a petition to court and to seek any
remedy that is equitable in the circumstances. The difference between the UPConduct and
the WUJaEG is that under the former, winding up is one of the many remedies which the
court may grant. The Advantage of this is that the minority shareholders do not have to
contend with the rule in Foss v Harbottle. So you can say that the way and manner in which
they are running the affairs of the company is prejudicial/discriminatory/oppressive
(oppressive has usually been difficult to prove) to your interest as the shareholder. The
persons that can bring the action are also listed. Read the section. This means that the court
has a wide discretion under UPC. It is not bound by the reliefs you seek when you bring a
petition. No matter how much you vex and want the company to close, the court may still
grant another more appropriate remedy.
Note however that Sc 408 CAMA still allows an applicant to bring an action under the just
and equitable ground (WUJaEG). What does this mean? Lets say we have an Ebrahimi
situation and Mr Ebrahimi comes to you for advice and he just wants the company to be
wound up and nothing more or less. As a lawyer, technically speaking, even though you
have the option of going under Section 310 and 311 you can go under Section 408 7(E) and
again tie the hands of the courts.
Don't you think the legislator should take out this section? Does this Section add anything to
the winding up debate? There are a host of cases in Nigeria on UPCs. Check em out.
14th July, 2016.
CORPORATE ADMINISTRATION/MANAGEMENT.
Remember that a registered company is a juristic person. However, these juristic persons
need a setup of some people that would run the business they administer the affairs of the
company. Corporate administration is necessary because of the nature of companies.
foregoing provisions of this subsection, the alteration or addition shall have effect as if it had
been duly made by a
resolution of the company.
(5) A certified true copy of an order made under this section altering or giving leave to alter a
companys
memorandum or articles shall, within 14 days from the making of the order or such longer
period as the court may
allow, be delivered by the company to the Commission for registration; and if the company
makes default in
complying with the provisions of this subsection, the company and every officer of it who is in
default shall be
guilty of an offence and liable to a fine of N50 and, for continued contravention, to a daily
default fine of N25
7 408. Circumstances in which companies may be wound up by courtA company may

be wound up by the court if
(a) the company has by special resolution resolved that the company be wound up by the
court;
(b) default is made in delivering the statutory report to the Commission or in holding the
statutory meeting;
(c) the number of members is reduced below two;
(d) the company is unable to pay its debts;
(e) the court is of opinion that it is just and equitable that the company should be wound up.

Representatives are necessary to help companies run their affairs.

Our concern therefore is to navigate these organ/representatives.
The Law has identified the following:
- General Meeting.
- Board of Directors.
- The Managing Director.
Any of the three can appoint Officers/Agents to help in the running of the affairs.
The reason for knowing the organs is because before the company can become liable for
acts done by the representatives the acts should fall within any of the three organs.
Taking it a little bit further, we have shareholders of the company. (e.g. The whole year 5
constitutes shareholders for the class of 2016. If you look at Section 37 (effect of
registration) the Section says that it shall be the collection of the subscribers that shall
become a body corporate). The members become the general meeting.
Now, looking at the Board of Directors: The law says that a co must have a minimum of 2
directors. There are however companies with more depending on their preferences. Only
managing director can represent the interests alone/as one. Look at Section 63(1)CAMA
and Section 65 CAMA as authority for those who can represent the company. Remember
Salomon v Salomon.. Look at Section 63 (1). Also Section 65 which reinforces Section 63.
We are made to understand that the MD is an organ. However in the usual private sector,
there is usually an MD and a Chairman. In law, how superior is the Chairman to the MD? It
appears the MD has more mouth. The Chairman is not really mentioned in the Act.
However, Section 263 provides that a chairman can be appointed by his colleagues. This
notwithstanding, he is not on the same level with the MD. Except as an agent. If you look at
Section 63 or officers/agents appointed by Therefore, if the Chairman is appointed to
act in a capacity, so be it.
The Next question is: Do these Organs have disparate or same powers? Who has more
mouth? Section 63(2) CAMA provides that the powers shall be as determined by the
Companys Articles. See also Section 263(5) and Section 64. It therefore appears that the
law is silent on it. The law gives the prerogative to the companys article to regulate and
design the power framework between the GM and BOD. Understanding this would be
important in practice when you are taking directions from both sides.
This takes us to the Articles.
What does the article do? They provide regulation. See Section 33 and 34 on the definition,
content and format of Articles.
The Memo has been provided for in Section 27 and makes it quite elaborate and fixed.
However, the provisions of the Articles are concerned with the internal regulation of the
company as suitable to particular preference of the co. The Article can regulate when the
law is silent on the matter. If you understand the knowledge of CAMA you would see that
its provisions are in 3 forms:
- Some provisions are mandatory.
- Others enabling/empowering: says that companies may regulate so so and so in
their articles. Section 63(2) is an example of an empowering provision.
- Others are in default form: in case companies do not make a provision, so so and

so is what the law gives. It simply means that the provisions would apply to
companies except they have modified it to suit their circumstances. Then Section
63(3) is a default provision. Which provides in favour of the BOD to manage the
business of the company. Note the first line except as otherwise provided in the
companys article this means that whatever the provision is saying can be
modified by the Articles. When they fail to modify by articles, then the provision
applies. Companies can use their articles to modify the power of the BOD to manage
the affairs of the co.
Therefore, the powers in 2 companies can be the same (when they are both operating under
the default provision) or they could be different where one or both of the companies vary
the provision by their article. When one of their article changes the default.
Going on to sub 4 which says that the general meeting should not chook hand in the matters
of the BOD.
If there is a problem in court on whether the BOD can override, the starting point is: where
is the companys article. Being aware of 63(3 and 4).
See also schedule 1 in Table A. There are some prototype articles that you can adopt. You
can adopt all of it, omit or alter. These articles are default articles which can be amended to
suit the peculiar preferences of the co.
16th July, 2016.

