NIGERIAN CODE OF CORPORATE GOVERNANCE Flashcards
1
Q
What body established the Nigerian Code of Corporate Governance 2018?
A
Financial Reporting Council of Nigeria.
2
Q
Is the Chairman Board of Directors involved in the day to day running of the company?
A
NO!
The Chairman’s primary responsibility is to ensure the effective operation of the Board such that the Board works as a group towards achieving the Company’s strategic objectives.
he’s a NED.
SEC 3
3
Q
Can the Chairman of BOD be a MD/CEO?
A
NO!
The positions of the Chairman of the Board and the Managing Director/Chief Executive Officer (MD/CEO) of the Company should be separate such that no person can combine the two positions.**
To avoid over concentration of power which may rob the Board of the required checks and balances in the discharge of its duties
ARTICLE 5.1 for public companies
4
Q
What is the duties of the MD/CEO?
A
- day-to-day management of the Company;
- agreeing an annual board plan with the board
- Ensuring the agenda for board meetings is set
- Ensuring the board meetings are properly conducted
- promoting and protecting the interests of the Company; and
- ensuring effective communication and relations with the company’s shareholders and other stakeholders
PRINCIPLE 4
5
Q
Can a director hold multiple directorships?
A
Directors may hold concurrent directorships. They have a duty to disclose the positions held during the meeting and such disclosures should be taken into account.
PRINCIPLE 2.8.1 CCGPC
SECTION 307(1)
Directors should not be members of Boards of competing companies to avoid conflict of interest-PRINCIPLE 2.8.3
6
Q
What are the duties of a Chairman?
A
- To oversee the activities of the directors
- presiding over meetings of the Board of Directors and general meetings of shareholders
- They prepare agenda for the BOD meeting
- ensuring that Board meetings are properly conducted
- They ensure that the BOD is effective and functions appropriately.
- Ensure that quorum is met through out the meeting.
- Powers to adjourn the meeting.
S 5.1 CCGPC
7
Q
What should the membership of the board consist of?
A
Not less than 5-Principle 4.2 CCGPC
Executive, Non-Executive and Independent Non-Executive directors-it is desirable that most of the directors are non executive.
PRINCIPLE 4.3 of CCGPC
8
Q
For public companies, how many times should the BOD meet?
A
To effectively perform its oversight function and monitor management’s performance, the board should meet quarterly.
9
Q
Who are restricted from being a part of the Audit Remuneration and Governance Community?
A
The CEO/MD cannot be appointed as a part of the audit, remuneration and governance community
10
Q
What are the Restrictions of the position of the CEO/MD?
A
A CEO/MD cannot be appointed as a part of the audit remuneration and governance community.
11
Q
Provisions for Auditors under Nigerian Code of Corporate Governance?
A
External Auditors are subject to rotation for firms every 5 years.
An individual shall not be an external auditor of a company for more than 10 years, he can only be considered for reappointment 7 years after their disengagement
PRINCIPLE 20
12
Q
What are the sectorial codes of Code of Corporate Governance in Nigeria?
A
- Code of Corporate Governance of Banks and discounting houses 2014 by the CBN
- Code of Corporate Governance for Public companies 2011 by the SEC
- Code of Corporate Governance for Insurance industry 2009 by the NIC
- Code of Corporate Governance for financial institutions in Nigeria **2018*^ issued by CBN
- CCG for Licensed Pension Fund Operators issued by National Pension Commission
- CCG for telecommunications industry 2016 issued by the Nigerian communications commission
13
Q
What is multiple directors?
A
A director in a public company cannot hold more than 5 directorship positions at the same time & where he does, he must resign before the next AGM.
Principle 2.8.1 of NCCG-A director can hold concurrent directorships must disclose to the board & the board must take account of the numbers.
He cannot hold in the same industry PRINCIPLE 2.8.3
S 307
14
Q
How many directors must be independent directors in a public company?
A
S 275
Every public company must have 1/3 of its directors as independent directors.
