The occurrence of the death of a director can result in unexpected disruptions in the corporate dynamics of a company especially in the case of private companies. The most prudent way for a company to reduce the effect of such unforeseen change is by preparing in advance, thus minimising the impact. Over the years, we have seen a few cases where the beneficiaries of a deceased shareholder, who is also a director of a private company assume that just as the shares of a deceased shareholder devolve on his/her estate, so should his directorship. This is not the position under Nigerian Company law.
Where a vacancy in the office of a director arises as a result of death, the surviving directors of the company are empowered to appoint a director to fill such casual vacancy until the appointment of the new director is either approved or rejected by the members of the company at a subsequent annual general meeting. However, in the event of all of the directors and shareholders dying, Section 248 of the Companies and Allied Matters Act (the “CAMA”) provides that any of the personal representatives (the “Representatives”) of the deceased shareholders of the company may apply to the court for an order to convene a meeting of all the Representativesof the shareholders entitled to attend and vote at a general meeting to appoint new directors to manage the company. This is the only instance when the personal representatives of a deceased shareholder may be able to decide on the persons to be appointed as the new directors of the company.
It is important to mention that there can be a distinction where a company which has corporate shareholders, has provisions in its articles of association which reserve board positions for each corporate shareholder. Such provisions usually reserve the right for each corporate shareholder to be able to nominate a person(s) for appointment as a director(s) and to change any such director(s) whenever necessary. In the case of an individual, the position of director may not be “willed” or automatically vested in his beneficiary even when such a director is a majority shareholder of the company as the appointment of every director is subject to the approval of other shareholders of the company. It is advisable for a forward planning director who is also a shareholder to plan his succession by seeking legal advice on the options open to him so that he can choose his successor and notify the company of his intentions in this regard prior to his demise.
The contents of this news alert are meant for the general information of our clients and friends and do not amount to legal advice. All enquiries on the subject may be made to: firstname.lastname@example.org
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