SHAREHOLDING, MEMBERSHIP AND SHARES.
UPDATE AT LEAST 10 LINES
Sub 1 of Section 79 has captured what he has told you in respect to the first leg of how you
can become the shareholder or members of the company. We know that the point of
incorporation is the only time one can subscribe to the memorandum. Section 79(1) says
that they are automatically members of the company when they have subscribed (to at least
25 percent).
You should however know that there is a difference between issued and unissued capital.
Therefore, the remaining 75 percent unissued can be issued to Okoro, Yahaya and so on.
You also know that shares are transferable. There is also a stock exchange where shares
issued by public companies are traded. How does the membership of the co play out?
All these put together (apart from automatic membership to subscribers) there are other
windows for people to become members of the co. This is provided under sub 79(2). There
must however be an agreement Next, the name of the person must be entered into the
register of members. These two elements must be present.
In the case of the first one (subscription to memart), it is automatic your name must be
entered. If you are a subscriber to the original memo and art and your name was not entered,
you can apply for an order for the rectification of the register. However, in the second
instance (taking shares): two things are required: an agreement and an entry of the name in
the register. Both must exist. Where only one exists, you are not a shareholder. In practical

parlance Section 79(2) says that there must be an agreement to take up shares. It does not
specify whom that agreement must be entered with. E.g. if the co makes an invitation and
you agree with the company that you want X amount of shares, the agreement is between
the co and the shareholder. Pursuant to the agreement you pay for the shares and your name
is entered into the register. This agreement is one between the co and the prospective
shareholder. This is usually the case in private cos between director and prospective
shareholder But in the case of a big public co, the co wants to do a public issue of shares
they then roll out 100 million units of shares to be sold at #5 each on public issue. You go to
your bank you collect the form of subscription and indicate the amount of shares you want
to take in the company then you submit them ultimately to the company. In such a case, oyu
want an agreement. This type is a process of public issue.
What is common in both is that there is an agreement to acquire shares for a specific period
and number.
Ada can transfer her shares to John. Such agreement can come under sub 2. The name of
John should then be entered in the register of shareholder. Transactions on a common share
exchange can be referred to as the secondary source (the primary source/market is when you
buy from the company.) while the secondary one is when you are buying the shares that is
already being held by a person. Common to both is sub 2.
Note that it is not in all circumstances that you buy shares from Ada that your name would
be entered. Why? When we treated the provisions of Section 21 you recall that private cos
should restrict transfer of shares. Therefore, Jane and Ada can enter into a contract for
transfer of shares but because there are restrictions, Jane may not be able to have her name
entered. This is not to say that the transaction is void or voidable. It is a complete
agreement irrespective of the fact that Jane may not become a shareholder in the context of
79(2). What it means is that Jane would become the shareholder in equity. Therefore being
the shareholder with beneficial interest even though the legal interest is vested in Ada.
Therefore, dividends accruing therefrom should be transferred to Jane. Notice of meetings
should also be communicated to Jane. Ada is the shareholder in the books of the company
therefore is the Legal shareholder but she has sold to Jane thus making Jane the beneficiary
in equity notwithstanding the fact that Jane cannot have her name entered in the book.
This brings us to shares:
The Shares of a company
You know the capital of a company is divided into units of shares for the purposes of
subscription. Also, from the first semester work when we examined Section 41 which
provides that the MEMARTS have the effect of a contract under seal by which the members
and officials respectively undertake to quote the Section. The effect of Section 41 is
that there are 6 contracts Co-mem, co-officers,- members-offic, office-offic, co-mem. To
observe. Membership of a co confers rights. These rights are the rights comprised in the
MEMARTs All of these we know about shares already we also know that shares deriving
from the capital has been broken down into units. Those units carry what is called the parvalue a share of #1 has a par value of #1 naira. Shares always carry a par value for the
purposes of subscription.

What is a share? Fawell J in Bolant Trustees v Steel Brother Co Ltd, said, a share is a unit
of investment in the capital of a co, it is itself not a sum of money quote it. He then
concludes that it includes a right to a sum more or less the amount. Find the quote in the
textbook. The definition has withstood the test of time.
In the next few minutes all of you are going to learn to recite that definition by heart. After
this class, you should remember it.
First take this down.
Definition of a Share.
1. A share is a unit of investment in a company.
2. A share is not a sum of money.
3. But it is an interest measured by a sum of money.
4. It is measured by a sum of money for the purpose of liability.
5. It is also measured by a sum of money for the purpose of interest.
6. It confers rights of membership under the articles of association.
7. It confers right of return of capital of a more or less amount.
These 7 statements encompass what Fawell J said in the case.
Memorise and understand these statements.
EXPLANATION.
On Statement 1: That it is an investment interest: Prof asks; why would you use your
money to buy shares? Looking at it from the perspective of income and investment. You
should know that human wants are insatiable. If you are given #1 million to spend before 12
noon, how would it be spent? How possible is it for one to have savings if your needs are so
large and your income cannot cover your need. How come you are able to have savings?
Why is it that your income that is smaller than your needs still finds its way into a savings
account? Answer: You are able to save because you have to forego some present enjoyment.
Every saving is a question of discipline. Why would you want to save instead of enjoying?
You forego some pleasures because of the future to secure the future. What would you do
to the money you are saving? You secure it. You are depriving yourself to be able to secure
the money. Knowing fully well that when you put your money in a company, you are losing
control which is a risk. (When money is in your hands or custody, you have control once
you part with it to another person, you lose control). The question is why? because you
hope the co would take care of it. You hope to make interest for every investment
instrument, instead of keeping your savings secure, you would part with it because:
1. You want the money to appreciate in value. If it is in your custody, it would remain
the same.
2. You probably dont have enough security to protect it.
3. Periodic interest. Apart from the money itself growing in value, it would be good if it
yields some periodic interest.
4. You want to hedge against inflation. You can keep the money in your wardrobe and
dollar rises. Your money has therefore lost value.
This is why a share is a unit of investment in a co. It is the product of your savings which
you want to appreciate in value instead of keeping it in one place. A share is therefore not a
gift or loan. But it is an investment interest in the capital of a co.

