Statutorily, Directors are entitled to receive fourteen days’ notice (except otherwise provided in the Articles of Association). Business exigencies however sometime require that meetings are convened with less than the statutory notice. Typically, Directors are required to sign waiver of notice, where a meeting of the Board of Directors has been convened with less than the statutory minimum notice. Are these waivers valid?
Section 266 of CAMA provides as follows:
(1) Every director shall be entitled to receive notice of the directors’ meetings, unless he is disqualified by any reason under the Act, from continuing with the office of director.
(2) There shall be given 14 days’ notice in writing to all directors entitled to receive notice unless otherwise provided in the articles.
(3) Failure to give notice in accordance with subsection (2) of this section shall invalidate the meeting.
It can be argued that section 266 imposes an obligation to give a minimum of 14 days’ notice. Thus, waivers have no place under Nigerian Company law and therefore cannot, except specifically provided for in the company’s Articles be valid. It can also be argued that directors have the right to dispense with the minimum notice and waive their right to receive notice as contemplated by CAMA. This argument is supported by Section 263(1);
“The Directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings as they think fit.”
It is worthy of note that Section 266 uses the word “shall”, a word which connotes an obligation. This is in stark comparison to the word “may” in Section 263(1). Furthermore, it can be argued that the obligation on the company is to “give notice”. This cannot be waived. Thus, whilst there can be no compromise as to the giving of notices, there can be some flexibility as to the length of such notices if all Directors “waive” their right to the statutory minimum.
In the United States of America, the Articles of Incorporation may specify the notice that is required for Director meetings. The Model Business Corporations Act (MBCA) provides that notice is not necessary for regular board meetings, and that special meetings may be called with two days’ notice. In the United Kingdom, Directors are expected to meet regularly, and a Director can call a meeting at any time provided reasonable notice is given to the Directors, unless the Articles provide otherwise. What is reasonable will depend on the type of company and precedent.
To be clear, it is not sufficient that a majority of Directors “agree” to convene the meeting with less than the statutory notice period. The issue of “majority” is by way of quorum at a properly convened meeting. As the Board is called to take a decision on abridging the notice required to convene a meeting, the issue of quorum does not come into the equation. Without exception, each Director has to agree (waive their right to statutory notice) to convene the meeting with less than the statutory notice. This waiver has to be properly documented. It is important to note that the mere fact of attending a meeting convened without the requisite notice (or short of this notice) does not in itself preclude a disgruntled Director form applying to set aside decisions taken there at. Out of the abundance of caution, some companies have amended their Articles to provide that attendance at a meeting convened with less than the statutory notice period by itself constitutes a waiver.
In order to avoid any challenge to the validity of meetings and decisions taken at such meetings, it is advised that were practicable, written resolutions be signed in respect of any decision/s taken at a meeting convened and held with less than the statutorily required notice. A company should also consider specifically providing for abridged notice and waiver of notice in its Articles. Since this is expressly permitted by CAMA, such an option would lay to rest any doubts regarding the validity or otherwise of meetings convened and held with less than the 14 days’ notice provided by CAMA.
On Thursday, 15th November 2018, DCSL will be hosting the following events at the Radisson Blu Anchorage Hotel, Victoria Island, Lagos;
- Improving the Performance of the Audit Committee ©;
- Enthroning Good Corporate Governance in Microfinance Banks.
For further enquiries and comments, kindly contact ntaiwo@dcsl.com.ng or 08037699347.
Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comments and reactions to badeyemi@dcsl.com.ng