15
Q
Who is an independent director in CAMA?
A
independent director” means a director of the company who, or whose relatives, during the two years preceding the time in question:
a. was not an employee of the company;
b. did not make to or receive from the company payments of more than
N20,000,000, or
c. own more than a 30% share or other ownership interest, in the company, or in a company that paid or received more than N20,000,000 from the company.
d. was not engaged directly or indirectly as an auditor for the company.
S 275(3)i
16
Q
What is the tenure of non executive directors for banks?
A
non-executive directors of banks shall serve for a maximum of 3 terms of
4 years each.
But maximum of 12 years
17
Q
Tenure of MD/CEO of banks?
A
Tenure of the MD/CEO is 12 years
3 terms of 4 years each.
SEC 3.2
Corporate Governance Guidelines for Commercial, Merchant, Non-Interest and Payment Service Banks
18
Q
composition of the board for banks?
A
Minimum of 7 directors
Maximum of 15 directors
SEC 1.3
Minimum of IED-It shall be three(3)
19
Q
What is the number of equity holding that requires disclosure in banks?
A
Holders of more than 5 of the equity holdings in a bank shall be subject to the CBN’s approval.
Government Holders of more than 10 of the equity holdings in a bank shall be subject to CBN’s approval
Article 3.2
20
Q
What is the required no of directors for a company to have?
A
-every company except from a small company shall have at least 2 directors.
-Where the directors are less than 2, within one month, new directors must be appointed & such company shall not carry on business without making such appointment.
21
Q
How are first directors appointed?
A
S 272
-By the subscribers of the memorandum of association in writing.
-By majority of the subscribers
-Naming them in the articles.
22
Q
Appointment of subsequent directors?
A
S 273 CAMA
1. The members can appoint or reject directors at the AGM
2. The memo or articles may empower someone to appoint & remove a director-SEC 46(3)
3. Where all the directors die, the PRs can convene a meeting & appoint directors, where they fail to do so, the creditors may do it.
23
Q
How can subsequent directors be appointed?
A
-Notice may be given within a period of 3-21 days before the date appointed for the meeting, in writing by a member entitled to vote at the meeting proposing the appointment of a person as a director.
-Such notice must be left at the head/registered office of the company and the proposed director must have signed, consenting to the appointment.
-Appointment is done by ORDINARY RESOLUTION
-The secretary files FORM CAC 7within 14days from the day the resolution was passed & a copy of the ordinary resolution with CAC.
24
Q
Appointment of MANAGING DIRECTORS?
A
-Such person must have been appointed as a director
-The BOD will subsequently appoint him as a MD & delegate all or any of their powers (not statutory duties) to such MD
S 289(5) CAMA
25
Removal of directors?
-ORDINARY RESOLUTION
-SPECIAL NOTICE should be given by the person proposing the removal.(at least 28 days before the proposed date for removal)
-Notice of removal must be given to the director
-Notice of removal must be given to members **21 days before the meeting**
-The director may make representation after receipt of the notice of removal.
Deliver to CAC within 14 days **CAC 7A**
-Effect the removal in the necessary registers i.e register of directors/directors shareholdings
**SEC 288**
26
Options available to a director that was wrongfully removed?
1. Compensation for loss of office/breach of service contract
2. Action for damages
3. Seek an order of court reinstating him as a director
**SEC 288(6)**
27
Who can be appointed as a secretary of a private company?
Any person who has requisite knowledge & skills in the opinion of the directors.
**SEC 332 CAMA**
28
Who can be appointed as a secretary of a private company?
Any person who has requisite knowledge & skills in the opinion of the directors.
**SEC 332 CAMA**
29
Who can be appointed as a secretary of a public company?
1. A member of the chartered institute of secretaries and administration
2. A legal practitioner within the definition of a LEGAL PRACTITIONER
3. A member of a professional body of accountancy established by an Act of the National Assembly
4. A person who has been appointed for at least 3 years of 5 years as a secretary before his appointment
5. A body corporate whose member is part of a,b & c
**SEC 332 CAMA**
30
Who appoints first secretaries?