THE SECOND STATEMENT: that a share is not money. You receive an instrument when
you buy shares rather than money.
THE THIRD POINT: but it is measured by a sum of money and for this purpose, it has a par
value. It is measured by reference to a sum of money but it is by itself not a sum of money.
THE FOURTH POINT: Limited liability refers to that situation where the liability of the
shareholders of a company is limited to the amount of capital they have contributed or
agreed to contribute to the company. Shares are measured by a sum of money for the
purpose of liability.
THE FIFTH: For the purposes of interest. Take for example: Ada has 10k, Seun has 20k
Prof Abugu has 20mil. They are trying to decide whether they should open a branch office
in Warri. Profs vote would prevail as he has majority interest. What is the measure of the
interest as between A, B and Prof? It is measured according to the amount of interest they
hold (share). Section 79(3) provides that a shareholder should have at least one share.
Moreover, when the co has made a profit, it is distributed according to the number of share
they hold in the company. One of the interest they share in common is the fact that they
have a right to have their money recovered/returned. In terms of interest, participation, vote
and so on.
THE SIXTH: that it confers right of membership.
SEVENTH: also clear. We have established that the share is not a loan or gift. If things are
good, you get more or less if the company suffered from loss. You may get more or less than
what you invested.
CLASSIFICATION/TYPES OF SHARES.
Ordinary shares and preference shares.
At common law, every co must have at least one ordinary.
The Ordinary Share: It is the primordial class of companys shares. The ordinary
shareholder is not subject to any limitation or restriction in the participation of the affairs of
the co either as a going concern or in the event of liquidation. This shareholder has
unrestricted latitude to participate in the affairs of the co. He is eligible to dividend, returns
and so on. He enjoys the plenary latitude of rights conferred under the Articles. This also
means that he is also subject to the vicissitudes of the fortunes of the co. If the co fails or
prospers, he loses or gains respectively. If the co makes a loss, the loss is a diminution of the
capital of the ordinary shareholders. The ordinary share is also referred to as equity or
risk capital. Equity in respect of fluctuations in the fortunes of the co. equity share is that
share that is subscribed to by the ordinary shareholder.
The Preference shareholder on the other hand enjoy some preference in their participation
in the affairs of the company as a going concern and they also enjoy a preference with
respect to returns in the event of liquidation. They therefore may be described as that share
that carries a preferential rate of dividend expressed as a percentage of the paid up capital of
the co. including a preferential right to the return of capital in the event of liquidation. A
preference shareholder is what we call a hedger he doesnt want to take full risk. A

cautious investor. The preference shareholder would say: Look I know that there are
some ordinary shareholders that are ready to give you their money, and their fortune
depends on the success of the business well that is not me. I want to invest on the terms
that I get X rate of dividend for every year, let us fix it so that I can know what I am getting
every year. Be giving me 5 percent as return on investment. Also, if you want to return
capital, you would give me my own first.
He is therefore (1) demanding a preferential right to dividend that is fixed and (2), a
preferential right to return of capital some other rights may be added to enhance and make
the preference share attractive but these two requirements are the cores.
Because preferential shareholders have preferential right to capital, if capital is lost, the
ordinary shareholders would first of all bear it. Then by Section 144 CAMA, preferential
dividends are deemed to be cumulative and in discussing Section 144 (classification of class
rights) see the book. Under the CAMA, when you create classes of shares, you can attach
different classes of rights to them. Cobra News? V Something other newspaper 8. The court
noted the distinction between shares. There are various classes which places little little
distinctions between members of each group. In essence, the two basic are ordinary and
preference. Then the co can create sub classes under each. You may come across the
deferred or founders share. There is also the holding/golden share. You would come
across it when reading. Bristol Aeroplane v Y???? with respect to class right. Also Section
121? with respect to modification of the rights of a class. (Pardon confirm spellings).
18th July, 2016.
Prof Bolodekun Continues from last class.
Looking at Section 64, you would see the law empowering the board. But it is subject to the
company restricting by articles. The question is; whose acts would bind the co?
See Automatic Self Cleansing Co v Cleaningkam?1906 2 CH
Quin and Axtens v Salmon 1909 1 CH Saw and Sons (Salford Ltd) vs Shaw??? Also
Marshall Beer Co Ltd v Manning, Wardie and Co Ltd. Also Odusola Holdings Ltd v
Ladejobi 2006 12 NWLR 321. Avoc? Plc v A.G Enugu State. 200 7 NWLR Virgin
Technologies Ltd and Mohammed v Platinum Habib Bank Plc.
Regarding fights between the board of Directors and members
If the shareholders are very angry, they should alter the articles since it is a default
provision which they can decide to take advantage of through the provision. However the co
shall not incure civil liability to a person where he had actual knowledge at the time of the
transaction that the organ had no power or had acted in an irregular way. Get the section.
Note however that if a co carries on business, the fact that it is not contained in the cos
memo does not mean it would not bind the co. Remember the ultra vires rule
Note also that acts of agents are not ordinarily acts of the company. Go back and read the
provisions. There must be express or implied authority. Section 66. Note the
circumstances where an action would be ratified. Ratification is not necessary for a regular
and valid act. Note Kelner v Baxter. Ratification is only possible where the person you are
8 Confirm all these things no time to correct. Pardon.

