CORPORATE GOVERNANCE III Flashcards
Who is a member of a company?
A person who has subscribed to the memorandum OR agreed in writing to become a member and is entered into the register of members
Section 79(2)
What is the minimum number of members of a company?
2
What is the maximum number of members of a company?
There is no maximum in a public company
A private company cannot exceed 50 members
Who cannot become a member of a company?
- A person of unsound mind
- An undischarged bankrupt
- A corporate body in liquidation
Can an infant become a member of a company?
General Rule: An infant can become a member of a company Section 18 CAMA
HOWEVER
An infant shall not be counted for the purpose of determine the legal minimum number of members Section 80 CAMA
How can you acquire membership of a company?
- Transfer
- Allotment
- Transmission
- Subscription
What is subscription?
Section 79(1) CAMA
Takes place at the time of registering the company when the subscribers agree to take a certain number of shares in the company or agree to indemnify the company’s liabilities to a certain sum of money
What is allotment?
Allotment of a specified number of shares to an applicant by a company
Section 125 CAMA
How long does a company have to respond to a request for allotment of shares by an applicant?
42 days
They must notify the applicant of allotment or send a letter of regret with a refund where the application is denied
What is Transfer?
This involved the purchase of shares from an existing member of a company or a transfer of shares of an existing shareholder by way of gift
After the transaction the name of the new holder of shares is entered into the company’s register of members
Section 151 CAMA
What is transmission?
This occurs where a person succeeds to shares upon death or bankruptcy of a member
After the execution of the relevant instrument transmitting the shares is registered, the name of the new holder/beneficiary of shares is entered into the company’s register of members
Section 155 CAMA
What are some rights of a member of a company?
- right to attend company meetings
- right to vote in company meetings
- right to receive notice of meeting
- right to receive dividend when declared by the board
- right to transfer shares as personal property
- right to demand poll
- right to inspect minutes of meeting
- right to financial reports
What are the different types of general meetings that can be held by a company?
- Statutory meeting
- Annual General meeting
- Extra-ordinary General Meeting
- Court-ordered Meeting
What is a statutory meeting?
A meeting which must be held by public companies within 6 months of the date of incorporation
What is the procedure for holding a statutory meeting?
The directors shall send out a statutory report with notice of the meeting at least 21 days before the meeting
The report shall be certified by at least 2 directors and shall be sent to CAC at the time of sending it to members. The meeting must be held in Nigeria
Section 211 CAMA
What are the contents of a statuary report sent out ahead of a statutory meeting?
- Total number of shares allotted and the consideration for which they have been allotted
- Total amount of cash received in respect of the shares
- Names, addresses and descriptions of directors, auditors, secretary of the company
- Particulars of any pre-incorporation contract
- Any underwriting contract that has not been carried out and the reasons
- The arrears if any due on calls from every director
- The particulars of any commission or brokerage paid or to be paid in connection with the issue or sale of shares or debentures
- An abstract of the receipts of the company and of the payment made from them up to date
Section 211(3)(4) CAMA
What is the penalty for failure to hold a statutory meeting?
It is an offence for which all the officers of the company are liable to a fine
It is also a ground on which the company ay be wound up pursuant to Section 408 CAMA
What is an Annual General Meeting?
A meeting which must be held by all companies in each year
When must the first AGM of a company be held?
Within 18 months of incorporation after which the company need not hold another AGM in that same year or the following year
There can be no extension of time for this
Section 213 CAMA
What is the maximum time that can pass between one AGM and the next?
15 months however CAC may extend the period by not more than 3 months
Where must an AGM be held?
Anywhere in Nigeria
What the of business is transacted at an AGM?
Ordinary business and special business
What is the ordinary business of an AGM?
- Declaration of dividend
- Presentation of financial statements and reports of Directors and Auditors
- Election of directors in place of those retiring
- Appointment of auditors
- Filing of remuneration of auditors
- Appointment of members of the audit committee
Any other business is special business
What can a shareholder do if the Board of Directs has failed to hold the company’s AGM?