The subscribers/promoters
-First secretary is named in **FORM CAC 1.1** deliver documents with the MEMART
-Notify CAC within **14 days** of the appointment, together with his written consent.
Subsequent secretaries-**CAC 8 & enter his details in the register of secretaries**
31
Removal of a secretary of a private company?
-Board Resolution
-Notify CAC within **14 days** of his removal together with **CAC 8A**
-Enter the details into the register of secretary.
32
Removal of secretary of a public company?
**SEC 333**
BOARD RESOLUTION
The directors shall give him notice stating:
1. Their intention to remove him
2. The grounds upon which the removal is based on
3. 7 working days period to resign
4. 7 working days to enter his defence.
-Where he fails to enter his defence or resign within the prescribed time, he shall be removed & the removal shall be reported at the next AGM.
However where he enters his defence & it’s not sufficient, the directors may remove him if the allegations are based on fraud or serious misconduct.
-If the allegations is not based on fraud or serious misconduct, he cannot be removed until the next AGM but he can be suspended
33
Should every company have 2 directors?
• Every company, EXCEPT a small company defined in **S.394(3)** of CAMA, is required to have at least two (2) directors
34
Must all companies have a minimum of 2 directors?
• Every company, EXCEPT a small company defined in S.394(3) of CAMA, is required to have at least two (2) directors
**S 271**
35
Who are the directors that don’t retire by rotation under section 285?
1. Executive
2. Independent directors
3. Life directors
36
Who are the directors that don’t retire by rotation in accordance to section 288?
1. Life directors
2. Shadow directors
3. Executive directors
37
Who is an executive director?
Executive directors are responsible for the day-to-day running of the company and their powers are usually guided by the articles.
• He is entitled to be remunerated.
• He is an alter ego, and a servant of the company, because he is an employee.
38
Who is a non executive director?
A non-executive director is a director that attends board of directors meeting and is not entitled to be remunerated apart from re-imbursement of his out-of-pocket expenses in attending company’s matters.
They do not retire by rotation i.e chairman BOD.
39
Who is an interloper director?
A directors that is not officially appointed but the company held him out as a director. The company will be liable and cannot rescind on contracts he validly entered into.
40
Who is an alternate director?
This is a person appointed by a director to sit on the board in his place under the powers contained in the **articles**
• There must be a provision in the Articles of Association & he must be approved at the AGM.
41
How is an appointment of a managing director done?
1. Appoint him as a director first: A managing director must first have been appointed as director.
2. Appoint him as a MD: BOD appoints him as MD and upon appointing him as a MD, the BOD can delegate all or any of their powers(not statutory) to him
42
How can a life director be removed?
Ordinary resolution at the AGM through special notice.
**S 288**
43
What happens where the chairman is late to the BOD meeting?
Another person may be appointed to replace him after 5 minutes
44
Is the chairman BOD an executive director?
NO! For public companies, Article 5.1(c) of the CCGPC, the chairman should be a
non-executive director.
45
Can a director over 70 years and above be appointed as a director of a public company?
YES! however he must give a disclosure to the members at the AGM(272 CAMA)
He must also give special notice to the company within 28 days of his proposed appointment stating his age(282 CAMA)
46
How are first directors appointed?
1. By majority of the subscribers in writing
2. The directors may be named in the articles
** S 272**
47
When can a PR convene a meeting to appoint directors?
Where all directors and shareholders die, any of their personal representatives may apply to court for an order to convene a meeting of all PRs of the shareholder to appoint new directors to manage the company.
If they fail to convene a meeting, creditors may do so. **Section 273(2) CAMA**
•
48
Can you appoint multiple director through a single resolution for public companies?
NO!
unless you draft an unanimous resolution & then the single resolution.