deemeing to represent has the authority in himself to do it. i.e. the principal should have
been capacitated to do what the agent did.
Note Section 197 regarding particulars of register it is like this is Section 58. The lack of
capacity of a company does not create automatic notice on members of the public. The law
can create certain assumptions. On this, See Section 69. Having had a cursory look, we now
move on to directors.
DIRECTORS.
See Longe v FBN.
In the Court of Appeal judgment, you would get to understand why it is important to
understand the organs. When talking about directors, the law mandates that there must be at
least 2 directors who would constitute the board of directors. A co should not operate
without two directors that constitute the BOD. Note Section 37 CAMA. The law also
mandates the institution of BOD. Note Section 276 CAMA. They are a core institution in
Corporate Law. The Directors represent a statutory institution that the
shareholders/company cannot do without. The Head of the Board (usually the chairman of
the board) See Section 64 and 263(5).
Therefore we have the chairman, we have the MD. The MD is often the number 1 employee
of the co. He is recognised by the Act. There are also committees of the board. See Section
64(which empowers the board to operate through committees). Some of them are Executive
Directors (These ones are also employees of the co as well as directors) the number of EDs
a co may have varies depending on the nature and size of the business. Non-Executive
Directors are not employees of the Company. They could be independent directors or nonindependent directors. The independent ones have nothing to do with the shareholders. They
are also not related to those that appointed them. They are appointed because of their quality
or the value they can add to the board. Therefore: work for the co and also be a member of
the board? = Executive Directors. They are workers they are on board because of the
information value they would have because they are inside and they are the ones
supervising those on the field. It is important for a normal board to have executive and nonexecutive directors. We are looking inside the board. In terms of responsibility, your duty to
the company is the same whether you are Executive or non-executive.
It is possible to have one person as the MD and CEO/Chairman. However in practice, with
Big Corporations you may have to sequestrate. The law is silent on who should be the
chairman. Also, there is no maximum for directors. How are the directors appointed?
Section 247, Section 248 deals with subsequent appointments. Very important sections. The
members in General Meetings are the ones that can appoint or remove sub 3 notes that
except the Act or Articles provide therefore, are there instances in the Act that power was
accorded to the general meeting instead of the directors. Section 53(5)??? In certain
circumstances look at the other provisions of the Act. Section 246(1). How do you appoint?
247,248. Is it possible for the board to also appoint directors? Yeah to fill casual vacancy.
This is restricted to casual vacancy.
Then look at Section 249 very carefully very important too. The question is; do directors
have the power to remove directors? Under what circumstances may that happen?

What is the meaning of Director.

20th July, 2016.
The class continues.
Last class we discussed the board as an organ. It is important to look at Section 63(5).
Shareholders would have to depend on what the acts says There are situations where the
act concedes certain powers to the general meeting. There are certain instances where the
general meeting may perform directors functions. Like where board is disqualified, there is
a deadlock on the board, board neglects to institute an action, and so on. The question is;
when can we say that the board has refused or neglected to institute an action? Instituting an
action is part of the managerial right this right may also extend to exercising the
discretion not to institute an action in the court of law if you are convinced that it would be
in the best interest of the Company not to do so. Neglect involves an action to the co that
is beneficial that you are overlooking. Now, if the Board thinks that it is in the interest of the
company not to sue and the Members insist that they sue. Shouldnt we say that a refusal is
something that is relative. Refusal means that there is an active obligation that one is meant
to do. But in the case of managerial duties the question is who is going to invite the board
to ask? These question can be clarified if the articles of the company empowers the
shareholders to give direction to the board of Directors, then we can talk of a refusal.
The members in general meeting may ratify or confirm any action taken by the board of
directors: There are certain rules guiding ratification. Where the board of directors might
have acted without authority to act. This is where the issue of ratification comes in. Under
what circumstances would ratification come up? It must have been something the
shareholders can actually do. The principal should be able to do the act. In what
circumstances would the board not have the power? When would you confirm an act?
Furthermore, the Members in General Meeting can make recommendation to the board.
There is a difference between recommendation and directives. The former being persuasive.
The Board need not comply with the recommendation. Professor Bolodekun then asks;
What is the essence of recommending when the board is at liberty to dishonour the
recommendation? This is another issue latent in the residual powers that the law has given
to the shareholder.
Sub (6). Modification of the articles does not modify what has been done.
Criticise the provisions. Are they functional or redundant?
We have looked at the types of Directors. The law Empowres the Board to appoint one of
them as the Chairman. We have also examined the relationship between them. The Board is
an institutional organ Every co must have a board. Section 246 talks about creation of the
board and appointment of the board. Find 3-4 instances in the Act where the law gives
power to the general meeting.
They can appoint and remove directors. This power of appointment is only to fill casual
vacancies. If the casual vacancy has been filled by the board, the director must be submitted
to the general meeting to confirm or reject.
On qualification as a director: the articles may provide that you should be a shareholder in

