PROVISION FOR ELECTRONIC SHARE TRANSFER, ELECTRONIC SIGNATURES, ELECTRONIC FILING AND E-MEETINGS.
- ELECTRONIC SHARE TRANSFER: S.176 (1)
Section 176 (1) provides that instruments of transfer of shares shall include electronic instruments of transfer. Before the enactment of CAMA 2020 the instrument of transfer of share was only limited to hardcopy or paper documents which must be executed by or on behalf of the transferor and transferee and the transferor shall be deemed to remain a holder of the share until the name of the transferee is entered in the register of members in respect of the share (Section 151(3) CAMA 1990). It is imperative to now advise public and private companies of the importance of the new provision for electronic transfer of shares and the electronic register of transfer in order to avoid legal liabilities.
(11)ELECTRONIC MEETINGS: Section 240(1)(2) CAMA 2020
CAMA 2020 retains the provision of the previous enactment for Public companies with regards to Statutory meetings and Annual general meetings which must all be held in Nigeria, With the unavoidable interruption of corporate calendars by the novel coronavirus which has been discovered to be a member of the β group of coronaviruses and scientifically described as an infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), it became imperative to make legal Provisions for electronic or virtual Annual General Meetings (AGM) provided that such meetings are conducted in accordance with the Articles of Association of the company. This gives room for participation at such meetings from any location within and outside Nigeria and at low budget costs.
11.1 PRIVATE COMPANIES: In the case of a private company, it is expressly provided in Section 240(2) of CAMA 2020 that Annual General meetings (AGM) and Extra-Ordinary General Meetings (EGM) can now be held electronically or virtually provided it is conducted in accordance with the article of association of such company.
11.2 PUBLIC COMPANIES: With regards to public companies, Section 240(1) provides that all Statutory and AGMS of Public companies must be held in Nigeria and to this end it is sacrosanct to state that ‘once all the requirements of CAMA’ on notices, quorum, and voting are complied with, a virtual statutory meeting or Annual General meeting held in Nigeria is valid and legal. Section 240(1) made no provision for the mode in which such meeting is to be conducted whether physical or virtual and it is an already established law that whatsoever is not expressly prohibited by a written law is permitted within the ambit of the law therefore a public company can also hold virtual meetings. This principle of law is advocated and given judicial affirmation by the Supreme Court of Nigeria in the words of the well-revered Justice John Inyang Okoro JSC in the case of Dankwambo v Abubakar & Ors (2015) LPELR- 25716 (SC) Page 77 Paragraphs B-E– where his Lordship stated thus:
“it is a cardinal principle of law that what is not expressly forbidden, is permitted. See Jarvis Motors (Harrow) Ltd & Anor (1964) 3 ALL ER 899 at 91 paras B-C. I need to say that…”
Internet connected technological devices have distinct Internet Protocol address which is known as IP address. This is used to uniquely identify a device from another and also locate network interference. Thus where the IP address hosting the meeting is in Nigeria, the meeting can be properly said to be held in Nigeria in accordance with section 240 of CAMA 2020.
Therefore, CAMA 2020 contains provisions which allows all companies to hold and conduct its meetings virtually.
Section 860 (1) of the new CAMA provides that Certiﬁed True Copies of electronically ﬁled documents are admissible in evidence, with equal validity with the original documents. This further buttresses the already established position of law with regards to admissibility of electronically generated evidence as widely provided for in Section 84 and 85 of the Evidence Act 2011 and in KUBOR v DICKSON (2013) 4 NWLR (pt. 1345) 534 Where the supreme Court decided that electronically generated documents are admissible in evidence.
Section 860 (2) succinctly provides thus;
“A copy or extract from any document electronically filed with the Commission or issued by the Commission and certified to be a true copy or extract shall in any proceedings be admissible in evidence as of equal validity with the original documents”
(13) INTRODUCTION OF ELECTRONIC SIGNATURES- SECTION 101 CAMA 2020
In line with global trend and technological development any document, agreement or proceeding requiring signature or authentication may be signed by a Director, Secretary, or other authorized officer of the company and need not be signed as a deed unless otherwise so required in this part and that an electronic signature is deemed legal, satisfactory and acceptable requirement for the signing of documents. Therefore Directors and officers of a company can make use of digital signatory platforms, computer software, and mobile applications like docusign, Adobe fill & sign, SignEasy etc. in appending their signatures digitally to documents from anywhere in the world. This would save time for matters that require urgency, save resources, and dispense with the need to always travel just to append signatures on documents.
PROVISIONS AFFECTING DIRECTOR(S) OFFICE
(14) USE OF COMMON SEAL IS NO LONGER A MANDATORY REQUIREMENT. SECTION 98 CAMA 2020
This is in line with international best patterns as practiced in most jurisdictions around the world where the compulsory common seal requirement has been expunged from their respective laws. Section 98 of the new Act provides:
“A company may have a common seal but need not have one, and where a company has a common seal, the design and use of that seal shall be regulated by the company’s articles and it shall have its name engraved in legible characters on the seal.”