**SEC 287(1) CAMA**
49
What is rotation of directors?
At the first AGM, all directors shall retire( who have been longest in office since their last election)
Then subsequent 1/3 shall retire or if the number isn’t a multiple of three, the closest number to 1/3 shall retire.
**S 285**
50
Can a retiring director be reappointed?
YES! if he presents himself for re election.
Where a director presents himself for re-election, a record of his attendance at the meeting of the board during the preceding **one year**. must be made available to the members at the
general meeting where he is to be re-elected.
**284(2)**
51
A retiring director who offers himself for re-election is deemed to have been re-elected unless??
a. Another person is elected to fill his place; or
b. It is expressly resolved at the meeting not to fill the vacancy created by his retirement;
or
c. A resolution for his re-election has been put to voting at the meeting and lost.
**S 285(3)**
52
Who are the categories disqualified from being directors?
a. An infant, that is, a person under the age of 18 years;
b. A lunatic or person of unsound mind;
c. A person suspended or removed as a director under section 288 of this Act where such
removal was on grounds of fraud, dishonesty, or unethical conduct; BFA Amendment
d. A person disqualified under section 279 (insolvent persons), section 280 (fraudulent persons), and section 284 (vacation of office)
e. A corporation, except its representative appointed to the board for a given period
**S 283**
53
Can a director be removed notwithstanding anything contrary in the articles or directors service agreement?
YES! but he will be entitled to compensation.
if the scenario provides for a simple way to remove him by the articles, apply it first
**S 288**
54
Remedies available to a director that was wrongfully removed?
1. A declaration that the removal was wrongful hence void - AWOYEMI V. SOLOMON
2. Seek for an Order of Court re-instating him as a director
3. Pray for an Order of compensation for breach of service contract
4. Compensation for loss of office, e.g., where it is also a breach of contract.
5. Seek for damages for the unlawful removal
55
Are first directors entitled to remuneration?
The first non-executive directors are not entitled to remuneration, because a company is not bound to pay remuneration to directors (except out-of-pocket expenses)
• The first executive directors may be entitled to remuneration as provided in their contract of service or articles of the company.
56
Failure to give notice of BOD meeting?
It invalidates the meeting.
**S 292**
57
Agenda of first BOD?
1. Appointment of chairman BOD
2. Ratification of pre incorporation contracts
3. Adoption of Company Seal, Official Seal, etc
4. Appointment of Auditors, Committee, Solicitors, Bankers, and Auditors
5. Approval and Allotment of Shares etc
58
Quorum of BOD?
The quorum may be fixed by the Articles otherwise (if not stated) it will be two, or if there are MORE than 6 directors, one-third of the number of directors or one third to the nearest number.
**Section 290**
59
Who may not be a member of a company?
**SEC 106**
1. A person of unsound mind
2. An undischarged bankrupt
3. A body corporate under liquidation
4. An infant may join as a member(with 2 adults that are not disqualified) however he will not be regarded as part of the quorum of a company.
60
Can a PR become a member?
YES! if he produces the relevant documents(letter of administration or share certificate or probate or death certificate)
The company will enter his name in the register of members
He can sell off the shares of the deceased without being a member.
61
Time to issue certificate of allotment?
**2 MONTHS after allotment**
62
Time to issue certificate of transfer?
**3 months after transfer**
63
What is transmission of shares?
Upon the death of an holder of shares
-If he was a joint holder, his shares goes to the survivor
-if he was a sole holder, it goes to his PR.
Their names must be entered in the register of members of the company
64
What to do when your name is not in the register of members?
1. Notify the company first to rectify it.
b. After 10 days of service of notice, and the company refuses to do so, the person entitled, may make an application to the Court for an order directing the company and any officer of the company to remedy its default, and the order may provide that all costs of and incidental to the application shall be borne by the company or by any officer of the company responsible for the default.
65
When can a company refuse to register transfer of shares?