the company before you can act as a director Section 251 is instructive on this.
On Remuneration: The MD and other directors see Section 267 and 268 on remuneration
of MD and Directors. You often find situations in practice where the mahority shareholders
are foreigners and they nominate the directors and their remuneration. The terms of
engagement and employment are fixed without recourse to the board. The question is: what
would you say about that practice?
There are some other statutory guidelines in terms of who can be a director. Can Articles
usurp? If it is a mandatory provision, the articles cannot change if it is in a default form,
then the Articles may counter.
- Section 257 prescribes some requirements for directors.
- Infants cannot be directors.
- Disqualified under Section 254(fraudulent persons).
- A corporation cannot be a director. Directors should be natural persons.
- Read Section 258 too.
Longe v FBN 2010 NWLR. (Longe (MD) was removed by the board and he questioned his
removal. He had taken some steps that ultimately turned out to be bad for the company. He
alleged that the board accepted/assented to the transaction. In the course of calling the
meeting, he was not served a notice and he was removed in the meeting. The question was
whether his removal without notice of the meeting would stand. The case started in 2003
and was resolved in 2010. Also read Odusola Holdings Ltd v Ladejobi 2006 12 NWLR
321.
Section 262 talks about removal quote the section regardless of the articles this means
that the articles are subject to the Act. The procedures for removal are noted there. There
should be special notice, stating grounds for removal the voting for or against is based on
shares. Generally one share one vote. Read the Section. Suppose that a director is removed
without compliance with the provisions, would the removal be valid? Section 262(6). Has
something to say in this regard. The right to remove is laid out in Section 262. Remember
that the Act is superior in this regard.
The law says that you should file an article CAC then says that you may not need an
article where you have signed that you have complied with the table. The question is why
dont you make your article to suit your specific circumstances because some sections may
not be of need or may not adequately solve your need. Why dont you shape your own rules.
An Article need not contain mandatory provision. Check the normal prototype English
Article.
The question is in what circumstances are Section 262(6) relevant.
DUTIES OF DIRECTORS:
They play a very key role in corporate administration. Direcros are the managers of the
companys business. The corporation is an artificial person. Forget about the law that says it
is an artificial person. People invested in the company (the members). The duties arise based
on the nature of the Companys work. The moneys in the co belong to some people as
shareholders and creditors. Therefore, the people managing their affairs owe some duty to
certain people whose money they are administering. CBN recently took over the
management of Skye Bank to forestall the possible problem of liquidation. Therefore, the

people who manage the companys capital should owe some form of duty. The communities
and other stakeholders may also have some claim in terms of responsibility since the
companys operations affect them. See Section 279, Section 284, Section 263 n 266 very
important. Also 2010 6 NWLR part 11 89.
21st July, 2016. Duties of Directors Continues.
Because directors manage the affaris of the company, they are usually in a fiduciary
relationship with the company. Section 279(1). He must exercise utmost good faith.
Look at sub 3 of Section 279 which mandates him to act in the interest of the company.
Note also sub 4.
In suing for the breach of the duty by the Director, there are certain considerations which the
court would use in determining breach. Look at this provision in a holistic manner. The
question is whether the director was acting within what he should believe to be the intention
of the company whether or not they have acted honestly and in good faith and if in so
acting they have considered what is in the interest of the company. They should also have
the interest of the employees and the shareholders not as a matter of bindingness but as a
matter of persuasion. E.g. they could decide on a course of action that could be good for the
employees. E.g. increased emoluments. In such a case, the profit of the shareholders may be
reduced. The question then is can the Shareholders revolt? Some employees are very
important to the industry and they are to be induced by special packages, bonuses and
emoluments. If they are not kept, rivalries would take them. Therefore, acting for the
interest of the co may favour an employee because they want the company to be able to
sustain its productive ability and compete with rivals in the market.
For example, Ferguson should have decided to pay Ronaldo more instead of letting him go.
What about for CSR? The directors may believe that investing in a community would be in
the interest of the company so that they do not close down. E.g. the avengers situation. They
are now blowing pipelines and so on. The problem is that this may hamper profit and
progress. Pacifying them may therefore be in the interest of the company and indeed the
country.
Looking at sub 5. There is a duty on directors to exercise his own powers for proper/special
purpose. The question then is; how do you determine those proper purposes for which
directors shall exercise their powers? You can look at the Act, articles and memo. The Act
may have given some powers to the directors to exercise for the company. The Articles may
also confer some powers on the directors. We should look at the language of grant.
To succeed, the plaintiff should show that the director did not act in good faith nor did he act
in the interest of the company.
Howard Smith Ltd v Ampul 1974 AC 821, Hallos? Nominees Property Ltd v Woodside Oil
Company 1968 121 CLR 483. Tec Corporation Ltd v Millar 1972 BLR (3D) 288. Will
Smith v Corset??? 1942 CH 304.
Note sub 6. Which prohibits a director to limit how it is going to vote in managing the
affairs of the company. In essence, dont fetter your discretion today for what you are to do
tomorrow because circumstances may change. Therefore, you should always be free to act

