1 - COMPANY LAW II

Question 1 Fortune Royals Limited

ISSUE
Whether or not the removal of the company secretary is procedural or legal.
Ruling
In addressing the above issue, it is essential to describe a company secretary: Mandatorily, by the
provisions of Section 330 of CAMA 2020, every company must have a secretary. The Secretary
is appointed by the directors. The Act employs the secretary to perform some duties which
include, attending the meetings of the company and the board of directors and its committees,
reading all other necessary secretarial services in respect of the meeting, Maintaining the register
and other records among others. These are encapsulated in Sec 335 of CAMA 2020
On Issues of removal of the secretary, Secretaries are generally removable in accordance to the
terms of their contracts. Section 333 CAMA 2020 states the procedures in detail. Secretary to a
private company may be removed like any other office of the company. However, where it is
intended to
remove the secretary of a public company, The board of directors shall give the notice.
 Stating that it is intended to remove him
 -Setting out ground on which it is intended to remove him
Giving in him a period not less than 7 working days – 333(2)CAMA,
However, where the Secretary does not give a defense following the notice, the board the board
may remove him from the office and shall make report to the next general meeting. And if the
board does not consider it sufficient, The board may remove him Particularly if the ground is on
fraud or serious misconduct.
It is expedient to state that Fortunes Royal Limited Company is a Private Company Limited by
shares, This is made clear in section 22 of CAMA 2020
APLICATION
By the Express provision of Sec 2((1) of CAMA 2020, the name of a private company, limited
by shares shall end with the word “Limited" Therefore, Fortunes Royal Limited is a private
company.
However, there is no certain procedure for the removal of a secretary of a private company.
CONCLUSION

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Since the provision of CAMA is not express as to the procedure for removing a secretary of a
private Company, it is not to be said that the procedure prescribed was not followed Also, it is
sufficient that the secretary was issued a letter of termination with payment of salaries in time of
notice.

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SHARES & DEBENTURES
The securities of a company consist mainly of shares and Debentures. A share represent the unit
of the bundle of rights and abilities which a share holder has in a company.
- A share is a close auctions and its properly transferable as provided in the articles .
The wordings of Section 139 CAMA 2020 states that:
“The shares or other interests of a member in a company are personal
property
transferable in the manner provided in articles of association of the
company.” This was also judicially buttressed in the case of Okoya V. Santili
In Borland Trustees V. Steel Bros and Co. Ltd, the court described the shareholder as a
proportionate owner of a company's asset which belong to the company as a separate and
independent legal entity.
Debentures
Debentures are instrument issued by the company but not necessarily called on the face of the
face of it a debenture and providing for the payment of or acknowledgment of indebtedness in a
specified sum at fixed date with interest thereon.
Essentially, debentures are instruments issued to lenders to show that they have lent money to the
company and each debentures evidences a district debt.
DIFERENCES BETWEEN SHARES & DEBENTURES
1. The holder of a debenture is a creditor and not a member of the company while the holder of a
share is a member of the company
2. Interest at the specified on debentures may be paid out to the capital of the company while
dividends on shares must be only be paid out with distributable profits.
3. Debentures may be issued out with discount, while shares may be issued at discount.

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4. A shareholder has interest and rights such as voting rights, A debenture holder has no right in
the management of the company
5. A company may purchase its own debentures, a shareholder company cannot purchase its own
shares except in accordance to specific procedures.
SIMILARITIES
1. They are issued to public
2. They are both financial asset
3. They both form part of the company's capital
4. Debentures are convertible to shares but shares are not convertible to Debentures.
2B
Floating charge Distinguished from fixed charge-
It is to be noted that debentures may be secured by fixed or floating charge – Section 203 CAMA
2020
According to Section 203(1) CAMA 2020 A “floating charge” means an equitable charge over
the whole or a specified part of the company’s undertakings and assets, including cash and
uncalled capital of the company both present and future, but so that the charge shall not preclude
the
company from dealing with such assets until—
(a) the security becomes enforceable and the holder thereof, pursuant to a power in that behalf in
the debenture or the deed securing the same, appoints a receiver or manager or enters into
possession of such assets; or
(b) the Court appoints a receiver or manager of such assets on the application of the holder; or
(c) the company goes into liquidation.
(2) On the happening of any of the events mentioned in subsection (1), the charge charge shall be
deemed to crystallise and become a fixed equitable charge on such of the company’s assets as are
subject to the charge, and if a receiver or manager is withdrawn with the consent of the chargee,
or the chargee withdraws from possession before the charge has been fully discharged, the
charge shall thereupon be deemed to cease to be a fixed charge and again to become a floating
charge.
Section 204. A fixed charge on any property shall have priority over a floating charge affecting
that property, unless the terms on which the floating charge was granted prohibits the company

