By Adewole Kehinde
The social media was agog with the news of the suspension of the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), Mal Mele Kyari, to the extent of linking the news to a major newspaper.
The purpose of this write-up is to enlighten Nigerians and even the Federal Government to avoid another case of Ifeanyi Ararume in the NNPC Limited.
A Federal High Court in Abuja argued that Ifeanyi Ararume’s removal as Executive Chairman of NNPCL was a violation of the Companies and Allied Matters Act (CAMA) after incorporating the oil company in his name.
Justice Ekwo ordered the immediate reinstatement of Ararume to the position and the payment of the sum of N5 billion in damages to him.
The Nigerian National Petroleum Company Limited (NNPC) became a fully limited liability company on July 1, 2022, whose operations are fully run in compliance with the provisions of the Companies and Allied Matters Act (CAMA) of 2020.
This is in accordance with the provisions of the Petroleum Industry Act (PIA). Indeed, with the passage of the PIA, there’s no doubt that the operations of the NNPC are significantly impacted.
By Section 53(1) of PIA 2021, the Minister of Petroleum Resources caused the incorporation of the NNPC Limited within six months of the enactment of the PIA in consultation with the Minister of Finance on the nominal shares of the company.
Also, Section 65 of the Act encourages NNPC Limited and its joint venture partners to explore the use of incorporated joint venture companies. The NNPC is also required to declare dividends to its shareholders and retain 20 percent of profit as retained earnings to grow its business like any other incorporated entity incorporated under the Companies and Allied Matters Act, as provided under Section 53(7) of the Petroleum Industry Act.
On September 21, last year, the Corporate Affairs Commission completed the incorporation of NNPC Ltd. in accordance with the provisions of the Petroleum Industry Act 2021.
The PIA was signed into law by President Muhammadu Buhari on August 16, 2021, following its passage by the National Assembly in July of the same year.
The Petroleum Industry Act 2021, Section 59, further states that the composition of the NNPC Limited board shall be determined in accordance with the provisions of the Companies and Allied Matters Act and its Articles of Association.
For any director to be removed, notice of removal of the director shall be filed with the CAC within fifteen (15) days of the removal in accordance with Section 262(1) of CAMA, though Section 321 imposes a duty on a company to notify the CAC within fourteen (14) days of the cessation of a person as a director.
Section 59(3) of the PIA 2021 clearly stipulates the conditions to be considered in appointing the directors of NNPC Limited. Consequently, by virtue of the appointment of Mallam Mele Kyari as NNPC Limited Group CEO by President Buhari for a tenure of five years with effect from September 16, 2021, based on the provisions of the Act, Mallam Mele Kyari is on a tenured appointment with NNPC Limited, and he is bound to run his tenure uninterrupted, which is a five-year tenured appointment at NNPC Limited.
The Companies and Allied Matters Act, 2020 (“CAMA 2020”), allows shareholders in an Annual General Meeting (“AGM”) or Extra-Ordinary Meeting (“EGM”) to remove any director subject to procedures and graduated notices. All references to sections or sub-sections are references to CAMA 2020.
As a preliminary step, s. 288 CAMA 2020 requires a company, whether private limited by shares, public limited liability, limited by guarantee, or unlimited company, to remove any director through ordinary resolution.
It is important to carefully lock in the steps; otherwise, the removal is invalid in law and will be successfully challenged in court.
The director to be removed must be given 21 days’ notice of the company’s intention to remove him, and he may make representations in writing. Except where the director to be removed sends in his written representation in the nick of time, the company must circulate the written representation to members (s. 288 (2) and (3)).
Provided that the representation is not circulated as required because it was received too late, the director to be removed may request that the representation be read at the meeting.
The representation by the director to be removed need not be circulated or read out if an aggrieved party can show the court that circulating or reading it out is aimed at needlessly publishing defamatory matters.
The said 21 (twenty-one) days’ notice will be sent to all members and directors through their registered addresses. The date of dispatch of the notice is included in computing the number of days (S. 241).
It is important to annex any written representation by the director to be removed. A registered address includes a physical or electronic address (S. 244(6)).
Any notice of meeting should specify the place, date, and time of the meeting and the general nature of the business to be transacted in sufficient detail to enable those to whom it is given to decide whether to attend or not (S. 242).
If it is an AGM, a statement that the purpose is to transact the ordinary business of an annual general meeting is deemed to be a sufficient specification that the business includes the removal of any director (S. 242(2);
We note that a private company may hold its general meeting electronically provided that such meetings are conducted in accordance with the articles of the company (s. 240(2)).
