The Legality of Acts Done By Or On Behalf of Companies In Nigeria

This article will be focused on the legality under Nigerian law, specifically the Companies and Allied Matters Act (CAMA) of acts done by or on behalf of a company in line with the principles of agency.

Of particular interest will be the subtopics of :-

– The division of powers between a general meeting and a board of directors

– Delegation of Powers

– Acts of Officers or Agents

– Constructive Notice of Registered Documents

– The legality of provisions seeking to exempt officers from liability to a company.

Division of Powers between General Meeting and Board of Directors

– A company shall act through its members in general meeting or its board of directors or through officers or agents appointed by, or under authority derived from, the members in general meeting or the board of directors.

– Subject to the provisions of this Act, the respective powers of the members in general meeting and the board of directors shall be determined by the company’s articles.

– Except as otherwise provided in the company’s articles, the business of the company shall be managed by the board of directors who may exercise all such powers of the company as are not by this Act or the articles required to be exercised by the members in general meeting.

– Unless the articles otherwise provide, the board of directors, when acting within the powers conferred upon them by this Act or the articles, is not bound to obey the directions or instructions of the members in general meeting provided that the directors acted in good faith and with due diligence.

– Notwithstanding the provisions mentioned above, the members in general meeting may:

(a) act in any matter if the members of the board of directors are disqualified or unable to act because of a deadlock on the board or otherwise ;

(b) institute legal proceedings in the name and on behalf of the company,if the board of directors refuse or neglect to do so ;

(c) ratify or confirm any action taken by the board of directors ; or

(d) make recommendations to the board of directors regarding action to be taken by the board.

– No alteration of the articles invalidates any prior act of the board of directors which would have been valid if that alteration had not been made.

Delegation to Committees and Managing Director

 – Unless otherwise provided in this Act or in the articles, the board of directors may:

(a) exercise its powers through committees consisting of such members of their body as they think fit ; or

(b) from time to time, appoint one or more of its members to the office of managing director and may delegate all or any of its powers to such managing director.

Acts of the General Meeting, The Board of Directors or The Managing Director

-Any act of the members in general meeting, the board of directors, or a managing director while carrying on in the usual way the business of the company, shall be treated as the act of the company itself and the company is criminally and civilly liable to the same extent as if it were a natural person :

Provided that-

(a) the company shall not incur civil liability to any person if that person had actual knowledge at the time of the transaction in question that the general meeting, board of directors, or managing director, as the case may be, had no power to act in the matter or had acted in an irregular manner or if, having regard to his position with or relationship to the company, he ought to have known of the absence of such power or of their irregularity ; and

(b) if in fact a business is being carried on by the company, the company shall not escape liability for acts undertaken in connection with that business merely because the business in question was not among the business authorised by the company’s memorandum.

Acts of Officers or Agents

– Except as provided under CAMA 2020, the acts of any officer or agent of a company shall not be deemed to be acts of the company,unless:

(a) the company, acting through its members in general meeting, board of directors, or managing director, shall have expressly or impliedly authorised such officer or agent to act in the matter ; or

(b) the company, acting as mentioned in paragraph (a), shall have represented the officer or agent as having its authority to act in the matter, in which event the company shall be civilly liable to any person who has entered into the transaction in reliance on such representation unless such person had actual knowledge that the officer or agent had no authority or unless having regard to his position with or relationship to the company, he ought to have known of such absence of authority.

Voiding of Provisions exempting Officers from liability to the company

– Any provision, whether contained in the articles of the company or in any contract with a company or otherwise, for exempting any officer of the company or any person employed by the company as auditor from, or indemnifying him against any liability which by virtue of any rule of law would otherwise attach to him in respect of any negligence, default, or breach of trust of which he may be guilty in relation to the company, is void.

– Notwithstanding the provisions mentioned above:

(a) person shall not be deprived of any exemption or right to be indemnified in respect of anything done or omitted to be done by him while any such provision as mentioned in that subsection was in force ; and

(b) company may, in pursuance of any such provision as mentioned above, indemnify any such officer or auditor against any liability incurred by him in defending any proceeding, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application under the Act in which relief is granted to him by the Court.

Abolition of Constructive Notice of Registered Documents

– Except as mentioned under this Act, regarding particulars in the register of particulars of charges, a person is not deemed to have knowledge of the contents of the memorandum and articles of a company or of any other particulars, documents, or the contents of documents merely because such particulars or documents are registered by the Commission or referred to in the particulars or documents so registered, or are available for inspection at an office of the company.

Presumptions of Regularity

– A person dealing with a company or with someone deriving title under the company, is entitled to make the following assumptions and the company and those deriving title under it shall be estopped from denying their truth that:

(a) the company’s memorandum and articles have been duly complied with;

(b) every person described in the particulars filed with the Commission pursuant to the relevant sections of this Act as a director, managing director or secretary of the company, or represented by the company, acting through its members in general meeting, board of directors, or managing director, as an officer or agent of the company, has been duly appointed and has authority to exercise the powers and discharge the duties customarily exercised or performed by a director, managing director, or secretary of a company carrying on business of the type carried on by the company or customarily exercised or performed by an officer or agent of the type concerned.

Liability of Company not affected by fraud or forgery of its officer

– Where, in accordance with  relevant sections of the Act, a company would be liable to a third party for the acts of any officer or agent, the company shall, except where there is collusion between the officer or agent and the third party, be liable notwithstanding that the officer or agent has acted fraudulently or forged a document purporting to be sealed by or signed on behalf of the company.