in the interest of the company dont place limits on how you are going to decide a
companys business. A transaction may require certain other future features or decisions to
be taken by the company if he undertakes to take the decision in the future this is not fatal
because it is perfecting the transaction. Therefore, for you to be able to succeed in limiting,
there must be a transaction already done for you in the company. A director shall not fetter
its discretion. Just read. Thorby v Goldberg 1964 112 CLR 597. Carber Estate v Fullham
Football Club, 1994 1 BCLC 364.
25th July, 2016.
Continuation.
How do you determine what is in the interest of the co? it is generally from the way the
directors deem and the particular circumstances. What is the starting point of analysis? You
should commence with the statute or instrument of grant to determine whether the power
has been properly exercised. When the power is given, and the language is wide, the courts
are usually faced with a dilemma as they are unwilling to interfere. Look at the cases you
are advised to read the full report.
When you read the cases, look at the language of the Statutes and Articles to determine the
scope of their power. The director shall not fetter his discretion.
Delegation of power shall be treated later. Section 279(7) regulates how delegation should
be. The law says that you should not delegate in such a way that you abdicate. Dont turn
your back on your duties. Delegatus non potest delegare. 263(5) too. You have to look at
the facts and circumstances of the case. Abdication is total/significant absence from your
duty post as though you were never there. No provision whether contained in the article
shall relieve any director (quote the Section).
Note the Heron???s case. In this case the fallen banks (about 80something) at some point
were merged and they were forced to be 25. Most of the directors were good but they
compromised.
A co can sue its directors. But problems may arise in certain situations. Take Salomons
Case (they were 7). Salomon retained the majority. If Salomon engaged himself as the MD
and Chairman and deny the company of so much opportunity and make so much money and
what was going to the shareholders was very small. The company may sue to enforce its
rights. Section 279(9) has no life as far as this is concerned. Because the company in
enforcing its rights does so through the board of Directors or the Members in general
meeting. In such a case you still find Mr Salomon controlling. This is why the law makes
some leeway for minority members to intervene. (look at the topic on minority protection).
Fiduciary Duties of the Director.
The performance of their duties should not conflict with their personal interest. Directors are
not running their own businesses. They are running the business of the company. In any
agency, there is a tendency for there to be a conflict between the interest of the agent and
that of the principal. There is always a cost to Agency agency cost there is usually a
conflict between the interest of the principal and the agent. The interests should be aligned
as well as possible. The Director should be made to understand that he stands to benefit
from the success of the company. This can be done by giving him some interest, bonuses,

shares, security of employment he should have the wealth effect of the decision. I.e. he
stands to benefit or loose based on his decision, he would be motivated to be more prudent
and meticulous. The director may have certain facts and information within his knowledge
which the shareholders may not have. Also, a director may choose to undermine the
company by referring an opportunity to another company in which he has an interest to take
it. This shows a conflict of interest.
Misuse of Corporate properties: he can be leasing properties of the company in his own
right he can be using the companys assets to further his own business. In such a case, there
is conflict. Using the assets of the company for personal purpose. See Section 280. Read the
following cases. Regal Hasting Ltd v Gulliver 1946 1 Al ER 378. Industrial Development
Consultants Ltd v Cooley 1972 1 WLR 443. Canadian Aero Services v Omalley? 1973 40
DLR 3D 371. Boardman? V Phibbs 1967 AC 46.
Official secrets obtained by the director should not be used by the Director even after
termination of appointment. (see Section 280). Sub 6 creates some exceptions. where a
director discloses his interest before the transaction See Section 284. There must be
disclosure and approval. In Section 290. Look at it very well in such a situation, what
would have been the liability of the company would then be transferred to the director(s) in
default. Section 288-289 also helps those dealing with the company. IT provides that it is
possible for the memo to make provisions for the limited liability of the directors. Where
this is the case, the shareholders and members would not be personally liable. However. It
can be included in the memo that the liability of the Director(s) shall be unlimited. This
makes the Directors more vigilant to prevent unlimited Liability. This one has nothing to do
with whether the director is in breach of his duty. 288 and 289 does not require that the
director should be in breach of their duty. You just need the memo to provide that their
liability to unlimited. Section 289 allows you to provide in your article that a memo can be
altered to provide for unlimited liability of members. Read these sections. It is a tool that
can be used to ensure that directors perform well. Look at Section 287 which also talks
about secret profit.
The Duty of Skill care and Diligence: Section 282. Directors are required to exercise cre,
skill and diligence in the way they run the affairs of the company. see Re City Equitable Fire
Insurance. 1925 CH 407. This was like the locus classicus on this Peoples Department
Store Inc v Wise? 2004 3 SCLR 461. Section 282(1) Read it it is the circumstances of the
case that would determine the level of care and skill the director is required to exercise.
Nemo Dat Quad non Habet. Directors should pay attention to the duty of their office. 279(7)
comes in here too. There is no distinction between executive and non-executive directors in
the application of this duty. Read Section 282(1,2,3 and 4) provide the framework for the
exercise of duty and care. The standard here is objective. They are meant to act like
directors in like circumstances. If the court were to hold that a diligent director would have
acted otherwise in like circumstances, then the directors may be held liable.
27th July, 2016.
Read on the fiduciary duties of the Directors. BCE v 1976 Debenture Holders 2008 3 SCR

560. The cases are very important and fundamental to understanding the analysis on this
issue. The CBCA is similar to our own statute. Different analysis applies when you are
looking at the fiduciary duties in contrast to the duty of care. Strictly speaking, the Fiduciary
Duties of the Directors are owed only to the company. Not to employee, community.
However, as a derivative of this application you can see that it may be impossible to isolate
the interest of the company from that of the shareholders. We can then say that if the
corporation is a distinct person (which comprises the shareholders and some other interest)
therefore the interest is meant to be distinct from that of the shareholders.
What is good for the corporation is not always necessarily good for the shareholders. What
the shareholders may consider to be in theri own interest may not be in the interest of the
company. Therefore, you need not focus on interest of shareholders, community, employee
and so on to determine what is best for the company. However, their interest may sometimes
be relevant. To what extent could creditors impose their own interest on that of other
creditors? The courts are not willing to override the decision of the directors especially
where there were justified grounds for taking that discretion. Notwithstanding that a
different decision could have been reached. Unlike the duty of care and skill (which test is
objective) the fiduciary duty
Note that most of these cases would trigger a Section 311 circumstance. They flow one into
the other. The same consideration applies when you are looking at the alteration of articles.
You would find that in many of those cases (note the cases on alteration of Articles) the
interest of some shareholders were hurt yet the court permitted most of the alterations. On
the principle that govern power to alter articles. (remember that courts always interpret
power based on the language of grant). Section 48(1)CAMA. Company law subjects are not
separate compartments on their own. Issues flow into one another.
GENERAL MEETING.
Under Section 63(1), the organs of the company are identified.
Members in General Meetings constitute an important organ of the company. in any
circumstance where the law requires resolution to be passed, then there has to be a meeting
of members to do so. E.g. removal of director, issuance of shares, and so on. Looking at
Section 211 up to Section 237. There are so many procedures involved in passing
resolutions.
WHAT are the kinds of meetings?
- Statutory
- Annual general meeting
- Extraordinary General meeting
THE STATUTORY MEETING: Section 211. Statutory meeting is usually the first meeting
that the company must hold within the first 6months of incorporation. It is held once in the
lifetie of the corporation. Not less than 21 days statutory report of meeting to shareholders.
What is the significance and nature of the statutory report? Look at Section 211(3). Note
Section 136 and 137 CAMA (which requires articles to authorise companies to issue shares
otherwise than in cash). The promoters would come in 211(3)sub 4. Watch out for their