1. Where there is a lien on it
2. It has not been fully paid up and they don’t approve of the person the shares are to be transferred to.
**SEC 176(3)**
Notify the party within **2 months**
66
Rights of a member?
1. Right to vote-**SEC 107**
2. Right to receive notices of meetings-**SECTION 243(1)a**
3. Right to appoint a proxy
4. Right to receive dividend when declared
5. Right to transfer shares as a personal property **SEC 139**
6. Right to demand voting by poll.
67
Who has the power to allot shares?
The board of directors once authorized by the articles of associations or at the AGM.
**SEC 149**
68
How is allotment done?
-Through an application or prospectus for public companies.
-Upon a receipt of an application, a company shall where it wholly or partially accepts the application, make an allotment to the applicant and within 42 days
- notify the applicant of the fact of the allotment and the number or shares allotted to him
-The person’s name must be included in the register of members.
• The company shall within 2 months after allotment, issue a certificate of Allotment to the allotee.
**section 150**
69
Effect of failure to hold statutory meetings?
Failure to deliver the report to the Commission or holding of statutory meeting may be: a ground for winding up the company.
Section 571
there is penalty as may be specified by the CAC for everyday of default in holding the meeting.
70
contents of statutory report?
1. Total number of shares allotted, distinguishing between those fully or partly paid up otherwise than in cash. In the case of those partly paid up, the extent to which they are paid up and, in any case, the consideration for which they have been allotted
2. The total amount of cash received in respect of shares allotted.
3. The names, address and description of directors, auditors, managers (if any) and the company secretary.
4. Particulars of pre-incorporation contract, together with modifications or proposed modification on it
5. Any underwriting contract which has not been carried out and the reasons therefore
6. The arrears, if any, due on calls from directors
7. Particulars of any commission or brokerage paid or to be paid
71
How should AGM be conducted?
Within **18 months** after incorporation.
Subsequently is 15 months & can be extended for not more than **3 months**
**SEC 237**
a company incorporated on 1st November 1995, it need not hold
annual general meeting in 1995 or 1996 but must hold it at least in April 1997.
72
what happens if the BOD refuse to call for AGM?
• If a company fails to call annual general meeting, a member can apply to CAC or CAC on its own may give directives on calling the meeting and such directive will include the power for one member to apply to court to make an order that such member shall take decisions that will bind members of the company
**237(2)**
73
Ordinary businesses at AGM?
1. Presentation of financial statement
2. Declaration of dividends
3. Directors and Auditor’s report
4. Remuneration of managers
5. Appointment and remuneration of auditors
6. Appointment of audit committee
7. Re-election of a director to replace a retiring director
**S 238**
74
Special business at the AGM?
1. Increase in share capital
2. Reduction of share capital
3. Appointment of directors
4. Removal of directors
5. Voluntary winding up
6. Change of name
7. Re registration.
75
Who can requisition an EGM?
**S 239**
-The BOD may whenever they deem fit, convene an extra-ordinary general meeting.
- Any director of the company where there have been a serious loss of capital-**S 137**
-If there are no other directors within Nigeria to form a quorum, he may whenever he deems fit, convene an extra-ordinary general meeting
-Members & Resigning Auditor(413) to convene an EGM, it must be through requisitioning.
-CAC
76
Procedure for requisition?
1. The members holding not less than 1/10th of the nominal value of shares in the company shall deliver a signed requisition to the Head office of the company . The requisition should contain the object & proposed resolution of the EGM
2. The directors shall convene a meeting within 21 days. Where they fail to do so, the requisitions may do so within 3 months from the deposit of the requisition
**S 239**
77
What are class meetings?
Class meetings are convened for shareholders of a specific class, such as preference shareholders or ordinary shareholders, when matters relate specifically to their class of shares.
i.e variation of their rights
78
Can a resolution passed at class meeting be challenged?
After a resolution is passed at a class meeting, shareholders of that class who did not vote in favor of the resolution can within **21 days** apply to the court to challenge it.
