Who is a Managing Director/ CEO?

To effectively dissect and provide answers to the above issues raised, it is imperative to understand who a Managing Director/ Chief Executive Officer is. Section 269 of the Companies and Allied Matters Act (CAMA) 2020 defines a director as a person appointed to manage the affairs of a company. Although the Act does not define who a managing director is, it is noteworthy to mention that Section 88 of CAMA is to the effect that the board may appoint one or more of its members to the office of managing director of the company. In the same vein, the Nigerian Code of Corporate Governance 2018, the regulation governing the practices of company boards in Nigeria defines a managing director as the head of management delegated by the board to manage or run the affairs of the company to achieve its strategic objectives.1

Can a Managing Director hold multiple executive positions?

A review of CAMA 2020 reveals that there is no express prohibition of a person from holding multiple executive directorship positions. Interestingly, section 278(2)2 mandates any person holding a directorship position in a public company to disclose where he has been appointed as director in another public company. Although this obligation applies to directors of a public company, in practice, directors of private companies make such disclosure during board meetings. Section 307 goes further to provide thus:

The fact that a person holds more than one directorship shall not derogate from his fiduciary duties to each company, including a duty not to use the property, opportunity or information obtained in the course of the management of one company for the benefit of the other company, or to his own or other person's advantage.

Similarly, principle 2.8 of NCCG 2018 states that directors may hold concurrent directorships. However, service on too many boards may interfere with an individual's ability to discharge his ability and it is advised that prospective directors should disclose memberships and such disclosures should be taken into account by the board. Although it may seem that these provisions are not specific to Managing Directors, Managing Directors are also members of the board. Thus, it can be inferred or implied that these provisions are applicable to Managing Directors as directors of the company and members of the board.

Notwithstanding the above, it is important to bear in mind the method of appointment of the Managing Director to understand whether or not an employment relationship has been created. This is because a Managing Director may be appointed through the Memorandum of Association or by a board, in accordance with the provisions of its Articles of Association. In Yalaju-Amaye v. Associated Registered Engineering Contractors Ltd. (1990) 2 NSCC 462, 475; (1990) 4 NWLR (Pt.l45) 422 at 444 it was observed on the status of a managing director as follows:

"... there is generally the relationship of master and servant between the managing director and his company. As an employee, there is usually a contract of service between him and the company"

Olakunle Orojo in his book Nigerian Company Law and Practice 3rd Edition at page 296 stated the position of law as follows:

" Sometimes the articles give the directors or the company power to appoint executive, special or alternate directors. In practice, the "executive" or "special" director is an employee of the company whose status has been raised to that of a director but who continues essentially as such employee, e.g. sales director. His status is usually limited by the articles but he may eventually be elevated to full directorial status.

A director who hardly goes to the office or place of business of his company merely attends occasional board meetings can hardly be called an employee of that company even by any stretch of imagination. But it would not, it is thought, be unreasonable to regard a full-time director or present-day Executive Director who devotes his whole time and attention to the work of his company to the exclusion of any other paid job, as an employee.

The implication of this is that where an employment relationship is established, and there is a written contract, such contract will govern the relationship between parties. Where there is any term in the contract to the effect that such person appointed as Managing Director is restricted from holding multiple directorship positions, then such a person cannot disregard the provision of the contract which he/ she executed.

In any event where the employment contract and Articles of Association are silent in that regard, nothing prevents a person from holding such position as MD/CEO in more than one company, in so far as he discloses same to the board, it does not interfere with the effective discharge of his duties, there are no conflicts of interest or breach of confidentiality and diversion of corporate opportunity.

In conclusion, given that there are no explicit provisions in both the Companies and Allied Matters Act 2020, and the NCCG 2018 on whether a Managing Director is prevented from holding such executive position in more than one company, it is safe to state that what would apply is the contract of service between the Managing Director and the company. Where the employment contract is silent on this issue, it is not illegal for a Managing Director to hold multiple executive positions, provided that there are adequate disclosures by such persons to the companies in which such positions are held, it does not interfere with his ability to perform and discharge his duties effectively, confidentiality is maintained and there are no diversions of corporate opportunities.

Footnotes

1. See the definition of principles section of the NCCG 2018

2. Any person who is proposed to be appointed a director of a public company shall disclose any position he holds as a director in any other public company at the meeting in which he is proposed for appointment as a director

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