craftiness they would be telling you how much money they have spent and want the
company to ratify and reimburse. Statutory meetings are critical meetings that you must pay
attention to. Section 212 contains penalties for non-compliance. The law also provides that
there should be independent valuation.
ANNUAL GENERAL MEETING: Under Section 213. In addition to any other general
meeting. Not more than 15 months should elapse. Look at sub 1(a). The CAC may extend
the time. The law also provides that if there is any default in holding AGM, there oculd be a
protest to the commission and the commission can direct the calling of an AGM. Look at
sub 2. Sub 3. Section 214 provides that businesses transacted at AGM shall be deemed
special business. The other business is ordinary business. It is important to know those
businesses that are ordinary business. Declaring dividends, presenting financial statement,
appoint and fix auditors, etc.
EXTRAORDINARY GENERAL MEETING.
To take care of things until the next Annul GM comes. The law allows you to have as many
times as you want depending on your circumstances. The BOD may decide to convene an
EGM. See Section 215. Section 216 place of meeting.
Notice of meetings in Section 217. 21 days.
On notice of meeting see Sections 217-221. When can a creditor insist on having a notice of
meeting? By stipulating same in the debt contract.
1st August, 2016.
Recap: we were talking about conflict of interest (that directors personal interest should not
conflict with duties) we then talked about some solutions which include disclosure (compare
the disclosure issues under Sections 284, 277, 285 and 286). Then we went to the general
meetings. We shall continue with the general meeting we stopped at Section 217, 218 and
219 on notice.
Class Continue: Section 221 deals with failure to serve notice. Those that are entitled to
receive notice should be served notice. Non-compliance can invalidate the meeting. This
reminds us of the Longes cases and Section 262 and 266. In the case he was not served
notice therefore decision in the meeting was invalidated. Section 223 provides thath the
court may order for the meetings be held/requisition a meeting.
Again, when talking about calling of meeting we remember section two-eighty-something.
Voting: in the meeting. Decisions may be either by a show of hand or by poll.
Show of hands: (look at Section 224) it is the chairman of the meeting (who is the chairman
of the meeting?) that would declare the result. Therefore, it is possible that even when the
chairman knows that those in favour are smaller than those against, he can declare that those
in favour are more. It is however possible that before the chariman declares the result,
someone can stand up and request for a poll. What this means is that they would have to
vote based on shares. This means that those with more interest in the co would have more
influence in the decision. Remember that shares are at par. (except in limited cases(like
preference shares a co may issue with weighted votes but not for ordinary shares). Section
224(1) provides for those that can demand for a poll. Schedule 1 Table Asomething

prototype article talks about the chairman. Section 240 talks about if within 1 hour, the
chairman is not available, the co could take steps to appoint another. But the default article
says 30 mins. The Act would prevail because the article cannot override the Act. Not even
the article can take the right to demand a poll away Section 225. You should remember the
repugnancy test... there is also a repugnancy test in CAMA. Section 542? Check the section.
Look at Section 225(1)(b). look at Sub(3). Right of attendance at general meeting Section
227.
Proxies: Section 230. A proxy is a representative. Proxies are persons appointed by
shareholders to represent them at meetings. They are entitled to do all that the shareholders
can.
Look at Section 231 for corporations appointing representative.
Quorum: Look at Section 232.
The CAC has a regulation that once you declare that your article is in the form of the
specimen, there is no need to file article. This shows that they are ignorant. This is a
violation of Section 34. The fact that the CAC made something does not mean that it is
valid. Read the details on quorum in that section.
We move on to Resolutions. The resolution may be special or ordinary look at Section 233238. Ordinary resolution requires just simple majority. Special requires i.e. 75 percent.
Resolution should be passed at the general meeting and filed with the CAC where required.
Read the proviso in sub 3 of 233. Section 234 mandates resolutions to be passed in general
meetings. Note the proviso there for private companies. Section 235 talks about members
also wanting a resolution to be passed.
ASSIGNMENT: GET THE THREE EXAMPLES OF THOSE RESOLUTIONS WHICH
REQUIRE SPECIAL NOTICE. READ Section 239, 240-242.
Answers: special notice required under:
Section 236 mandates that where special notice is required by the Act, it must be served.
Section 256: for appointment of directors above 70.
Section 262: For removing a director or to appoint some other person in his stead.
Section 364: in relation to auditors: Special notice required for resolution at a general
meeting for appointing auditor, casual vacancy filling, re-appointing/retiring auditor who
was appointed by directors to fill casual vacancy. removing an auditor before the expiration
of his term.
3rd August, 2016.
RECAP: WE have looked at the General Meeting and how they conduct business. We
looked at how polls are conducted, then we moved on to resolutions. We noted that a
resolution may be ordinary or special. There are certain acts that require resolutions. The
Law defines those instances. See Section 100 on increase and reduction of capital. Also the
Section on appointment of Directors, alteration of articles and so on which require
resolutions. All resolutions must be passed in a general meeting with little exceptions in
Section 234? where some conditions are met. We also looked at situations where special
notices are to be given. You were given an assignment to find out these instances. Note that

