The Companies and Allied Matters Act, CAP C20, LFN 2004 ("CAMA") imposes duties, responsibilities and statutory obligations on the members and directors of public and private companies regarding their Board of Directors meetings ("BOD"), Annual General Meeting ("AGM") and other meetings.
However, the various social gathering prohibitions and stay at home orders made by the President of the Federal Republic of Nigeria during his 29th March, 2020 broadcast restricting movement in Lagos, Ogun and the Federal Capital Territory ("FCT") Abuja , similar to measures previously announced by several State governors and the Minister of the FCT, will undoubtedly have a direct impact on the ability of public and private companies to convene the mandatory meetings prescribed by CAMA due to the corona virus pandemic ("COVID-19").
For example, the mandatory notice period for holding an AGM under CAMA is a minimum of 21 clear days', which must be strictly complied with by public companies, while for a BOD meeting the notice period is 14 days. Thus, a notice issued on 20 March 2020 would have effectively been restricted by the COVID-19 related restrictions on movement announced by the President, since the venue to host the AGM or BOD meeting might no longer be easily accessible.
This article therefore seeks to explore the impact of COVID- 19 on company meetings and recommend ways to ensure that the corporate governance procedures and formalities are complied with by members and directors of companies, notwithstanding necessary but drastic movement restrictions intended to curb the spread of the deadly virus.
With regard to BOD meetings, CAMA requires that Directors of both private and public companies should hold BOD meetings every year and the first BOD meeting should be held within six (6) months after a company is incorporated. Also, the Nigerian Code of Corporate Governance, 2018 ("Code") which is applicable to both public and private companies recommends that BOD meetings should be held at least once every quarter.
CAMA empowers the BOD of a company to meet together for the dispatch of business and to regulate their meetings as they deem fit. However, the law is silent about the location (whether physical or virtual) for holding of BOD meetings. In contrast, CAMA specifies that AGMs must be held in Nigeria. This has led to the practice of some BOD meetings taking place at venues outside Nigeria and also holding of BOD meetings via virtual media such as telephone or video conference.
Valid notice specifying the venue and details for such meetings will also be circulated to the entire BOD prior to the meeting and it is expected that such meeting should be held in accordance with the information contained in the notice. In view of the Federal government's restrictions which limit movement until 28 April 2020 except for emergencies or trips to the market to shop for food items and with the Lagos State government restrictions on public gatherings of not more than 20 persons in a venue, it will be extremely difficult for public or private companies within these locations to hold their BOD meetings during this period.
Companies will no doubt seek for alternatives to hold their BOD meetings within this period and the option of holding the BOD meetings through tele/video conference or other means of electronic communication will most likely be considered.
The reality is that a company cannot convene its BOD meetings virtually unless this is provided for in the company's Articles of Association ("Articles"). Over the years, private companies have largely altered their Articles with the consent of the Corporate Affairs Commission ("CAC") to allow for virtual BOD meetings. However, it would appear that no policy on the regulation of virtual BOD meetings has been introduced by the CAC, for example it is unclear how the mode of participation, confirmation of identity of directors and ascertaining continuous participation of the directors during the meetings will be determined.
This raises the question of whether all directors of a private or public company empowered by its Articles to hold virtual BOD meetings can attend the BOD meetings virtually without at least one director being physically present at the scheduled venue specified in the notice of meeting.
Although the laws of the jurisdiction where a company is situate may govern the manner in which virtual BOD meetings are held, it appears that the concept of a completely virtual BOD meeting has not yet been fully embraced globally. This is so because remote BOD meetings in most jurisdictions are still expected to be anchored to physical locations. Therefore, best practice seems to dictate that at least one director of the BOD be present at the physical venue of a BOD meeting stated on the notice of BOD meeting, whilst other directors may attend the meeting via tele/video conference. This for example, is the practice in the UK and the US and it curtails any dispute that may arise regarding the validity of the meeting and facilitates proof to the regulatory authority that the BOD meeting was in fact held as scheduled in the notice.
For instance, a situation may arise where the BOD meeting of a private company cannot be postponed after a valid notice of meeting has been circulated to members of the BOD and it is clearly foreseeable that on the date scheduled for the meeting, board members would be unable to access the meeting venue due to COVID-19 restrictions. If the company's Articles permit the holding of virtual meetings, in order to address the issue of a director being present at the notified physical venue of the meeting, a prudent solution will be to change the meeting venue to an alternate or more convenient venue (e.g. a director's residence or private office etc.) to enable at least one director to be physically present at the notified venue while others may attend the meeting virtually, in compliance with best practice. The change of venue may be effected by e-mail correspondence to the BOD members setting out details of the new address, pursuant to the broad powers conferred by CAMA on members of the BOD to regulate their meetings as they deem fit.
