By Peter Eboch Ibe Esq.
It is a well-known fact that Nigeria, like most parts of the world is currently struggling with a global pandemic known as the novel corona virus. This pandemic, which is also referred to as the covid19 virus is of such a colossal scale that businesses, schools and industries have been forced to close so as to reduce or eliminate human contact which is the virus’s primary mode of transmission. The scale of economic downturn is widespread and unavoidable especially in a society like ours that thrives on human contact.
The government’s effort to contain the virus by issuing widespread lockdown orders on cities and communities, closure of international borders, grounding of domestic and international flights, ban on interstate travel, prohibition of public gathering, closure of worship centers, and introduction and encouragement of social distancing amongst others have brought into view unique challenges especially in company management which were neither envisaged by the Companies and Allied Matters Act (CAMA) or the Articles and Memorandum of Association of most, if not all companies.
The prohibition of social contact has generally brought to the fore an era of virtual meetings and conferences. The weekly Federal Executive Council meetings since the death of Mr. Abba Kyari, former Chief of Staff to the Nigerian President, Major General Muhamadu Buhari (rtd) of covid19 complications, has held virtually. Business organizations have also employed virtual means to hold business meetings. The Nigerian Bar Association is set to hold its Annual General Conference online for the first time since its inception and even our traditionally conservative courts are exploring virtual means to have court sittings. I am therefore curious as to whether it is legally permissible to hold company meetings by virtual means.
While there is plethora of virtual means through which a company may hold its company meeting, the legality of such meeting may depend on the type of company meeting and the type of company itself.
A company meeting is the general meeting of shareholders or members of the company as well as other persons who may be authorized or entitled to attend, such as directors, auditors and debenture holders. As a forum, the company meeting is the highest decision making body of the company and is empowered among others, to elect or remove the directors of the company. The company meeting also sets the tone and gives bearing to the company for the year in view. Section 63(1) of CAMA provides that “A company shall act through its members in General meeting or its board of directors or through officers or agents, appointed by or under the authority derived from the members in general meeting or the board of directors”.
The importance of company meetings is indubitable. Asides being compulsory, decisions apropos the composition, designation and remuneration of the company’s management, ratification of the ultra vires actions of the board of directors, alteration and amendment of the Memorandum and Articles of Association amongst others can only be taken at the company meeting.
Under CAMA, there are basically four types of company meetings, namely: Statutory Meetings, Annual General Meeting, Extra-Ordinary General Meeting and court ordered meeting. Each of these company meetings are occasioned by different circumstances and therefore subject to diverse rubrics.
Section 211(1) of the CAMA provides that “every public company shall, within a period of six months of its incorporation, hold a general meeting of the members of the company”. Thus, a statutory meeting is a company meeting that is compulsorily scheduled to hold within six months of the incorporation of the company and has its specific agenda. This meeting is only applicable to a public companies and the CAMA in section 216 specifically provides that it must be held within Nigeria. Though there is no specific provision in the CAMA which expressly or impliedly prohibits a virtual company meeting however the express provision of section 216 of the CAMA as well as the marginal notes thereto (which are interpretation aids) suggest that the statutory meeting ought to be in a physical venue which thus may constitute an impediment to the legality of a virtual statutory meeting. It is therefore my submission that a statutory meeting of the company cannot be held by virtual means as this was not envisaged nor can it be justified by any provision of the CAMA.
ANNUAL GENERAL MEETING:
By section 213 of the CAMA, an annual general meeting of a company so termed, is a general meeting of a company which must be held every year in addition to any other general meetings in that year, and which is specified as such in the notice calling it. Not more than 15 months may elapse between the date of one annual general meeting of the company and the next. An Annual General Meeting must be held within eighteen months of its incorporation and the company, upon holding its first annual general meeting is exempted from compulsorily holding another annual general meeting in the subsequent year. Both ordinary and special businesses may be transacted at an annual general meeting of the company. The Corporate Affairs Commission has the power to, upon application, extend the time within which the company may hold its Annual General Meeting. The Annual General Meeting of the company is applicable to all types of companies.
By section 216 of the CAMA, the Annual General Meeting a company must be held in Nigeria. While the CAMA is silent as to whether the physical presence of members is required, the marginal notes to section 216 of the CAMA is explicit as it refers to a ‘place of meeting’. It may therefore be concluded that the Annual General Meeting of the company cannot be held virtually.
EXTRA-ORDINARY GENERAL MEETING:
Section 215 of the CAMA provides for an extra-ordinary general meeting of the company. This meeting is held at any time to conduct business and take decisions within the “special business” category which cannot wait for the next annual general meeting. Unlike the statutory and annual general meetings, the extra-ordinary general meeting need not compulsorily hold in Nigeria as it is excluded by section 216 of the CAMA. I believe the intention of the draftsmen by exempting the extra-ordinary general meeting from being compulsorily held in Nigeria is to make accommodation for instances where it is impossible or difficult for shareholders and members of the company to meet especially within Nigeria. This may happen when the shareholders or director are foreigners and or based abroad. However, just like in the previously discussed meetings, there is no way to justify an online extraordinary meeting of the company under the CAMA.