To apply to the court, shareholders representing at least 15% of the class rights must agree to the challenge. They can ask the court to set aside the resolution or provide another appropriate remedy.
79
Can a omission of the place, date, time and business to be transacted nullify the notice of meeting?
Unless bad faith or failure to exercise due care and diligence exists, an error or omission in a notice with respect to the place, date, time or general nature of the business of a meeting shall not invalidate the meeting.
**S 242**
80
Persons entitled to receive notice of meetings?
**S 243**
1. Every member
2. Every person upon whom the ownership of shares delves upon whether by him being a trustee or receiver
3. Every directors
4. Auditors for the time being.
5. Secretary or CAC for public companies
for banks i.e CBN because its the regulatory agency.
81
How is notice delivered?
personally
electronically
post to him to his registered address
82
What is the effect of failure to give notice?
Failure to give notice invalidates the meeting in favour of a person entitled to receive notice of it and was not given EXCEPT if it was accidental omission on the part of the person or persons giving the notice.
If the failure to give notice arises from misrepresentation or misinterpretation regarding the provisions of C.A.M.A. or the articles, this does not qualify as an accidental omission & the meeting will still be invalid.
**S 245**
83
Quorum of meetings?
When the articles are silent, the quorum shall be 1/3(where there is no multiple of 3, it shall be the nearest no) or 25 which is less.
Where the number of members is 6 or less, the quorum shall be 2 members.
**S 256**
84
What is voting by poll?
It is a secret method of voting, in a ballot paper-**SECTION 248**
Where there is a tie in voting, whether by show of hands or poll, the chairman would have a second vote or a casting vote.
85
Where is voting by poll not allowed?
where the articles provides that it cannot be used for issue of:
a. election of a chairman or
b. adjournment of the meeting.
c. Election of audit committee.
86
Resolutions requiring special notice?
1. To appoint an overage director-**SEC 282**
2. To remove an auditor
3. To remove a director
87
Tenure of ED(MD/CEO), NED & INED for banks?
SEC 3.2.
**12 years** for ED & NED.
Tenure of INED-**8 years**
88
Contents of accounting records?
1. Entries from day to day of all sums received and expended by the company
2. Records of all assets and liabilities of the company.
If the company deals with goods and services
1. Statement of all stock held by the company at the end of each year.
2. Statement of all stock takings made in respect to A
3. Statement of all goods sold and purchased, showing the goods and the buyer and seller in sufficient details.
**SEC 374(3)**
89
who are the persons entitled to receive financial statements?
1. All members whether entitled to receive notice of general meetings or not
2. All debenture holders whether entitled to receive notice of general meeting
3. Any other person apart from members and debenture holders entitled to receive notices of meeting.
A copy shall be sent out **21 days** before they are laid down at the AGM.
**SEC 387**
90
What are the contents of financial statement?
a. statement of the accounting policies; (not compulsory for private companies)
b. the balance sheet as at the last day of the year;
c. a profit and loss account or, in the case of a company not trading for profit, an income and expenditure account for the year;
d. notes on the accounts;
e. the auditors’ report;
f. the directors’ report;
g. a statement of the source and application of fund or statement of cash flow; (not compulsory for private companies).
h. changes in equity; (not compulsory for private companies).
i. a value-added statement for the year; (not compulsory for private companies).
j. a five-year financial summary; (not compulsory for private companies).
**SEC 377(2)**
91
Procedure after making financial statement?
Once the financial statement is prepared, it will be laid before the members at the AGM(Presenting it & reading the auditor’s report)
• The financial statement must be signed by two directors on behalf of the company.
-Then, deliver the financial statement to CAC, together with the balance sheet & profit & loss account & annual returns within 14 days.
**SEC 388**
92
when must financial statement be laid down after incorporation?
**The financial statement shall be laid not later than 18 months after incorporation**
Then subsequently not exceeding than **nine months** to the date of meeting
93
Time to deliver financial statement to CAC?