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from granting any later charge having priority over the floating charge and the person in whose
favour such later charge was granted had notice of that prohibition at the time when the charge
was granted to him:
Provided that a person is deemed to have notice of such prohibition in a floating charge where a
notice indicating the existence of such prohibition is registered with the Commission.
From the foregoing provisions of the CAMA, a fixed charge is a mortgage of a specified
property of the company such as land.
A floating charge on the other hand is an equitable charge over the whole or specified part of the
undertaking or assets of the company which includes cash and uncalled capital both present and
future. In a fixed charge, the charge may be a legal or equitable mortgage and operates in general
as ordinary mortgage by and to the individuals. Where series of debentures are issued, secured
by a fixed charge, it is necessary to have a trust deed by which trustees are appointed and the
fixed vested on them.
The Floating Charge on the other hand do not include the company from dealing with the asset
until sometimes becomes enforceable and a receiver or manager is appointed, or the charge
enters the possession of the assets, or the company goes into liquidation.
When any of these events happen, the charge become a fixed equitable charge.
QUESTION 3
The legal issues to be determined are;
I. Whether or not the general meeting is valid
II. Whether or not the vote for increment will be valid
The area of law that will be used in the determination of the first issue is provided in section 237
of CAMA 2020 which provides that except in the cases of small company and any other
company having a single shareholder, a company's annual general meeting must be held in each
year, and not more than 15 months should elapse between the date of one annual general meeting
and the next. If a company holds its first annual general meeting within eighteen months of
incorporation, it need not hold it in the year of its incorporation or in the following year. Any
general meeting other than annual general meeting is an extraordinary general meeting, this is
provided in section 239 of the Act. The meeting is usually convened by the director, by a
member on requisition or by the court at the request of a member. Subsection 2 of this section
provides that an extraordinary general meeting of a company may be requisitioned by any

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member or members of the company, in the case of a company having a share capital, by
members holding not less than one-tenth if the paid-up capital carrying voting rights at general
meetings or in the case of a company with no share capital, by members representing not less
than one-tenth of the total voting rights of all members having a right to vote at general meetings.
Subsection 3 provides that the requisition must state the objects of the meeting and be signed by
the requisitionists and deposited at the registered office of the company. The meeting is
convened in the same manner as convened by the directors as provided in section subsection 5 of
this section.
Applying the above rule of law to the instant case, the General meeting is not valid because Mr
Benz who requisitioned it does not fulfil the above requirement of CAMA
On the second issue aforementioned, the area of law that will be used is Quorum. In the case of
HENDERSON V LOUTTIT AND CO. LTD, it was said that the quorum is the minimum
number that must be present at a meeting before business can be transacted and it is generally
fixed by the articles of the company. However, section 256(1) of CAMA 2020 provides that
except in the case of a company with one member and unless otherwise provided in the articles
no business shall be transacted at the general meeting unless a quorum of members is present at
the time when the meeting proceeds to business and throughout he meeting. Subsection 2
provides that except in the case of a company with one member and unless otherwise provided in
the articles, the quorum for the meeting of a company shall be one-third of total number of the
company or twenty-five members (whichever is less) present in person or by proxy: provided
that where the number of members is not a multiple of three, then the number nearest to one-
third, and when the number is six or less, the quorum shall be two members. Subsection 3
provides that when a member withdraws from a meeting for a purpose which appear to the
chairman to be insufficient or for the reduction of the quorum, and in fact the quorum is no
longer present the meeting may continue and whatever was decided in the meeting would be
binding on all shareholder. Subsection 4 Where there is only one member he may seek direction
of the court to take a decision. However, if the chairman is satisfied with the reason for members
to leave the meeting the meeting shall be adjourned to the same place and time.
Applying this ruling to the instant case, the vote cannot be deemed valid as the number of votes
is not commensurate with the requirement of the company’s article.