The following persons are entitled to receive notice of an AGM or EGM:
- Every member;
- Every person upon whom the ownership of a share devolves by reason of his being a legal representative, receiver, or trustee in bankruptcy of a member;
- Every director of the company
- Every auditor for the time being of the company; and
- The secretary and commission in the case of public companies (s. 243)
A copy of the proposed resolution may be circulated. The fact that it was not circulated does not invalidate the meeting or the consequent removal of any directors.
Bear in mind that the notice of removal of any director should be filed with the Corporate Affairs Commission within 14 days; otherwise, a default fee or penalty will apply.
The procedure for removing a director under Section 288 of CAMA is highlighted below:
- Issuance of Special Notice to Remove (and Appoint a New Director): Issue a Special Notice (of not less than 28 days) for the removal of a named person as director (with or without a named person to be appointed instead of the director so removed) and send a copy to the affected director, inviting him to make a written representation to the board or a verbal representation at the meeting where the resolution for his removal will be passed.
- Right of Fair Hearing: A director sought to be removed is entitled under Section 288 (3) (a) and (b) of CAMA to make a written representation (not exceeding a reasonable length) and request that a copy be sent to the members of the company. If the director submits a written representation (usually not more than 1,000 words; see S.260 of CAMA) that is timely submitted to the company secretary in response to any allegation against him, the company is required to circulate the written representation amongst the shareholders or, on the director’s request, cause the representation to be read out at the meeting. Please note that a court order may be obtained to restrain the company from circulating or reading out a director’s representation if doing so will amount to abuse or needless publicity of defamatory matter, award costs against the company, and order the company to pay such costs, notwithstanding that he is not a party to the application before the court.
- Passing of a Special Resolution to Remove a Director: After the affected director has made a representation or his written representation has been read out at the meeting, the members (voting in person or by proxy) are required to pass a special resolution to remove the director. In practice, the declaration of the chairman that the special resolution was carried is conclusive evidence without proof that three-fourths of the members voted to remove the director, unless a poll is demanded. Section 258 (2) of CAMA provides that a resolution is special when it has been passed by at least three-fourths of the votes cast by members of the company (voting in person or by proxy) at the general meeting of which 21 days’ notice specifying the intention to propose the resolution as a special resolution has been duly given. Provided that members with 95% of the company’s shares or voting rights may propose and pass a special resolution at a meeting to which less than 21 days’ notice has been given.
- Filling a Vacancy Created by a Removed Director: As provided in Section 288 (4) of CAMA, a vacancy created by the removal of a director may be filled at the same members’ meeting after the special resolution for the removal of the director has been passed. The mode of voting on the appointment of directors is provided in Section 287(1) of CAMA. If there is no appointment of a new director by the members, the board of directors may thereafter appoint any person to fill the position as a casual vacancy. In order to determine the retirement of the new director, the date of appointment shall be the date on which the removed director was appointed, not the date of appointing the new director to fill the casual vacancy.
What is the consequence of a director who has been removed without following due process?
By virtue of Section 288(6) of CAMA, non-compliance with the procedure for removal of directors entitles the aggrieved director to compensation or damages. It is to be noted that the office of a director is a statutorily protected office, and it is very possible for a director removed without due process to obtain an order of court reinstating him back to the office if he has not been properly removed.
Section 63(3) of the PIA gave the President the power to suspend or remove from office a member of the Board of NNPC Limited.
The section provides the following: A member of the Board of the NNPC Limited shall be suspended or removed from office by the President, where the member (a) is found to be
(i) unqualified for appointment under Section 59 of this Act
(ii) unqualified subsequent to his appointment, or
(iii) in breach of conflict of interest provisions in the Companies and Allied Matters Act or any regulation regarding conflicts of interest passed under the Act;
(b) ceases to be an employee of the ministry or agency he represents on the board of NNPC Limited;
(c) has demonstrated an inability to effectively perform the duties of his office;
(d) has been absent from the meeting of the Board of the NNPC Limited for three consecutive times without the consent of the President, except where good reason is shown for the absence;
(e) is found guilty of serious misconduct by a court or tribunal of competent jurisdiction; or
(f) has, under the law in force in any country:
(i) been adjudged or declared bankrupt or insolvent and has not been discharged,
(ii) made an assignment to or arrangement or composition with his creditors that has not been rescinded or set aside, or
(iii) incapable of discharge the duties of his office as a result of infirmity of body or mind
Adewole Kehinde is an Energy Fellow at the Abuja Chamber of Commerce and Industry, Policy Center, Abuja. He can be reached at 08166240846, kennyadewole@gmail.com
