Mr Arrowhead, a very prominent Nigerian suffered a stroke and was flown abroad where he received medical attention for several months. Unfortunately, he died abroad and his body was flown back to the country for burial which was celebrated in grand style. Although Mr Arrowhead left a will, there was serious contention among family members over the content of the will especially as some of the family members felt disappointed over what was bequeathed to them. Typical of a polygamous family, the will was contested in court. It was discovered in the will, that Mr Arrowhead appointed his wife as a director of one of his companies which brings us to the question “Can a director of a company be appointed by a will?”
Who is a director?
Directors are appointed by a company to direct and manage the business of the company. They are officers of a company who are appointed to operate the business for the benefit of the shareholders. A director could be an executive director or a non-executive director. Executive directors are those directly engaged in the day to day management of the business on a full time basis while non-executive directors are external board members who act as a check on the executive management. They are usually appointed on part time basis and they have become more prominent with the development of corporate governance.
Appointment of directors
The authority to act as a director of a company comes the director’s appointment. A person who acts as a director without being appointed commits an offence and would be personally liable for any actions taken. Where the company holds out a person not duly appointed as a director to carry out responsibilities in that capacity, the company will also be liable to a fine. Therefore proper appointment is a fundamental to validating the position and authority of a director of a company.
In Nigeria, the law provides for the manner in which the director of a company may be appointed: who can appoint and how to appoint a director. For the first directors, the law provides that they should be appointed by the subscribers to the memorandum of association of the company, a majority of them or they may be named in the articles of association of the proposed company. For subsequent appointments generally, it is the shareholders in a general meeting who are empowered by law to appoint directors by ordinary resolution. The board of directors of a company could also appoint other directors subject to the approval of the shareholders at the next annual general meeting where a vacancy arises from death, resignation, removal of a director. This is referred to as filling a casual vacancy and where the newly appointed director is not approved by the shareholders in a general meeting, he would cease to be a director. Where all shareholders and directors of a company die, any of the personal representatives may apply to court to convene a meeting of all personal representatives of the shareholders entitled to attend and vote at a general meeting to appoint new directors to manage the company. Where the personal representatives of the deceased shareholders fail to do so, the creditors of the company, if any, shall be able to appoint a director.
What is a will and what kind of bequest can be made by a will?
A will is a voluntary expression of the intention or wishes of a person of sound mind where the person states or gives directives of how his/her property should be disposed of in event of death. Property given by a person in a will is referred to as legacy and could either be chattels i.e. movable items such as wrist-watch or car; realty i.e. immovable items such as land or buildings; or pecuniary i.e. money.
Directorship in a company is not a type of property and does not fall under the types of properties that can be bequeathed by a will. A person who dies automatically ceases to be a Director of the Company and so loses the power to bind the company which is a separate entity from the owners & Directors. Any subsequent director can only be validly appointed by due procedures laid down by statute. Thus, any purported appointment by a will goes to no issue as it cannot be recognised except due process has been followed. At best, it can serve as an expression of intention of the deceased director as to who such deceased director wishes to be on the Board of the company. This intention can only be executed by the living directors, if any and until so executed, it is invalid.
This post was written by Teingo Inko-Tariah, Teingo is a lawyer at Accord Legal. This post first appeared on LegalNaija.