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4(a)
On the question on where Mr Dung decides to sell all his shares, this is provided in section
175and 176 of CAMA 2020 these sections provide that the purchaser (transferee) prepares a
proper instrument of transfer and tenders it to the vendor for execution. After execution, the
transferor
will deliver to the transferee the duly executed transfer together with his share certificate. The
transferee, on receipt, executes the transfer as required by section 175 and forwards it with the
share certificate and the registration fee to the company for registration, but application for
registration may be made by the transferor as provided in section 176(1) of CAMA. Subsection 2
provides that until the name of the transferee is entered in the register of members in respect of
the transferred shares, the transferor shall, so far as concerns the company, be deemed to remain
the holder of the shares. The company may refuse to recognize any instrument of transfer of
shares to a person to whom they do not approve, and may also refuse to register the transfer of a
share on which the company has a lien as provide in sub section 3. Subsection 4 provides that the
company may refuse to recognize any instrument of transfer unless; (a) a fee as the company
may, from time to time, determine is paid to the company in respect of the instrument;
(b) the instrument of transfer is accompanied by the certificate of the shares to which it relates an
d such other evidence as the directors may reasonably require to show the right of the transferor
to make the transfer;
(c) the instrument of transfer is in respect of only one class of shares.
4a(ii) whether the advice would be different if Mr Dung decides to keep some of the share
for himself
Yes, the advice would be different if he decides to keep some of the share for himself. And as
regard the transfer of part of his share he has to follow the procedure as laid out in section 181 of
CAMA 2020 which provides that the transferor executes the transfer but does not hand it over to
the transferee. Instead, he sends it to the company together with his share certificate with the
request that the instrument of transfer be certificated. The secretary of the company endorses on
the instrument of transfer, the word "certificate lodged” or similar words. The company must
within three months either register the shares and issue a certificate of the transfer for he amour
transferred and the certificate for the balance to the transferor or some other transferee, as the

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case may be, or if it refuses the registration, inform the transferee accordingly within two
months.
The certification by a company of the transfer is deemed to be a representation by the company
to any person action on faith of the certification that there has been produced to the company
such documentary evidence showing a prima facie title in the transferor named in the transfer but
not as a representation that the transferor has any title to the shares. If a company makes a
certification falsely or negligently and a person acts on faith of such certification and suffers
damage, the company will be under the same liability to that person as if the certification has
been made fraudulently. Section 181(5) provides for certain assumptions. First, an instrument of
transfer is deemed to be recognized if it bears the words “certificate lodged" or words to the like
effect. Secondly, the recognition of an instrument of transfer is deemed to be made by a company
if the person issuing the instrument is authorized to issue certificate instrument of transfer on
behalf of the company and the recognition is signed by a person authorized to recognize transfer
on the company's behalf or by any officer or servant either of the company or of aa body
corporate so authorized. Thirdly, a recognition is deemed to be signed by nay person if it
purports to be authenticated by his signature or initials and it is not shown that this was done by
any person other than him or a person authorized to use the signature or initials for transfer.
4c(i)
The two major steps involved in a merger is provided in section 119(2) of Investment and
Securities Act 2007 they are;
a) Purchase or lease of the shares, interest or assets of the other company in question
b) Amalgamation or other combination with the other company in question.
4c(ii) The major steps for involved in member's involuntary winding up are
a) Declaration solvency
b) General meeting of company
c) Appointment of liquidator
d) Liquidator to call meeting

