NIGERIA Law and Practice Contributed by: Yeye Nwidaa, Mariam Olayinka Akinyemi and Toluwalase Oliver-Jude, Jackson, Etti & Edu
• avoid conflicts of interest, whether actual or poten - tial; and • refrain from making secret profits, and account fully to the company for any improper gain. 3.7 Responsibility/Accountability of Directors Under Nigerian law, directors owe their primary duties to the company as a separate legal entity, not to indi - vidual shareholders or other stakeholders. They must act in good faith to promote the company’s objectives and long-term success. However, in fulfilling this duty, directors are expected to consider broader stakeholder interests, including those of employees and shareholders, and the impact of the company’s activities on the environment and society. They must also consider the long-term con - sequences of their decisions. While these considerations do not override the duty owed to the company, they help to define what act - ing in the company’s best interests means in practice, reflecting a more stakeholder-aware and sustaina - bility-focused approach to corporate governance in Nigeria. 3.8 Breach of Directors’ Duties Under Nigerian law, particularly CAMA, directors owe their duties primarily to the company as a separate legal entity, meaning the company is the main par - ty entitled to sue for breaches. Remedies available include injunctions, damages and rescission of con - tracts. However, shareholders may bring actions (typi - cally derivative suits) where the company is unwilling or unable to act, such as in cases of illegal or ultra vires acts, fraud, infringement of personal rights or misuse of resolutions, or where directors profit from breaches. Regulatory oversight is also exercised by bodies like the FRCN, the SEC and the CBN, which may impose sanctions for non-compliance with governance rules. Consequences for breach can include removal from office, personal liability for losses, regulatory fines and clawback of improperly earned incentives. 3.9 Other Claims/Enforcement Against Directors/Officers Directors and officers of companies in Nigeria are subject to a range of legal and regulatory obligations
designed to ensure accountability, transparency and sound corporate governance. Where these obliga - tions are breached, liability may arise from several legal and regulatory frameworks, depending on the nature and severity of the misconduct. • Statutory and regulatory framework: Nigerian companies operate within a robust statutory envi - ronment governed by laws and regulatory institu - tions. Directors and officers are required to comply strictly with applicable laws, regulations and corpo - rate governance codes. Failure to do so may result in regulatory investigations, sanctions, penalties or other enforcement actions. • Common law principles: under common law, direc - tors owe fiduciary duties to the company, includ - ing duties of care, skill, diligence and loyalty. A breach of these duties – such as negligence, abuse of power or breach of trust – may expose direc - tors to personal liability. Courts may hold directors accountable where their conduct falls below the standard expected of a reasonably diligent director acting in good faith. • Shareholder remedies: shareholders may initi - ate legal proceedings against directors through derivative actions (on behalf of the company) or direct claims where their personal rights have been affected. These actions typically arise in cases of misconduct, mismanagement or breaches of fiduciary duty that harm the company or its share - holders. • Criminal liability: in addition to civil liability, direc - tors and officers may face criminal prosecution under Nigerian law for offences such as fraud, insider trading, misappropriation of funds or other financial crimes. Convictions may result in fines, imprisonment or both, depending on the nature and gravity of the offence. • Tortious liability: directors may also be liable in tort for wrongful acts that cause harm to third parties or the company, including negligence, misrepresenta - tion and defamation. Such liability is independent of contractual or fiduciary obligations, and may arise where a duty of care is breached. • Regulatory enforcement actions: regulatory bod - ies such as the SEC, the Corporate Affairs Com - mission (CAC), the NGX and the FRCN, etc, are empowered to enforce compliance with relevant
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