Question Tag: Termination of Directors

i) The limitations on the powers of directors include:

• Directors are not to sell, lease, or otherwise dispose of the whole or substantially the whole of a company’s undertaking or assets.
• Directors are not to issue any new shares or unused shares, other than treasury shares in the company, unless the same was first offered on the same terms and conditions to all existing shareholders.
• The Act would debar the issue by the directors of new and unissued shares or treasury shares to any director or past director or a nominee of such director of the company unless the same was first offered on the same terms and conditions to all existing shareholders or to members of the public where applicable.
• Directors are not to make voluntary contributions to any charitable or other funds other than pension funds for the benefit of employees of the company or any associated company of the amounts the aggregate of which will, in a financial year of the company, exceed a prescribed amount or two percent (2%) of the income surplus of the company at the end of the immediately preceding financial year.
• A director with shares in the company cannot, in the absence of express authority in the company’s constitution, exercise the company’s power of borrowing money or of charging any of its assets except with the approval of an ordinary resolution of the company.
  (Any three points @ 3 marks each = 9 marks)

ii) Companies Act, 2019 (Act 992) provides that:

• A director will have to vacate his office if he becomes incompetent under section 173 of Act 992.
• Where he/she ceases to hold office by failure to meet a share qualification as required by section 174 of Act 992.
• If he resigns without any reasons by notice in writing to the company.
• By order of the court in case of a person found guilty of fraud or dishonesty, or any offence in connection with companies.
• If the director is properly removed under Section 176 of the Act.
  (Any three points @ 2 marks each = 6 marks)