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Question 5
5a. Whether or not Mr. Oge can assert that he is the rightful owner of the bonus shares.
This issue is covered under Sec 151 CAMA 2020
151(1) the transfer of a company's share shall be by instrument of transfer and except as
expressly provided in the articles transfer of shares shall be without restrictions
151(2) also states that it shall not be lawful for the company to register a transfer of shares in the
company, unless proper instrument of transfer has been delivered in the company has been
transmitted by operation of law. Sec 15(3) further provides that the instrument of the transfer of
any shares shall 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.
Application
From the given scenario, it is clear that the share certificate was forwarded to Mr. Oge This
makes him the Prima facie holder of the bonus shares. It also follows that until the name of he
transferee is entered in the register in respect of the share, the transferor is deemed to remain a
holder Mr. Oge is the transferor in this constant case.
Conclusion and Advice
Until the company enters Mrs Olatunji's name in its register of members, the name transfer will
still remain the holder thus, in other age is the transferor is deemed to remain a holder mr. Oge is
he transferor in this constant case her name is required in sec 152(1) Starcola Ltd. V Adeniyi
5b. Certification of transfer
This is underscored in section 181 CAMA 2020 which provides that:
When the holder of any share of a company wishes to transfer to any person only a part of the
shares represented by one or more certificates, the instrument of transfer together with the
relevant certificates shall be delivered to the company with a request that the instrument of
transfer be recognised and registered and a certificate of transfer shall include a certificate issued
in electronic form.

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The company to which such request is made may recognize the instrument by endorsing
if "certificate lodged" - sec 181(2).
The recognition by a company of any instrument of a representation by the company to a
person acting on the faith of the recognition that have been produced to the company Sec 181(3).
Thus, for the purpose of sections 181 CAMA, All instrument of transfer is deemed to be
recognized once it bears the words "certificarte lodged" or words to the like effect –181(5)(a)
Also, the recognition of an instrument shall be deemed to be made by a company authorized to
recognize transfer of shares on the company's behalf and also by any office or servant either of
the company or of a body corporate to authorized - Sec 181(5b)
Assuming Mr. Oge, a ... shareholder died into state the procedure for the acquisition of shares
owned by him is simply through transmission. Transmission of shares to the resting of shared in
the personal representatives on the death of a shareholder. On the death of a share holder, the
survivor(s) where the deacesed was a joint holder or the personal representatives of the deceased
where he was a sole holder, shall be the only persons recognized by the company as having any
title to his interest in the shares -
Section 179(1) CAMA 2020 deals with the issue of transmission of shares. It states that
“In case of the death of a member, the survivor or survivors where the deceased was a joint
holder, or the legal personal representative of the deceased where he was a sole holder, is the
only person recognised by the company as having any title to his interest in the shares, but
nothing in this section shall release the estate of a deceased joint holder from any liability in
respect of any share which had been jointly held by him with other persons.”
In Tika Tore Press Ltd V. Abina. The personal representatives may however validly transfer the
share or other interests of a deceased member even though he is not registered as a member.
Also, the interests of a beneficiary under a will are equitable only until the shares and transferred
to him and he has been registered as a member. Thus, a person claiming an interest in any shares
of a deceased may protect his interest by serving on the company concerned a noble and affidavit
of interest by serving in the company concerned a noble and affidavit of interest.
5d.
Transfer and allotment of shares
The shares or other interest of a member in a company are personal property, transferable
subject to the articles - see 175 CAMA

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(The procedure for transfer have been discussed earlier above) See also the case of Starcola v.
Adeniji where the court held that the transferor is deemed to remain holder of he share until the
name of the transferee is entered in the register of members in respect of the shares.

6i.
issue
Whether or not the general meeting can intervene and take over the management of he
company.
Ruling
This position of law is provided in Sec 87 CAMA 2020 Sec 87(1) expressly states that: A
company shall act through its members in the general meeting or its board of directors or through
officers
or agents appointed or under authority derived from the members in general meeting or the board
of directors.
Sec 87(2) further provides that the powers of the members and directors is determined by the
Article of the company.
Also, the business shall be managed by the company's board of directors. However, the members
can intervene in the management of the company if The board of Directors are disqualified or are
unable to act because of a deadlock on the board as state in 87(5)(a) CAMA 2020 or 87(5)b If
the board of director neglect to act eg by neglecting to institute legal proceeding where
necessary.
Application and conclusion
Since Ronaldo & Messi are not on talking terms and cannot hold board meeting, it is
permissible by section 87 for the General meeting to intervene.
біі. .
Issue

