An Appraisal of the Liabilities of a Company for the Acts of Its Directors
CHAPTER ONE
OBJECTIVES OF THE STUDY
The objectives of this essay is to extensively discuss the duty and study the position of the law as stated in the Companies Allied Matters Acts,2004 on the powers and the proceedings of Directors and their personal liabilities. The duties and responsibilities of directors etc, would be discussed, with a view to letting the directors know the extent to which the company can be liable.
This project work would also aim at ensuring that the company is liable for the acts of its directors during the operation of carrying out duties. Furthermore, it is also aims at ensuring the position of CAMA, 2004 as it relates to when the company would be liable for the acts of its Director and why?
CHAPTER TWO
THE DIRECTORS OF A COMPANY
INTRODUCTION
The company directors occupy a very unique and enviable position in a company and are to be regarded as the framework within which the company stands. Many aspects of the law are directed specifically at them and depend on them for effective operation and actualization.
Their special role is stressed from the fact that they are the mind and the will, as well as the limbs of the artificial entity called the company, as they are to attend to its day-to-day governance. This position is evidenced in the case of Lenard’s Carrying Co. v.
Asiatic Petroleum Co Ltd26.
In recognition of this position, companies legislation throughout history, have as a matter of tradition, accorded special attention to the company Director, by regulating his manner of appointment, his functions, powers and duties in order to achieve a greater level of efficiency and effectiveness27. In accordance with tradition, the Companies Allied Matters Act 1990 has introduced a great number of innovations in this area.
A company as an abstract person cannot manage itself and it is not practicable for the members in general meeting to do so. Accordingly, every company must have at least one Director and a Public company must have a minimum of two28.
The question of who a Director is is a question of function. It is provided that “Directors‟ include any person occupying the position of a Director, by whatever name he is called. Therefore, if any of the members of the managing body are called “Trustees‟ or “Governors‟, they are nonetheless Company Directors by virtue of their powers.
TYPES OF DIRECTORS
- Alternate Director: He is appointed by a director to sit on the board in his place under powers contained in the articles.29While the powers of an “executive” or “special” director may be so limited as to take him out of the definition of “directors” under section 567, an “alternate” director will be within the definition.
- Executive Directors: Officers holding service contracts of the company appointedto the board in a two-tier system comprising executive and non-executive directors. Executive directors are responsible for the day to day running of the company and their powers are usually circumcised by the articles. See further Longe v. First bank of Nigeria Plc30
CHAPTER THREE
DUTIES AND RESPONSIBILITIES OF DIRECTORS
INTRODUCTION
Directors for certain reasons may be described as an organ of a company as they are in some circumstances agents of the company by whom its acts and the relation between them is governed by the general principles of the law of agency. When they are acting within the scope of their authority and on behalf of the company, they may be regarded as agents of the company under Part III of the Act.63 Like other agents, they incur no personal liability, and are accountable for any secret profits made,64but if they exceed their authority they may become liable for breach of warranty65and they will also be liable if they contract in their own names or otherwise assume liability as agents.
CHAPTER FOUR
LIABILITIES AND REMEDIES OF DIRECTORS
INTRODUCTION
A company being an artificial person can only incur liability through organs, agents and officers. The position was explained by Viscount Haldane L.C. in Lennard’s Carrying Company Ltd. v. Asiastic Petroleum Co Ltd102in a passage quoted by Aniagolu J.S.C. in Trenco (Nigeria) Ltd v. African Real Estate Ltd103, as follows:
CHAPTER FIVE
GENERAL CONCLUSION
CONCLUSION
The principle of corporate personality, though fundamental in company law was never meant to be sacrosanct to the extent that it could be used to protect crime, fraud or unethical commercial practice.
However, the corporate structure lends itself easily to numerous fraudulent dimensions; it permits criminals to operate behind a veil of anonymity, it also fosters notions of respectability based on a cooperate image which may have been carefully contrived by dishonest insiders. The challenge posed to the law by persons who deliberately use the corporate personality concept for dishonest or criminal motives are formidable.
This is not to say however, that in every case where a company is involved in crime, the agents and officers are responsible. The advantage of incorporations has been put to dubious use by insiders to the disadvantage of the company.
RECOMMENDATION
An attempt has been made to examine the officers and agents of a company: their appointment, duties, remuneration, removal and liabilities under the Company Allied Matters Act 2004.The Act even though has made for the protection of the officers also gave room for instances where these right can be boycotted that is, lifting the veil of incorporation.
Be that as it may, there is the need for companies in Nigeria to employ committed officers and agents who seek to uphold the course of the company at all times and not people who run after their own selfish interest or means of defrauding the company.
The area of the law in Nigeria need further development as to curb the rate at which fraud is being perpetrated by the officers and agents of the company who hide under the principle of corporate personality to defraud the company. Therefore, a more stringent method of appointment of officers and agents should be employed.
BIBLIOGRAPHY
ARTICLES IN JOURNALS
- Oladeje Akanki,„Abuse of Power and Breach of duty by Company‟s directors,
- Nigerian Journal of contemporary law, Unilag (1975) Vol. No 1&2
BOOKS
- Akanki E.O, „Essay on Company Law’ (4th Ed.University of Lagos Press, Lagos 1992).
- Charlesworth & Morse, „Company Law’ (5th Ed,Sweet & Maxwell.London 1997).
- Davies P and Gower L ‘Gower’s Principles of Modern Company Law’(6th Ed. Butterworths London (1992) )
- Sheila Bone „The Osborne’s Concise Law Dictionary’ (9th Ed. Clarendon Press US 1995).
- Della Thompson ‘Encyclopaedia of Forms and Precedents’ (4th Ed. Sweet Maxwell, London 1998)
- Felix C.Amadi, ‘Fundamentals of Company Law & Practice in Nigeria’ (1st Ed. (Rodi Printing & Publishing Company, Rivers State 2004)
- Henry Campbell Black M.A, ‘Black’s Law Dictionary’ (5th Ed, West Publishing Co. 1777)
- Hon Dr. J Olakunle Orojo, ‘Company Law and Practice in Nigeria’ (5th Edition Interpak Books Pietermaritburg 2008)
- Sofowora M.O. ‘Modern Nigerian Company Law’ (2nd ed. Olakanmi & Co, Lagos 1992)