COURT ORDERED MEETINGS:
A court ordered meeting of a company is a general meeting ordered by the Federal High Court upon application by relevant interested parties. Section 223(1) of the CAMA provides as follows:
“if for any reason it is impracticable to call a meeting of the company or of the board of directors in a manner in which meetings of the company or the board may be called, or to conduct the meeting of the company or board in the manner prescribed by the articles or this Act, the court may, either of its own motion or on the application of any director of the company or of any member of the company who would be entitled to vote at the meeting , in the case of the meeting of the board, order a meeting of the company or board , as the case may be, to be called , held or conducted in such manner as the court thinks fit, and where such an order is made, may give such ancillary directions as it thinks expedient”.
By virtue of the above section, where it is impracticable for any reason whatsoever for a company to call a meeting of its members in the manner prescribe by the CAMA or the Articles of the company, the Federal High Court may suo motu or upon application by a specified class of people so order the meeting in the manner it thinks fit.
It is my submission that the safest means to stay within the boundaries of the CAMA in conducting a meeting of the company by virtual means is through a court ordered meeting. Note that by section 223(1) is general in nature as to the type of meeting that the court may order. Also, either special or ordinary businesses of the company may be transacted if so ordered by the court.
The application to the court may be made by the board of directors, any director if other directors are not within Nigeria and a quorum may be affected, members holding not less than one tenth of the paid up voting share capital (or in the case of a company without a share capital, members holding one tenth of the voting rights) who have complied with the rules of procedure for members requisitioned extraordinary general meeting, and auditors.
The application would necessarily state the manner in which the applicants require the company meeting to be held and should of course put cogent reasons (covid19) before the court to enable it grant the application on the terms sought. The Federal High Court is empowered to make orders that may deviate from the Articles of Association or the CAMA which if followed would make it impossible to hold the meeting. Such orders could be as to venue and businesses to be transacted.
Technology available for conducting such meetings include zoom, google hangout, Facebook among others. These apps can be installed on all smart phones and computers. They do however require mobile data connection and may be affected by network or weather issues. Their installation requires minimal technological knowhow and they are all freely downloadable from respective app stores.
Notwithsatanding the above, the CAC has realeased the following guidelines to guide Companies on the procedure and conduct of the AGM: –
1. The approval of the Corporate Affairs Commission (CAC) shall be obtained before such meeting is held. The application can be submitted to the Head Office in Abuja or by email to: email@example.com or firstname.lastname@example.org.
2. CAC may send a representative(s) as observer(s) to the meeting, in the absence of which the Company shall send a detailed report to the CAC, after the meeting.
3. The meeting shall only discuss the Ordinary Business of an AGM as provided in S.214 of CAMA. However, where any Special Business is considered very urgent and necessary, the application letter shall provide the justification and the nature of the special business.
4. Notice of meeting and proxy form shall be sent to EVERY member in accordance with the requirements of CAMA. Companies will be required to provide the CAC with the evidence of postage or delivery of such notices after the meeting.
5. All the members shall be advised in the notice calling the meeting that in view of the Government directive on physical distancing and the restriction on the maximum number of people in every gathering due to the Covid-19 pandemic, attendance shall only be by proxy with list and particulars of persons willing to act as proxies for them to select therefrom. The invitation shall be issued at the Companies expense as well as the stamp duties which shall be prepaid by the Company. The proxies need not be members of the Company.
6. The Company shall be guided by the provisions of its Articles or CAMA as regards to quorum. However, for the purpose of determining quorum, each duly completed proxy form shall be counted as one.
However, where there is no exigency in holding an Annual General Meeting, and the time within which the company ought to hold its Annual General Meeting is about to elapse, section 213(1)b of the CAMA empowers the Corporate Affairs Commission to extend the time within which an annual general meeting of the company shall be held. The power of the commission is however limited as the commission may not extend such time beyond 3 months. The company may therefore apply for an extension while hoping that before it elapses, the lockdown would have been eased.
Also, members of a private company may take decisions without necessarily holding a company meeting. Section 234 of the CAMA provides that:
“All resolution shall be passed at general meeting meetings and shall not be effective unless so passed: Provided that in the case of a private company a written resolution signed by all the members entitled to attend and vote shall be as valid and effective as if passed in a general meeting.” Although this is not the focal point of this paper, it provides another avenue through which critical decisions may be taken within the provisions of CAMA during this pandemic without necessary risking the lives of members or contravening local restrictions.
ABOUT THE AUTHOR
Peter Eboch Ibe Esq. is an associate with the law firm of J. N. Okezie & Associates and practices law in Jalingo, Taraba State.
Speak with the author, ask questions or make enquiries via email@example.com or 08031584636.
This publication is the writer’s view and not legal advice. It does not create any form of legal relationship. You may reach the writer for more information.