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Whether or not the general meeting can institute an action against the supplier. As earlier
explained above in sec 87 CAMA 2020, the General Meeting shall have the power to act where
the Directors refuse moving into action. Section 87(5)(a) specifically states that the general
meeting can intervene if the board of directors disqualified or are unable to act because of a
deadlock in the board.
See 86(5)(b) further states that the general meeting can institute legal proceedings in the name
and on behalf of he company if he directors refuse or neglect to do so.
Application and conclusion
Since it is clear, from the instant case that the general meeting is not happy that the directors of
Alatishe Nig. Ltd., have refused to institute an action and have also resolved at the annual
general meeting to giving into actor, they are therefore permitted by virtue of the above stated
provision to institute an action against the supplier. Circumstances when a general meeting can
set in the management of he company. The circumstances are well stated in 87(5) as follows:
1. Where the board of directors are disqualified or are unable to act because of a
deadlock on the board or otherwise.
2. Where the board of directors refuse to or neglect to institute legal procedure, the general
meeting can institute even in the name of the company.
Also, the general meeting may ratify any action taken by the board of directors. The general
meeting may make recommendations to the board of directors regarding actions to be taken by
the board.
7.
Shareholder's right and the rule in Foss v Harbottle. The rule in Foss v Harbottle
The rule states that for any actions in respect of the company's governance, the appropriate party
to suit is the company itself. This rule translates the doctrine of separate legal personality, the
statutory contract, the internal management principle and the principle of majority rule into a rule
of procedure governing locus standi. It connotes that, the proper claimant in action resulting to a
wrong to the company is the company and any alleged wrong transaction which might be made
binding on the company, no individual has the right to pursue an action where majority members
of the company have passed the vote. The rationale for this rule is that:
1) It prevents series of suit over or similar incident
2) The members in general meeting can ratify the wrongful acts of the directors.

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3) It preserves the principle of majority rule
The rule is however accompanied by some exceptions.
1. Illegality and ultra vires act. In prudential assurance Co Lid. V Newman Industries, it has held
that a minority can bring an action where the majority shareholders purport to do an illegal or
ultra vires act which is prohibited by statutes or by the company's article.
2. Irregular procedure such as purporting to do what is required by special resolution
through an ordinary resolution.
3. Infringement on membership right The breach of any industrial rights of a member is a ground
to enforce such breach again, the management of the company. The right may include the failure
to give notice of meeting, pay dividend when declared, refusal to vote in resolution either by self
or proxy, failure to admit duly appointed proxy to company meeting
4. Fraud on minority, where fraud is committed against the minority as a result of majority
decision such act can be challenged by the minority.
The essence of this is to curb the abuse of power by the board of directors. Burlard V Parle
5. Impracticability to all company meeting in time to redress using done to the company or
minority. A good example of this is where the directors have exceeded their borrowing limits and
have mortgaged the prime assets of the company and the loan may not be properly managed if
not stopped.
6. Where the directors are likely to derive a profit or benefit from their negligence or breach of
duty section 343(f) CAMA 2020
8(1)
Circumstances under which the company can be said to be unable to pay its debts. These are
stipulated
In section 572 of CAMA 2020 it contains provisions in relation to when a company is deemed to
be
(a) a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding
N2,000, then due, has served on the company, by leaving it at its registered office or head office,
a demand under his hand requiring the company to pay the sum so due, and the company has for
three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable
satisfaction of the creditor, or
(b) execution or other process issued on a judgment, Act or order of any court in favour of a cred