In light of Section 98 of CAMA 2020, the use of common seal is now optional as opposed to the provision of Section 74 of the repealed Act which made the use of common seal compulsory and regulated by the articles of the association. Therefore, companies and corporate entities can now go into contract and executed commercial agreement without affixing the common seal as the use of common seal is now left to the sole discretion of the company. A company may now decide either to have a common seal or not.
(15) SHARE CERTIFICATES CAN NOW BE SIGNED AS DEED AND NEED NOT BE UNDER SEAL
With regards to Section 98 of CAMA 2020 which removes the compulsory requirement of a common seal on a transactional document of the company, the use of common seal on share certificate is now optional as it may either be;
(a) issued under the company’s seal (where the company has a common seal or
(b) signed as a deed by the Directors/secretary..
(16) EXPANSION OF THE SCOPE OF ORDINARY BUSINESSES TO BE TRANSACTED AT ANNUAL GENERAL MEETINGS (AGM). SECTION 238, 242, 257.
Compulsory Disclosure of the remuneration of Managers must be done at the AGM.
Section 238 of CAMA 2020 has added the disclosure of remuneration of managers of a company to the list of ordinary businesses which can be transacted at the AGM. Originally AGM’S are legally designed for special business as all businesses transacted at the AGM are deemed to be special businesses except for 5 (five) ordinary business permitted under Section 214 of the previous enactment which are declaration of dividend, presentation of the financial statements and reports of the directors and auditors, election of directors in the place of those retiring, the appointment, fixing of the remuneration of the auditors, appointment of members of the audit committee.
Section 238 of CAMA 2020 has successfully added the disclosure of remuneration of managers of a company as a sixth ordinary business which can be transacted at the AGM.
On the flip side, Section 257 of CAMA 2020 makes the disclosure of the compensation of managers of a company compulsory at the AGM. It provides thus:
“The compensation of managers of a company shall be disclosed to members of the company at the annual general meeting.”
Even though Section 242 of CAMA 2020 listed the businesses to be transacted as ordinary businesses at the AGM to the exclusion of disclosure of remuneration of managers of a company, it is widely believed that where this goes before the Court in issue, the Court will not hesitate to decide in the affirmative.
(17) DISCLOSURE OF AGE OF DIRECTORS AND RESTRICTION ON MULTIPLE DIRECTORSHIP IN PUBLIC COMPANIES- SECTION 278, 307(1) CAMA 2020.
The maximum number of director positions that can be held by a person in public companies is now 5 (Section 307). Any person who is a director in more than five public companies shall, at the next Annual General Meeting of the companies after the expiration of two years from the commencement of CAMA 2020, resign from being a director from all but five of the companies.
Furthermore, Section 278 of CAMA 2020 provides that any person who is appointed or to his knowledge proposed to be appointed director of a public company and who is 70 or more years old shall disclose this fact to the members at the general meeting and where any person fails to disclose his age or multiple directorship as now newly required under the law shall be liable to a penalty in such amount as the Corporate Affairs Commission shall specify in its regulations.
This is in conformity with the provision of the various code of good corporate governance (CGCG) and focuses on the ability of a director to discharge the functions of his office despite his multiple responsibility to different entities and also to inform the company of any potential or existing conflicts of interest in respect of the multiple directorships.
(18) MINORITY PROTECTION: PROHIBITION OF MANAGING DIRECTORS FROM OCCUPYING DUAL POSITIONS ON THE BOARD
Section 265 (6) of CAMA 2020 restricts companies from appointing directors to hold the office of the chairman and chief executive officer of a private company. This is acquiescent with the Code of Corporate Governance for Public Companies in Nigeria 2011 issued by the Securities and Exchange Commission (SEC) which replaced the 2003 SEC Code.
The 2011 SEC Code recommended that the Chairman of the Company should provide leadership and not be involved in the day to day running of the Company. Therefore, in line with best corporate practice, the position of the Chairman should be separated from the Executive Directors of the Company through the instrumentality of a Board Charter which defines clearly the roles and responsibilities of the directors of the Company. The 2020 CAMA has however gone further to make a mandatory provision that no public company should have a director who doubles as the Managing Director and the Chairman.
Other provisions for minority protection includes
- Preservation of the preemptive rights of existing shareholders where new shares are issued.
- Whenever there is a proposed sale of more than 51% (fifty one percent) of the company’s asset it will now become mandatory to seek and receive the consent/approval of minority shareholders.
- Full disclosure of all material facts relating to buyer-seller transactions and the existence of a conflict of interest.
- The courts will now be able to rescind third party transactions which are proved to be unfair or oppressive or cause economic harm to the company, in general.
- Conflict of interest is now one of the grounds upon which shareholders can hold the Board liable for damages caused by related third-party transactions,
- Erring directors are now to be disqualified from continuing to serve for a one-year period for causing loss to the company.
The requirement of a minimum of three (3) independent directors on the Board of private companies.
To Be Continued…