Within 14 days after being laid, it is delivered to the CAC with the annual returns, balance sheet, profit and loss account which was laid at the AGM.
94
Purpose of the balance sheet, statement of source & application of funds, value added statement and five year financial summary in financial statements?
1. The balance sheet gives a fair overview of the state of affairs of the company, the profit & loss account states the profit and losses made by the company
2 The statement of source & application of funds states how funds gotten are utilized by the company.
3. Value added statement, the wealth created by the company during the year and its distribution among various groups.
4. five year financial summary shall provide a report for a comparison over a period of five years or more
95
companies that are exempted from auditing its financial statement?
1. Where it has proved that it has not carried out any business in a financial year since incorporation
2. Where it qualifies to be qualified as a small company, in a financial year
• This exception does not apply to insurance companies, banks.
96
who appoints the first auditors of a company?
The Board of Directors.
Any auditor(s) appointed by the directors may be removed by the company at the AGM and the company appoint in his place, any other person(s) who has been nominated for appointment, by any member of the company.
The notice of such nomination, must have been given to the members, not less than **14 days** before the date of the meeting.
**SEC 401**
97
WHEN DIRECTOR CAN APPOINT AUDITORS?
1. Appointing of first auditors
2. To fill a casual vacancy of an auditor
3. Where the members at AGM fail to exercise their power to appoint an auditor
98
RE-APPOINTMENT OF RETIRING AUDITORS?
A retiring auditor is automatically reappointed except
a. a resolution has been passed at that meeting appointing some other person instead of him or
b. a resolution has been passed providing expressly that he shall not be re-appointed; or
c. he is not qualified for re-appointment; or
d. he has given the company notice in writing of his unwillingness to be re-appointed
**SEC 401**
99
Persons that cannot be appointed as auditors?
**S 403**
1. An officer or servant of the firm
2. A person who is a partner of the company
3. A body corporate
4. A member that worked as a consultant for the firm’s financial record for a year
5. A person disqualified from being an auditor in subsidiary company of a holding company
100
Removal of a company’s auditor?
-Special notice
-Ordinary resolution
Notify CAC within 14 days.
Copy of the special notice must be sent to the concerned Auditor(s) that is; auditor to be appointed, to be retired, to be removed or to resign as the case may be, to enable him make representations to the company and request the company to circulate them to members of the company.
**S 409**
101
duties of an auditor?
1. Right to access the company’s books of accounts and financial records
2. Duty to carry out investigations while preparing their reports
3. Consider whether the information given in the director’s report for the year is consistent
102
RESIGNATION OF AUDITORS?
1. Notice in writing at the company’s head office
The notice shall take effect from the day it was deposited in the company’s head office or any other specified date except
-Statement to the effect that there are reasons attached to the resignation which should be brought to the notice of the members & creditors
-any such circumstances connected with his resignation which he considers should be brought to the notice of the members or creditors of the company
**S 412**
-
• Once this is done, the company must within 14 days, send his notice and statement to CAC.
It may also be brought to the notice of the members except the auditor refuses on the grounds of needless publicity.
103
Rights of a resigning auditor?
1. To requisition an extraordinary general meeting to discuss the circumstances concerned with his resignation
2. He is entitled to attend and receive notices and communications relating to such meeting
3. He has the right to be heard at a meeting that concerns him or her as a former auditor of the company
**S 413 CAMA**
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functions of the audit committee?
a.examine the auditors’ report
b. prevents collusion of the external and internal auditor
c. to review the external auditors
d. authorise the internal auditor to carry out investigations
e. to make recommendations to the board about the appointment, remuneration of external auditors
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penalty of not filing annual returns?
1. Penalty
2. Enforcement of returns
3. STRIKING OFF AS A DEFUNCT COMPANY: the CAC can strike off the company from its register of companies on the grounds that it is a defunct company.
If they haven’t filed annual returns for **10 years**
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Who may inspect accounting records?