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itor of the company is returned unsatisfied in whole or in part; or
(c) the court, after taking into account any contingent or prospective liability of the company, is s
atisfied that the company is unable to pay its debts.
The court often applies strict rules in granting an application for winding up based on the ground
since it is often abused. Thus the debt must not be disputed. In RE LONDON PARIS BANKING
CORPORATION Jessel, M.R. said as follows;
"... I should be bound to hold that if the debt is bona fide contested and these is no evidence other
than non-compliance with the statutory notice to show that the company is insolvent, and the
company denies this insolvency, I ought to dismiss the petition." In the case, a petition based on
inability to pay debt was dismissed because the debt was disputed.
In TANDY SND FEEMAN V HARMONY HOUSE FURNITURE COMPANY LIMITED, the
supreme court granted a petition for winding up of a company on the basis of her inability to pay
debt. in RE W. BINEY AND COMPANY (NIG) LIMITED, there was a bona fide dispute as to
the indebtedness of the company as sworn to in the company's affidavit filed to contest the
petition. Consequently, the petition for winding up based on this ground was rejected. In
NIGERIAN COMMERCIAL AND INDUSTRIAL ENTERPRISE LIMITED v. REGISTRAR
OF COMPANY, it was held that a demand made by a solicitor to a company for payment of debt
was not a demand by an officer of the company.
8(bi)
A company may be wound up by an order of the court. The court that has the jurisdiction is the
Federal High Court whose jurisdiction covers the area where the head of the office of the
company is located
Section 571. A company may be wound up by the court if —
(a) the company has by special resolution resolved that the company be wound up by the Court;
(b) default is made in delivering the statutory report to the Commission or in holding the
statutory meeting;
(c) the number of members is reduced below two in the case of companies with more than one
shareholder;
(d) the company is unable to pay its debts;
(e) the condition precedent to the operation of the company has ceased to exist; or
(f) the Court is of opinion that it is just and equitable that the company should be wound up.

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Circumstances in which companies may be wound up by Court.572. A company is deemed to be
unable to pay its debts if — (a) a creditor, by assignment or otherwise, to whom the
company is indebted in a sum exceeding ₦200,000, then due, has served on the company, by
leaving it at its registered office or head office, a demand under his hand requiring the company
to pay the sum due, and the company has for three weeks thereafter neglected to pay the sum or
to secure or compound for it to the reasonable satisfaction of the creditor;
(b) execution or other process issued on a judgment, act or order of any Court in favour of a
creditor of the company is returned unsatisfied in whole or in part; or
(c) the Court, after taking into account any contingent or prospective liability of the company, is
satisfied that the company is unable to pay its debts.
From the above, where the company has passed a resolution for voluntary winding up, the court
may make an order that the voluntary winding up be subject to the supervision of the court on the
strength of a petition or application made to the court. The court's order shall be with such liberty
for creditors, contributories, or other to apply to the court on such terms and conditions as the
court thinks fit.
The order is not obtained as a matter of course and the petitioner must show special
circumstances to justify the order as, for example the liquidation is being improperly conducted
resulting n prejudice to his interests

QUESTION 10
Whether or not the directors can enter into a contract on behalf of the company
Whether or not the contract will be binding on the company
Whether or not Mr. ben can become an independent director
Whether or not Dr. benedict can be on regular income
Whether or not Dr. benedict can be a rubber stamp of the md and protect the interest of
rampage
The area of law that governs the first issue is provided in section 863(1) of CAMA 2020, it
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 authority derived from, the
members in general meeting or the board of directors. Subsection 2 provides that subject to the
provisions of this Act, the company's article shall determine the powers of the member in general

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meeting and the board of directors. Subsection 3 provides that the business of the company shall
be managed by the board of directors of the company except otherwise provided by the
company's article. Also, the board of directors are not bound to obey the instructions of the
general meeting when action within the powers conferred on them by this act or by the
company's article, unless it is otherwise stated in the articles, this is provided in subsection 4.
Subsection 5 provides for circumstances when the general meting may act as regards the
company. In the case of AVOP PLC V AG ENUGU STATE, a state government who had shares
in a company became dissatisfied with the operation of the company, it then unilaterally
appointed a judicial commission of enquiry to investigate the affairs of the company. Following
the report of the commission, the state Government appointed a person to take over the
management of the company. The company sued and lost. On appeal, the court condemned in
strong terms the action of the government.
Apply the above.
The area of law that will govern the second is provided in Section 233 2020 CAMA provides
that any act of the members in the general meeting, the board or 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 shall be liable to the same extent as if it were a natural person.
A company being an artificial person can only incur liability through organs, agents and officers.
This position was explained in the case of LENNARD'S CARRYING CO. V. ASIATIC
PETROLEUM CO LTD as follows, "my Lords, a corporation is an abstraction. It has no mind of
its own any more than it has a body of its own; its active and directing will must consequently be
sought in the person of somebody who for some purpose may be called an agent, but who is
really the directing mind and will of the corporation, the very ego and center of the personality of
the corporation..."
On the third issue, the arca of law that will be used could be seen in section 5.5 of Securities and
Exchange Commission Code of Corporate Governance 2004 (SEC CODE), it provides that an
independent director is a non-executive director who is not a substantial shareholder of the
company, that is one whose shareholding directly or indirectly, does not exceed 0.1% of the
company's paid-up capital, is not a representative of a shareholder that has the ability to control
or significantly influence management. He has not been employed by the company or the group
which it currently forms part or has served in any executive capacity in the company or group for

