14 Nov Legal Duties of a Director of a Nigerian Company – Part 3
If you missed our last post on the duties of a director of a Nigerian company, you can check it out here.
In this post, we will look at two further duties of a director of a Nigerian company which are also covered by Part IX of CAMA. They are Section 276 (the duty to give notice of shareholding) and 277 (the duty to declare interest in contracts).
Section 276 requires a director to declare to the other directors, an interest in any shares of the company.
Section 277 requires a director to declare to the other directors, any interest (whether direct or indirect) in any proposed or existing contract with the company.
Practical guidance: It is mandatory that the director declares an interest in the shares of the company, whether directly or indirectly especially if it is a listed company. This interest should be declared before or at the time of acquisition of or gifting of the shares to the director.
The interest of a director in a proposed or existing contract, should be declared at the meeting where the contract is being considered for award, not thereafter. This interest need not be a direct interest, it can be an indirect interest e.g. if the director’s spouse is acquiring the shares or seeking to be awarded the contract. However, a director does not need to declare an interest if the interest is in relation to his/her director service contract with the company.
This duty also implicitly extends to any significant interest in the business of the company, which should be declared to all the directors at any time the business is being discussed.
The director declaring the interest must state the extent of the interest in the shares or the contract being awarded (or the business), for the other directors to determine whether it is an insignificant or significant conflict of interest.
A director is not required under this duty to disclose facts of which the other directors should already know or ought reasonably to be presumed to know. However, if a director becomes aware that some of the information declared is not accurate or complete before the share transaction or contract award has taken place, he/she must ensure that he/she corrects the initial declaration so that it is accurate.
It helps the directors if the company secretary makes ‘declaration of interest’ a routine item on each Board meeting agenda so that it triggers the directors’ consideration at each meeting of any interests that may be of conflict. It is good practice for the board to take decisions on related matters without the director present.
Note: The Company is mandatorily required to maintain a register of directors’ shareholding, so the declarations of interest (specifically for shares) made by directors could be required to be recorded in the statutory register.
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