• It is only the officers of the company that has the power of inspection of the company accounting records, unless the Articles of Association otherwise provides.
**director, manager, or secretary**
107
Who may inspect accounting records?
• It is only the officers of the company that has the power of inspection of the company accounting records, unless the Articles of Association otherwise provides.
**director, manager, or secretary**
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tenure of auditors under cama?
Every company shall at each annual general meeting appoint an auditor or auditors to audit the financial statements of the company, and to hold office from the conclusion of that, until the conclusion of the next, annual general meeting.
**S 401**
109
is a firm qualified to be an auditor?
A firm is qualified for appointment as auditor of a company if, all the partners are qualified for appointment as auditors of the company.
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When can you bring injunction and declaration under minority protection?
1. Illegal or ultra vires
2. Purporting to do something by ordinary resolution that should be done by special resolution
3. Any act or omission affecting individual right as member
4. Committing fraud on either the company or the minority shareholders
5. Meeting of company cannot be called in time to be of practical use in redressing a wrong
6. Where directors are likely too or have benefited/profited from their breach of duty/ negligence.
7. Any other act or omission where the interest of justice so demands:
**SEC 344 CAMA**
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Forms of minority protection?
A. Members Direct Action: The members’ direct action can be brought in two forms as follows:
1. Personal Action: A member can institute a personal action to enforce a right due to him personally - Section 344(1) CAMA. Personal action is restricted to such infringements directed at the individual membership rights in the company e.g. entitlement to notice of meeting, voting, attendance to meetings, payment of dividend
when declared etc.
2. Representative Action: Members can bring action in a representative capacity for the enforcement of personal rights due to them
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How do you bring an application for derivative action?
They are actions which ought to have been brought by the company through the directors. Thus, the plaintiff’s right of action derives from that of the company and any benefit obtained will accrue to the company.
Seek the leave of court & bring the action in the company’s name.
**SEC 346**
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Who may bring a derivative action?
1. A registered holder (member) or beneficial owner and a former registered holder or beneficial owner of a company’s security
2. A director or officer or a former Director or Officer of a company.
3. Corporate Affairs Commission.
4. Any other person the Court may permit to make the application.
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procedure for bringing derivative action?
a. A cause of action has arisen from an actual or proposed act or omission involving negligence, default, breach of duty or trust from a director or former director
b. The applicant has given reasonable notice to the directors of the company of his intention to apply to the court.
c. The directors do not bring , diligently prosecute, defend or discontinue the action
d. The notice contains a factual basis for the claim and the actual or potential damage caused to the company
e. The applicant is acting in good faith
f. It appears to be in the best interest of the company that the action be brought, prosecuted, defended or
discontinued.
**S 346**
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what are reliefs of grounds of unfairly prejudicial and oppressive conduct?
Here, the affairs of the company are being conducted in an illegal or oppressive manner or unfairly prejudicial or discriminatory against a member or members’ interest or in disregard of public interest - Section 354 CAMA. E.g of unfairly prejudicial conduct includes; shares issued to directors on generous terms, dividend issue, exclusion from management, etc.
**S 354**
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Who may apply for investigation of the company’s affairs?
1. Holders of not less than 1/10th of the nominal value of shares in the company or an application of 1/10th of the persons in the company’s register of members.
They must show that they are acting in good faith.
2. CAC
3. Upon court order for the investigation of the company
**S 357**
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Who removes first auditor of a company?
THE BOD!
-Board resolution to remove the auditor.
-28 days special notice to the auditor to enable him make representations to the company and request the company to circulate them to members of the company.
-However, the company or an aggrieved person may apply for court order that, the representation should not be sent out or read out on the ground that, the right to do so, is being abused to secure needless publicity for defamatory matter.
-Remove him at extra ordinary general meeting
-Ordinary removal
-Returns to CAC in 14 days
**SEC 409**
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quantum of shares that can be held in a public company?
There is no limit
however, refer to banks.