15
the preceding three financial years. He is not a member of the immediate family of an individual
who is, or has been in any of the past three financial years. Employed by the company or the
group in an executive capacity. He is not a professional adviser to the company or the group
other than in a capacity of a director and is not a significant supplier to or customer of the
company or group. He has no significant contractual relationship with the company or group and
is free from any business or other relationship which could materially interfere with his/her
capacity to act in an independent manner and is not a partner or an executive of the company's
statutory audit firm, internal audit firm, legal or other consulting firm that have a material
association with the company and has not been a partner or an executive of any such firm for
three financial years preceding his her appointment.
Question 11
Issues
I. Whether or not Mr. Smart can sue in his own capacity
II. Whether or not the award for breach of duties should be awarded to him
III. Whether or not the removal of Mr. Smart is valid
Ruling
The ruling on issue one is covered under the doctrine of corporate sovereignty and minority
protections. It is pertinent to note that, upon incorporation of a company, it vests the power of
legal
personality on the company which makes it a separate entity different from its members. The
legal personality of the company is generally sacrosanct to the effect that if any injury is done to
the corporate body, it is the appropriate person to sue and be sued, not the aggrieved members.
This concept is also to the effect that the court would not interfere in the internal affairs of a
corporation, because it should be conducted by the shareholders members. The decision can be
arrived at by way of simple majority expressed through ordinary resolution, special resolution as
held in FOSS V. HABOTLE.
However, the minority is adversely affected at times, in the application of these basic rules or
corporate sovereignty and democracy. As a reason of this, there are exceptions given to the
majority rule in other to protect the minority members of he company. These are exceptions are:
1. Illegality and ultra vires act
2. Irregular procedure

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3. Infringement of membership rights
4. Fraud in the minority
Ruling of ISSUE 2
Whether or not the award of the breach be given to Mr. Smart.
It is to be noted under the minority protection rule that a personal action from an individual
member or shareholder of a company can only arise when the infringement is directed at the
individual membership rights in the company and his may not bring about
right to be awarded damages for breach Sec 301(1) it can only bring about a declaration
and injunction restraining the company or the directors from doing such acts. Examples
of acts resulting into violation or infringement of a member's right are:
1. Refusal to be issued notice of meetings
2. Refusal to vote
3. Violation of meting attendance
4. Refusal to pay dividend when declared.
Ruling on issue 3
whether or not the removal of Mr. Smart is valid.
procedure for the removal of Directors is entrenched on Section 288 CAMA 2020 which
provides that a Director may be removed before the expiration of his period of office,
notwithstanding
any agreement 288(1)
however, any director removed in line with the aforementioned section shall be entitled to
damages for any breach of employment contract that has occurred. This is also the decision in
STIRLING V. MAITLAND. Therefore, all directors are liable for removal only that they are
protected from being affected by retirement and rotation rule.
Application
In applying the aforementioned provisions to the instant case, Mr. Smart is a director of C
company but cannot bring a minority action against the company simply because his reasons for
doing some is not contained under the exceptions to the majority rule in FOSS V HABOTTLE.
On the second issue, Mr. Smart cannot take personal actions and recover damages for breach as
the actions of the company does not infringe his individual membership right of the company. In

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cases where it infringes membership right, the remedy is not damages but declaration of
injunction.
Lastly, the procedure for removal of the company's director is regulatory and is clear in sections
of 288 only that such director is entitled to remedy for breach of employment contract.
Conclusion
Mr. Smart cannot sue the directors in his own capacity because, it is against the
corporate sovereignty concept of an incorporations. The company is the only appropriate
body to sue and be sued in such circumstance.
Also, his prayers to the court that he should be granted award if damages at the director
breach cannot be granted because his membership right as an individual has not been violated.
He can however, be awarded damage for his removal even though he can be successfully
removed in line with Section 288 (CAMA 2020).

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