Comparative Analysis Of The Powers Of General Meeting And Board Of Directors In Africa And Elsewhere

By Okpi, Bernard Adaafu

INTRODUCTION

This paper will analyze the controversy for the control of a company between board of directors and general meeting under different jurisdictions namely; England, India, Ghana and Nigeria.

THE POSITION IN ENGLAND

Generally, under common law the general meeting is the main organ that determines extent of the exercise of the powers assigned to the Board of Directors. Even though the board is responsible for the day to day running of the company, the board must not act outside its powers contained in the article or as may be prescribed by the members in general meeting.

The Court in AUTOMATIC SELF CLEANSING FILTER SYNDICATE V CUNNINGHAM (1906) 2 Ch PG. 34, held that;

‘the division of power between the Board of Directors and members of the company in the General meeting depends entirely on the definition of the articles’. So where the powers are vested on the Board of Directors, the General meeting cannot interfere because the Articles of Association is a contract between members, and where the Articles of Association say only the directors should manage the company, so be it’.

The English Companies Act of 1985 in Article 80, Table A of the 1^st Schedule to the Act stated that; ‘the business of the company shall be exercised by the directors……’

A renowned English professor of law, Professor Gower in his book ‘Principles of Modern Corporate Law’ page 152 captured the new position, when he stated that;

‘Both the General meeting and Board of Directors are the primary organs of the company, between whom the powers are divided. The old idea that the General meeting is the only organ of the company and the Board of Directors are the servant seem no longer the law as it is certainly a fact’.

THE POSITION IN INDIA

In India, the law expressly provides for the power of the general meeting and powers of the board of directors. Section 179 of the India’s Companies Act 2013 provides for the powers of the board of directors. The section is reproduced below.

• The board of directors of a company shall be entitled to exercise such powers, and to do such acts and thing, as the company is authorized to exercise and do:

Provided that in exercising such power or doing such act or thing, the board shall be subject to the provisions contained in that behalf in Act, or in the memorandum or articles, or in any regulations not inconsistent therewith and duly made thereunder, including regulations made by the company in general meeting:

Provided further that the board shall not exercise any power or do any act or thing which is directed or required whether under the Act or by the memorandum or articles of the company or otherwise, to be exercised or done by the company in general meeting.

• No regulation made by the company in general meeting shall invalidate any prior act of the board which would have been valid if that regulation had not been made.
• This section enumerates powers of the board….
• Nothing in this section shall be deemed to affect the right of the company in general meeting to impose restrictions and conditions on the exercise by the board of any of the powers specified in this section.

The above section is clear on how the board of directors shall run the company subject to regulation by the Act and members in general meeting. Thus the board can restrict the exercise of the powers of the board of directors and impose condition for exercise of such powers when necessary.

THE POSITION IN GHANA                      

In Ghana, the controversy of whether or the not the board of directors is superior to the members in general meeting has been addressed in the new Ghana’s Companies Act 2019 in section 145. The section is reproduced below;

“(1)  A company shall act through the members of the company in general meeting or the 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.

(2) Subject to this Act, the respective powers of the members in general meeting and the board of directors shall be determined by the constitution of the company.

(3) Except as otherwise provided in the constitution of a company, the business of the company shall be managed by the board of directors who may exercise the powers of the company that are not by this Act or the constitution required to be exercised by the members in general meeting.

(4) Unless the constitution of the company otherwise provides, the board of directors when acting within the powers conferred upon them by this Act or the constitution of the company are not bound to comply with the directions or instructions of the members in general meeting.

(5) Subject to section 145, the members in general meeting may;

(a) act in any matter if the members of the board of directors are disqualified or are unable to act because of a  deadlock on the board or otherwise;  

(b) institute legal proceedings in the name of and on behalf of the company, if the board of directors refuse or  neglect to do so;  

(c) ratify or confirm any action taken by the board of directors; or  

(d) make recommendations to the board of directors regarding action to be taken by the board.  

(6) An amendment of the constitution of a company shall not invalidate any prior act of the board of directors which would have been valid  if that amendment had not been made”.  

Section 145 made it compulsory for major transactions of the company to be sanctioned by special resolution.

The Act in subsection 4 empowered the board to exercise its powers without any restriction from members in general meeting except as may be prescribed by the constitution of the company. At first sight it appears the subsection made the board a superior organ but a cursory look at subjection 5 reveals that fact that the general meeting is the watch dog of a company.

THE POSITION IN NIGERIA

Under the Nigerian legal system, the powers of board of directors and general meeting are provided by the law. The position is provided in Section 63 of the Companies and Allied Matters Act 2004, and section 87 of the Companies and Allied Matters Act 2020.

The position in Nigeria is similar to that of Ghana. In fact the provisions of the new

Nigerian Companies and Allied Matters Act 2020 is modeled after the Ghana Companies Act of 2019.

It is pertinent to reproduce the provision in Section 63 of the old Companies and Allied Matters Act 2004 before looking at the current position in the Act. Section 63 is reproduced thus;

“(1) 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.  

(2) Subject to the provisions of this Act, the respective powers of the members in general meeting and the board of directors shall be determined by the company’s articles.  

(3) Except as otherwise provided in the company’s articles, the business of the company shall be managed by the  board of directors who may exercise all such powers of the company as are not by this Act or the articles required  to be exercised by the members in general meeting.  

(4) Unless the articles shall otherwise provide, the board of directors, when acting within the powers conferred  upon them by this Act or the articles, shall not be bound to obey the directions or instructions of the members in  general meeting:  Provided that the directors acted in good faith and with due diligence.  

(5) Notwithstanding the provisions of subsection (3) of this section, the members in general meeting may‐  

(a) act in any matter if the members of the board of directors are disqualified or are unable to act because of a  deadlock on the board or otherwise;  

(b) institute legal proceedings in the name and on behalf of the company, if the board of directors refuse or  neglect to do so;  

(c) ratify or confirm any action taken by the board of directors; or  

(d) make recommendations to the board of directors regarding action to be taken by the board.  

(6) No alteration of the articles shall invalidate any prior act of the board of directors which would have been valid  if that alteration had not been made”. 

The above section gave the board of directors the power to carryon routine business of the company but at the same time limits the exercise of such powers by regulations made by general meeting or the articles. Subsection 5 clearly enumerated instances where the general meeting can act for and on behalf of the board of the directors.

Section 87 of the Companies and Allied Matters Act 2020 is reproduction of the old section 63 in the Companies and Allied Matters Act 2004.

CONCLUSSION

From the foregoing, it is obvious that in England,  India, Ghana and Nigeria  the powers of the company are shared between the general meeting and the board of directors as contained in the articles or the Act. However, the board undertakes the day to day running of the company and may act ultra vires but the general meeting is empowered as the watch dog to checkmate the excesses of the board of directors. The two organs are assigned essential duties for the growth of a company and one cannot be elevated above the other because none of the organ can exist in isolation. Professor Gower was right when he postulated that, “Both the General meeting and Board of Directors are the primary organs of the company, between whom the powers are divided. The old idea that the General meeting is the only organ of the company and the Board of Directors are the servant seems no longer the law as it is certainly a fact”.

Written By Okpi, Bernard Adaafu, LL.B, B.L, LL.M(IN VIEW)

okpibernardadaafu@gmail.com, obaattorneys@gmail.com, Okpi Bernard @Twitter