India is an example of a jurisdiction that has developed elaborate procedures and guidelines in its Companies Act and Rules, for the regulation of BOD meetings held either in person or virtually using video/audio visual means. The procedures and guidelines detail steps to be taken to establish that a virtual BOD meeting was held and that it was duly attended by members of the BOD. The guidelines require video/audio visual equipment deployed for virtual BOD meetings to have recording, recognition and data storage capabilities facilitating recognition of directors' participation in the meeting and recording/storage of the proceedings with the attendant date and time of the meeting. The notice convening such BOD meetings are required to state the option of attendance/participation by the directors at the meeting either in person or virtually, and there is no requirement for at least one director to be present at the notified meeting venue.
Indian procedures and guidelines on virtual BOD meetings are similar to those of other jurisdictions. They however differ from the regulations in the UK and the US in one material respect. They offer a solution to the dilemma of having at least one member of the BOD at the notified physical venue of a virtual BOD meeting when attendance at the notified physical venue of the meeting is difficult or impracticable, for example, due to COVID-19 restrictions. The guidelines stipulate that BOD meetings attended by all directors virtually (i.e. without any director present at the notified physical venue of the meeting) would be deemed to have been held at the notified physical venue for such meetings. In our view, the Indian example appears to be more in tune with current realities and it is recommended for adoption by the CAC in providing a more viable alternative to holding physical BOD meetings in Nigeria, particularly under extant COVID-19 restrictions.
On 15th April 2020, the Nigerian Stock Exchange ("NSE") published a set of guidelines titled, "Guidance on Companies' Virtual Board, Committee and Management Meetings" ("Guidance"). The Guidance was issued to guide Nigerian public companies quoted on the NSE in convening virtual meetings in view of the current uncertainties. It is recommended in the Guidance that virtual BOD meetings be transparent, efficient and meet the business and corporate governance needs of stakeholders. It is further recommended that the Articles (or Board, Committee and Management Charters or Terms of Reference) be amended to allow for virtual BOD meetings and provides steps to be adopted for such meetings to include: precise agenda; communication of meeting details timeously; acquiring necessary facilities and technical support to afford remote participants a considerably similar access as they would have had in person; and ensuring information security and data protection. These recommendations are useful considerations for virtual meetings that should be noted by the CAC in developing much-needed guidelines for the regulation of virtual BOD meetings in Nigeria with a view to providing clarity on the foregoing issues.
Where it is impossible to hold a physical or virtual meeting of the BOD due to COVID-19 restrictions, companies may utilise the option of passing written resolutions in which decisions of the BOD are taken in the absence of a physical meeting. A written resolution must however be signed by all the directors of the company. This requirement presents a difficulty under COVID-19 restrictions of obtaining wet signatures from all the directors of the Company, particularly for public companies that may have numerous directors. Although the Evidence Act 2011 recognizes the use of electronic signatures and companies may want to utilize this in executing such resolutions, the CAC does not accept resolutions signed with electronic signatures, perhaps due to fraud.
The CAC's power to reject electronic signatures derives from section 5 (2) & (3) of the Companies Regulations 2012, which empowers it to determine the requirements for signatures to corporate documents. Unfortunately, the CAC's rejection of electronic signatures on resolutions will impose undue hardship on companies during the COVID-19 lockdown in Lagos and Ogun states and the FCT, Abuja, as they are unlikely to be able to secure wet signatures from their directors due to restrictions on movement.
It is therefore notable that Nigerian law provides a measure of relief to both private and public companies dealing with the foregoing issues during the COVID-19 lockdown, to wit: (i) urgent situations where the Articles of Association of a company does not expressly provide for virtual meetings and a physical meeting has been scheduled and cannot be postponed; (ii) it is impracticable for at least one director to be present at the notified venue of the meeting; and (iii) it would be impossible to obtain wet signatures of all the directors that attend a virtual meeting. Section 223 of CAMA provides that where it is impracticable to call a meeting of a company or of the BOD or to conduct such meetings in accordance the Articles or CAMA, an application may be made to the Federal High Court ("FHC"), by a director. Incidentally, this provision will also apply to general meetings where an application may similarly be made to the FHC by a member who is entitled to vote at general meetings discussed below, to order such meeting to be called, held and conducted in such manner as the court deems fit. By virtue of such order of the court, any meeting called, held and conducted accordingly, shall for all purposes be deemed to be a meeting of the company, or of the BOD duly called, held and conducted.
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