The incorporated company is a person at law, but we all know it has no brains, eyes, hands nor mouth to function like a natural person. The company functions through its organs: the board and general meeting. These people are not less than 2 in number, therefore to decide for the company, they come together in meetings and do the most simple and obvious thing when a large number of people have to make choices – vote.
Let’s treat the meetings of each organ:
The board Section 263- 266: They are the directors and they have board meetings. Their first meeting must be held within 6 months of incorporation. Board meetings require 14 days prior notice. Failure to give notice to any director invalidates the meeting unless the director had been disqualified from being a director. The board meeting is usually the prelude to the general meeting. If a director is not in the country, he is not entitled to notice unless he has notified the company of his address abroad. Section 266(3). They pass RESOLUTIONS but the resolutions are simple majority resolution; neither special nor ordinary.
The quorum of directors is one-third of their total number or the nearest figure, if the number is not a multiple of 3. When it comes to voting each director has one vote while the chairman has a second or casting vote to break the tie for equal vote.
The can elect a chairman for themselves and decide his tenure as they deem fit. Where at a given meeting the chairman is not present within 5 minutes of commencement, the other directors may elect one of the rest.
The company: the company meets in general meetings and there are 3 types of meetings which are:
Statutory general meeting Section 211, 212: Like the name suggests it is mandated by law strictly for PLCs. Not like others aren’t, but it happens only once in the lifetime of the public company. Yeah, at the early stages of it life within 6 months of its incorporation. It MUST be held in Nigeria. The consequences of not holding this meeting are dire: A fine on the officers of the company, and a ground for WINDING UP!
What goes down at this meeting? As you might expect, preliminary matters like adoption of common seal, ratification of pre-incorporation contracts, and consideration of a special document called the STATUTORY REPORT. This document must have been sent along with the notice of meeting so if anybody has anything to say about it they can come well prepared. See Section 211 for its contents (try and read and put in your own words…Bar II and lists)
Annual General Meeting Section 213. 214: This one is required to be held once in a year. The law is nice to new born companies so that since they’ve already done their SGM (and there probably isn’t much to talk about anyway) their first AGM won’t be due until 18 months after the SGM. But after that first grace period, AGMs are a yearly thing o, don’t dull. They must not be more than 15 months apart and must also be held in Nigeria. Consequence of not holding your AGM. CAC really takes this meeting P; first any member can approach the CAC to compel the company to do the right thing, CAC can also tell the person to approach the FHC to make a decision binding on the company. Yeah just one person can decide what the company does just because the company failed to hold AGM.
What goes down at this meeting? Two species of things, rather businesses: ORDINARY AND SPECIAL businesses.
Ordinary business are 5 in number:
- Declaration of dividend
- the presentation of the financial statements, directors’ report and auditors’ report
- The election of directors in the place of those retiring (appointment of new directors)
- The appointment and the fixing of the remuneration of the auditors
- The appointment of the members of the audit committee.
Just remember dividends, directors and auditors (DDAARR)
Special businesses are anything other than ordinary businesses.
Extraordinary General Meeting Section 215: This one is not by force, just in case you members of the company have something else to discuss that your AGM did not cover or you like seeing each other’s faces too much, you can call an EGM. Its formalities are like the other meetings, it is just a jara something.
What goes down? Anything basically, because it is an extra meeting, you can consider pressing issues for which you can’t wait till the next AGM. And all businesses at the EGM are special businesses. The EGM is the only meeting that can be instituted by any organ or person apart from the board of directors. The other person who can institute an EGM are:
- Requisitionists (see below)
- A retiring auditor (to be discussed in subsequent post)
- A lone director where there aren’t enough directors to hold a board meeting
Court Ordered Meeting Section 223: The court (FHC) has the power to order the members of a company to meet, whether suo motu, by application of a member or a director. The FHC exercises this power for several reasons: Where it is impracticable to call a meeting of directors or members. The other reasons are discussed under other topics.