Section 213(2) CAMA says he can apply by way of petition to the CAC to issue a directive to the company to hold the AGM
What is an Extra Ordinary General Meeting?
An EGM is a meeting held at any time to transact business that cannot be delated till the next AGM
Where can an Extra-ordinary GM be held?
Anywhere at any time
What sot of business is transacted at an EGM?
Only special business
Who can convene an EGM?
- The Board of directors
- Any director if there are not enough in Nigeria to form a quorum
- Members of a company holding not less than 1/10th of the paid up voting share capital / voting rights by way of Requisition
Section 215 CAMA
What is a quorum?
The minimum number of directors that must be present at a meeting to make the proceedings valid
What is the procedure for members’ requisitioned EGM?
- The requisition stating the objects of the meeting is signed by the requisitions and deposited at the registered office of the company
- Upon receipt of the requisition the directors convene an EGM within 21 days
- If within 21 days the directors fail to convene an EGM, the requisitions or any one or more of them representing more than 1/2 of the their total voting rights of the initial 1/10th may proceed to convene an EGM
- The Requisitions must convene the EGM within 3 moths from the date of depositing the requisition if not they lose their right to convene
- Any reasonable expenses incurred by the Requisitionists in convening the meeting shall be repaid to the Requisitionists by the company
What happens if an adjourned EGM is convened upon requisition of members does not have quorum present at the subsequent meeting?
If quorum is not present within one hour of the time appointed for the meeting, the meeting shall be dissolved
Section 239(3) CAMA
When is a court ordered meeting convened?
In circumstances where it is impracticable or impossible to call a meeting of the company or of the board of directors
It may be ordered upon application to the FHC by a member or Director of the company or it may be ordered solely upon the court’s motion
Section 223 CAMA
What are some practical instances in which a court ordered meeting would be necessary?
- Where all directors and shareholders die
- Where the company is making a compromise with its members or creditors
- Where there is a restructuring scheme between two or more companies and separate meetings of the companies must be held to approve such scheme
What is the length of notice that a director must receive for a board meeting?
14 days
What is the effect of failure to give notice to a director of a board meeting?
The meeting shall be invalid
Section 266 CAMA
Who is entitled to receive notice of a general meeting?
- Every member
- Legal representatives, receiver, trustee in bankruptcy of a member
- Every director
- Every auditor
- The secretary
What is the consequence of failure to give notice to any of the above listed eligible persons?
The general rule: it shall invalidate the meeting
Exception: Unless the failure to give notice was as a result of accidental omission which does not include misinterpretation of CAMA
Section 221(2) CAMA
What is the length of notice required for all general meetings?
21 days from the date on which the notice is sent
Section 217 CAMA
When can shorter notice of a general meeting be given?
- When agreed upon by all members entitled to attend and vote at the AGM OR
- Members representing 95% of the voting rights/shares for other general meetings
Section 217(2) CAMA
What must you do when giving notice of a general meeting of a public company?
A public company is required for general meetings by way of advertising notice of such meeting in at least two daily newspapers
Section 222 CAMA
How do you serve notice of a meeting?
May be personal or by post to the registered address of the person entitled to receive such notice
Section 220 CAMA
What are the contents of a notice of general meeting?
- The place, date and time
- The general nature of business to be transacted at the meeting
- If the meeting shall consider a special resolution, the terms of said resolution
- a statement that all members have the right to appoint a proxy to attend and vote in his place
Who is a proxy?
A person delegated by another person to represent him and to do certain acts on his behalf.
What is the effect of not including a statement of proxy in a note of a meeting for a company having share capital?
It would amount to an offence
Section 230 CAMA
Who can appoint a proxy?
A member entitled to attend and vote at a general meeting?
What rights does a proxy have?
The same rights as a member
When can a member revoke a proxy?
Before the meeting is held but this must be communicated to the company before the meeting
What is the procedure for appointing a proxy?
