In corporate governance in Nigeria, Directors and Shareholders are the two principal stakeholders in a company. Although they often work in harmony, their roles, rights, and responsibilities are distinct and when misunderstood, can lead to conflicts, mismanagement, or even the collapse of a business.

In this write-up we are going to examine the roles, responsibilities and some of the rights of Directors and Shareholders in a company.

Read:Company Registration (Limited Liability Company)

the Directors of a company are appointed to manage and direct the affairs of the company. They are to act as agents and fiduciaries of the company. and their duties and authorities are regulated by the Companies and Allied Matters Act (CAMA) 2020 and the company’s internal governance documents (Articles of Association). They are appointed by the shareholders or at the Board meeting. Their main power is the strategic decision making and the daily operation of the company.

Whereas the Shareholders also known as members, are the owners of the company. They hold shares representing a portion of the company’s capital. They are not involved in daily management but have ultimate control through general meetings. Their appointment comes by subscribing to the shares of a company. They do not have any fiduciary duty like the Directors and their remuneration is the Dividends when declared. The shareholders authorities emanate from CAMA, shareholders Agreements and the General meetings.

The roles and Responsibilities of a Director are as follows:

1. The Directors set company policies and strategy.
2. They approve budgets, financial statements, and key decisions (e.g., borrowing, major contracts).
3. They ensure compliance with laws and corporate governance standards.
4. They appoint or remove senior management.
5. They declare dividends (subject to shareholders approval).
6. They file statutory documents with the Corporate Affairs Commission (CAC) through an accredited CAC agent.

The Directors have the rights to access company information and records, to receive board meeting notices and participate in board decisions, to remuneration (if so agreed), they also have the right to indemnity for actions taken in good faith.

While the roles and responsibilities of the Shareholders are

1. To attend and vote at general meetings (Annual General Meeting – AGM; Extra-ordinary General Meeting – EGM).
2. To appoint or remove directors.
3. To approve audited accounts and dividend declarations.
4. To amend the Articles of Association.
5. To authorize share capital increase or reduction.
6. To approve major changes (e.g., merger, acquisition, liquidation).

The shareholders also have the right to vote at meetings (1 share = 1 vote typically), right to receive dividends (when declared), right to inspect certain records (e.g., register of members), right to sue for unfair prejudice or mismanagement, right to transfer or sell shares (subject to restrictions).

Note that for one to be a Director of a company he or she must be 18 years and above but shareholders, a minor can be a shareholder of a company.

In conclusion, the relationship between directors and shareholders in Nigerian companies is both complementary and potentially contentious. When roles are clearly defined, rights respected the company benefits through improved performance, accountability, and long-term growth. Before you register that business please find out the roles and responsibilities and know the person that most suit such roles.

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