Requisitioned Meeting: Let’s call this a type of EGM. Meetings are initiated by the board. But what if the board refuses to exercise this prerogative? Then members (who qualify to do so) can requisition a meeting. Section 215:
Who can Requisition? Member(s) of a company with not less than one-tenth of the paid up share capital or – where there is no share capital – voting rights in the company. [Take note, it is paid-up capital not just the nominal value of the share capital]
- Deposit a signed requisition at the registered office setting out the whole agenda of the meeting; it must be signed by all of them.
- Give the directors 21 days to convene the meeting. Where the directors fail to convene, the requisitionists or a number of them representing half of their total voting rights can convene the meeting (i.e. if all of them have 20% voting rights, those who convene should have at least 10% voting rights)
- The meeting must be convened within 3 months (Counting from the date they deposited the notice in step 1), after the expiration of 3 months their whole crusade is over. If they are still interested they will have to start at the very beginning.
- If they successfully hold the meeting, the quorum must be formed within an hour. If not, meeting is dissolved and they are back at square one.
Directors bear cost of requisitioned meetings and the decisions arrived at in such meetings are binding.
Notice of Meeting Sections 217 – 223: So you have to tell the people that there is meeting, the notice of meeting goes out unfailingly not less than 21 days before the date. The company can agree to a shorter notice if 100% (AGM) or 95% (SGM or EGM) agree that a shorter notice should be issued. The notice should contain all the resolutions and matters to be considered. If by post, then it is deemed to have been delivered 7 days after it was posted. (This means you should make sure if you are sending by post you send out 28 days before so you won’t run afoul of the 21 days and can cover your bases). These notices are sent out to Members, Directors, Auditors, Company Secretary and Legatees/Receiver/Trustee (Say DAMSL) See Section 217. For our PLCs we need an extra medium – 2 daily newspapers at least 21 days before the meeting. Section 222
Contents of a notice- Section 218
- Time, Venue and Date of the meeting
- The resolutions to be considered at the meeting
- The business to be conducted at the meeting (Note that if the notice is for an AGM and it says ‘ordinary business’ it is deemed to have covered all the activities known as ordinary business but for the purpose of Bar II, list out everything when drafting your notice.)
Effect of failure to give notice: whatever decision taken at such a meeting is void, unless it is shown that the omission was a bona fide mistake. Young v. Imperial Ladies’ Club. It doesn’t matter if the person is a director at the time and is on directorial suspension or anything like that. Longe v. FBN; as long as he is a member he gets the notice. Don’t sly your company members like that.
Chairman of the meeting: The CAMA provides that the Chairman of the Board of Directors should preside over every meeting. If he is not around within an hour of commencement of the meeting or he is unwilling to act, the directors should elect one director to fill the position.
If the directors do not do this or are not willing to act within an hour, then one of the members should act. The chairman is supposed to be in charge of the meeting; guide the attendants through the agenda, ensure order (no noisemakers) and such similar duties.
Being a chairman has one perk – you get to be a tie-breaker. Section 226(3) CAMA, says where there is equality of votes, the chairman casts a SECOND VOTE /CASTING VOTE.
Resolutions – Section 233
Resolutions are of two kinds at a general meeting: Ordinary and Special. The ordinary resolution requires a simple majority in favour of the decision while special resolution requires at least three-quarters majority. The law usually states which resolution is required and where it doesn’t state so, it is cool to pass an ordinary resolution.
Written Resolution: Can members of a company, without the formality of a meeting just append their signatures to a document and hold it up as a resolution? Yes but only private companies and it must be signed by ALL the members. When you make resolutions you usual decide to do something like change your company’s name, appoint a director, retire a director, increase share capital etc. and normally those kinds of acts must be reported to CAC. However asides reporting in this normal way some types of resolutions must be specially reported to CAC (I think it is because of the wow factor, like how can everyone in a company agree to something; perhaps CAC wants to be sure there’s no foul play). They are:
- Unanimous Resolution where special resolution is required
- Unanimous Class Resolution
- Special resolution
- Resolution for winding up…See Section 237
To make resolutions the company members vote and the voting may be by mere show of hands or by poll. By show of hands the people present at the meeting raise their hands in support of what they want. It doesn’t matter whether they have 20% shares or 1% shares, each individual gets a vote. However with the poll-voting, the votes depend on shareholding; thus if three men together hold 5 percent of shares and a single man holds 10% that man will win against the other two men but if it were ordinary show of hands the two men (of course supporting the same thing) will win against the single man.