- The instrument appointing a proxy shall be in writing and duly signed by the member/member company appointing a proxy or his lawyer (authorised in writing)
- The instrument appointing a proxy shall be deposited at the registered office or head office of the company or at such other place within Nigeria as is specified for that purpose in the Notice of the meeting
- The instrument shall be lodged not later than 48 hours before a meeting or adjourned meeting
- If it is an instrument in respect of poll voting it shall be deposited not less than 24 hours before the time appointed for taking the poll
What is poll voting?
voting according to the number of shares one holds in a company instead of by a show of hands
Section 230 CAMA
How does a company which is a member of another company attend and vote at meetings of the other company?
The company which is a member in the other company shall appoint any person by a resolution of the board to be its representative in the general meetings of the other company of which it is a member
What constitutes a quorum?
This is usually provided for in the Articles of Association
When must you have quorum for proceedings to be valid?
At the start and throughout a meeting unless the articles state otherwise
How is quorum determined?
By the articles. Where the articles are silent by Section 232 CAMA
- 1/3rd of the total number of members of the company or 25 members whichever is less
- Where the number of members is not a multiple of 3, quorum shall be the nearest to 1/3rd
- Where the number of members is six or less, quorum shall be 2
What happens if some members who are counted for the purpose of forming quorum at the start of the meeting withdraw from the meeting while the meeting is in progress?
Withdrawal with insufficient reason*: the meeting may continue with the number present and their decision will bind all shareholders
Withdrawal with sufficient reasons*: The meeting shall be adjourned to the same place and time a week later. If there is no quorum at the adjourned meeting the number present shall constituted the quorum and their decision shall be binding
If only 1 director is present he can see, direction of the court to take a decision
*In the opinion of the Chairman
How can members vote?
By show of hands or by Poll
What is conclusive evidence of voting by show of hands?
A declaration by the Chairman, that a resolution has been carried or lost, which is duly entered into the minutes of the proceedings of the company
What happens where there is equality of votes?
Where votes are equal, the Chairman shall be entitled to a second or casting vote
Who can demand a poll?
- The Chairman where he is a shareholder
- At least 3 members present
- Any member who represented not less than 1/10th of the total voting rights/paid up shares
Can poll voting be used in every circumstance?
No, poll voting cannot be done for the election of the Chairman of the meeting OR in voting for adjournment of the meeting
What can be done if the Chairman is not present within one hour of the time appointed for holding a meeting or is unwilling to act?
The directors present shall elect one from amongst themselves to be Chairman
What can be done if the Chairman is not present within one hour of the time appointed for holding a meeting or is unwilling to act and the directors also fail to act?
The members present shall choose amongst themselves to be Chairman
What are the functions of a chairman of a meeting?
- to ensure the meeting is properly conducted
- Preservation of order
- To act bonafide in the interest of the company
- He may adjourn if so directed by members at the meeting
When can a meeting be adjourned?
When quorum is not present at the original meeting or when there is still unfinished business from the original meeting
What sort of business is transacted at an adjourned meeting?
Only the unfinished business from the original meeting
What is the length of notice that must be given for an adjourned meeting?
It is not necessary to give notice of an adjourned meeting except if adjourned for more than 30 days
Section 239 CAMA
What is the consequence of a company’s failure to keep minutes?
It would amount to an offence for which the company and every officer would be liable to a fine
What constitutes prima facie evidence of proceedings at a meeting?
The minutes signed by the Chairman
Section 241 CAMA
What are the forms in which minutes can be kept?
Minutes can be kept in any of the following forms:
- Bound books
- Loose leaves
- Photographic film form
- Storage device
Section 550 CAMA
What is a resolution?
A decision reached at a meeting after a vote has been put to members
How is an ordinary resolution passed?
By simple majority of votes in person or by proxy at a general meeting
How is a special resolution passed?
By at easy 3/4 majority of members voting at the meeting
What is a written resolution?
A resolution passed without members having to meet physically
The resolution is circulated for all members who are entitled to attend to sign
It is deemed as passed on the date the last member signs