for special notice, a minimum of 21 days is required. Note further that the giving of notice
for resolutions and the giving of notice for general meetings are not the same. This means
that 28 days notice is required to the company who shall then give the shareholders the
requisite notice. Read the sections. We talked about minutes of meeting. For every meeting
there should be minutes. The minutes constitute a record of what happens during the
meeting.
We move on to
CORPORATE GOVERNANCE.
It ensures effective administration of corporations/companies in such a way that it benefits
the interest groups of a company. To ensure that the investors are benefitted. Cases of
company failure usually arise as a result of mismanagement of the directors, chairman, and
so on. This is apparent in Bank failures. Therefore, policy makers thought it necessary to
have some guidelines for the managers of corporations (starting with the Cadbury
committee 1922?). Essentially, Certain codes prescribe conducts for how corporations
should be run. CAMA talks about the law without talking about how to conceptualise or
carry it out. See for example Section 62?, 279, and so on which provides for the Board. But
CAMA did not succinctly state their functions. You also find in the law the board may
delegate their powers to the MD. Then in the code, you would see an attempt to define the
scope of operation of the office of the MD in such a way that that office is still accountable
to the board. The law also recognises that there should be a chairman for the board. The
question is; what is the relationship between the role of the chairman and the MD? What if
the Chairman also chairs the board? You would see most of the answers in the Code which
provides for how. To ensure that the Board is efficient, functional and performs its duties
under the law. You find in the code, prescriptions as to who may be directors, considerations
to have in choosing directors etc. How is the director meant to function? It is no longer
practice for the director to abscond from meetings. The codes reminds him not to. In a
typical board, we have the ED and the non-EDs. How are they to be appointed and what is
the mix? (because they play different roles). The EDs are corporate employees yet they are
directors. But the nonEDs are outsiders who also work for the co. The EDs supply
information because they have field knowledge of their areas (the areas they oversee). The
question is: if you have EDs dominating the Board is that in consonance with CG? If EDs
dominate, (remember that the whole essence of the board is to ensure proper supervision)
they are likely to make decisions that favour themselves. This is why it is being canvassed
that the number of NonEDs should outweigh EDs. Even within the rubric of EDship, there
is still a clamour that the Non-EDs should be independent. So that they would not take
sides. These are all the stipulations in the CGcodes. This is the theory. In actual practice,
most of what is in the code may not apply. In real life situation, you would discover that it is
the MD that is supervising other directors instead of vice versa which the theory mandates.
Remember the Aaron???? Co which failed despite the calibre of independent directors they
had. (we are looking at the structure of Corp Gov).
In essence, Just know that there is a linkage between the CGcodes and the Law. The code is

supposed to help the statutes work effectively. The statute would always override in the
event of inconsistency.
The code helps to classify the contents of the Board. (non-EDs and EDs). It also provides
some kind of guidance to the directors. The codes also appeal that there should be constant
education of the Board. To make them aware.
To make a board totally work, the code also prescribes the number of how many should be
on the board. Most of these things are mere guidelines. Mandating that a board should break
itself down to committees. Like remuneration committees, audit committees 9. But the code
would provide the nature of knowledge and expertise required). All these are to ensure that
the interest of shareholders are well protected. (Note the provision requiring the BOD to
have regard to certain interest)
Check the Skye Bank scenario.
Look at a company which works in the domain/territory of the avengers. If the co does not
pay attention to their needs then its very existence may be threatened.
Note CSR. Discover what Section 38(1) CAMA and Section 221(2) Of the 1999
Constitution has to say as regards them.
We are discussing the code in terms of what the board should be and how their structure
should be. The codes now allow employees to blow the whistle (report their boss) under
anonymous circumstances. Although in practice, certain issues arise in relation to reporting.
Foreign jurisdictions have incorporated ICT in their Company law provisions. Meetings can
now be virtually held. Nigeria should take a cue.
Possible AOC. Look at areas in the Class Notes where emphasis were placed.
9 although this one is statutory contained in Section 359.


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Compiled By: Nwosu Isochukwu Michael.

Nature: Partnership Class Note Recording.

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action or entitles the shareholders to bring a representative action in their personal

Compiled By: Nwosu Isochukwu Michael.

Compiled By: Nwosu Isochukwu Michael.

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Compiled By: Nwosu Isochukwu Michael.

7 408. Circumstances in which companies may be wound up by courtA company may

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Representatives are necessary to help companies run their affairs.

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16th July, 2016.

Compiled By: Nwosu Isochukwu Michael.

Compiled By: Nwosu Isochukwu Michael.

Compiled By: Nwosu Isochukwu Michael.

Compiled By: Nwosu Isochukwu Michael.

Compiled By: Nwosu Isochukwu Michael.

Compiled By: Nwosu Isochukwu Michael.

What is the meaning of Director.

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Compiled By: Nwosu Isochukwu Michael.

Compiled By: Nwosu Isochukwu Michael.

Compiled By: Nwosu Isochukwu Michael.

Compiled By: Nwosu Isochukwu Michael.

Compiled By: Nwosu Isochukwu Michael.

Compiled By: Nwosu Isochukwu Michael.

9 although this one is statutory contained in Section 359.

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