Voting is by default show of hands unless poll is demanded.
Demand of poll Section 224: This can be done by:
- the chairman, where he is a shareholder or a proxy,
- 3 members present in person or by proxy,
- member(s) present in person or by proxy having not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting
- Any member(s) having not less than one-tenth of the amount paid up on all the shares conferring a right to vote at the meeting.
The right to demand poll is sacred, you cannot take it away from any member whether by article or by simple refusal. However the following situations are exempted: election of chairman or adjournment of meeting. There is an absolute bar on using poll for electing members of the audit committee.
I’ll illustrate with this:
At the 3rd AGM of SkenConsult Ltd the members were deliberating on whether a retiring director should be reappointed. The chairman called everyone to order and asked them to vote on the matter. Before the members could put up their Hands Chief Kasala (who has 10% of the paid up share capital) demanded a vote by poll. The people roared and the secretary held up a copy of the articles where voting by poll was barred for matter like election and reappointment of directors. Chief Kasala felt defeated and kept quiet. Later after a long meeting, the members decided to adjourn the meeting, Chief Kasala wanted this to be by poll but the secretary responded with the same gesture as before and Chief Kasala resigned his fate.
On the vote for adjournment, the secretary was right, because the law says the article CAN restrict the right to demand poll on election of chairman and adjournment of meeting, however the article was ultra vires on the issue of reappointment of directors because the law says the right to demand poll CAN be alienated in those 2 situations.
Proxy: As a member of a company you cannot possibly be available at all times for company meetings, so the law allows you to appoint a PROXY, to attend in your stead. A proxy is appointed with an instrument. As illustrated above a notice of meeting usually has a proxy form attached so when you get notice of meeting and you want to send a proxy, you just fill that form and send the form and the instrument to the registered office at least 48 hours before the meeting. Section 230. A proxy can exercise all the powers of the principal at a meeting and doesn’t have to be a member of the company. If you are revoking a proxy you must do so in writing. If the proxy has not been revoked you can attend the meeting but you can’t exercise any powers because that would amount to double attendance.
Quorum: it is: One-third or 25 or 2, whichever is less… i.e.
- one-third of the total number of members or 25 members, whichever is less
- Or the nearest number to one-third, where the number is not a multiple of 5 or
- 2 members if the membership of the company is less than 6
CAMA says Quorum must exist from the beginning to the end of a meeting, but a company can tweak this in their articles. So if in the heat of discussion some people walk out and disrupt the quorum, the chairman has to make a decision: Did they walk out for sufficient reasons?
If no: He can ignore them and go on with his meeting, it’s their loss. If it is only one person remaining after the walk-out was staged, that person can apply to court to sanction his decision.
If yes: He must adjourn the meeting to same time and same place the next week. At the adjourned meeting if the people sly and don’t show, the few people present can go ahead with the meeting and if it is just one member, the court will receive him with open arms and sanction his decision.
Adjournment Section 239: The meeting may be adjourned to any day, same time, and same venue. However at the adjourned meeting you can only go on talking about what you were talking about before; no new issues. If the adjourned date is up to 30 days away, you will have to give a fresh notice for the adjourned meeting. If at the adjourned meeting there is no quorum within one hour, the meeting shall stand adjourned to the following week, same time and same venue.
At the second meeting, still no show? Two members can form quorum. If it is only one member, (I’m sure you can take a good guess here) he can apply to the court to sanction his decision.
I believe I’ve discussed all the discussables, excuse me if my sections are not all there or correct, that’s for your due diligence *wink*. Don’t forget to consult your statutes and textbooks this breakdown should make it more approachable. Drafts are coming up soon and filling of forms.