NIGERIA Law and Practice Contributed by: Yeye Nwidaa, Mariam Olayinka Akinyemi and Toluwalase Oliver-Jude, Jackson, Etti & Edu
laws and regulations. These institutions may impose sanctions, issue directives, suspend trad - ing privileges or take other disciplinary actions against companies and their directors for non- compliance. Limitation of Directors’ Liability Generally, directors are protected from personal liability for decisions made in the ordinary course of business, provided such decisions are taken in good faith, with due care, and in the best interests of the company. However, this protection is not absolute. Where misconduct, fraud, gross negligence or breach of fiduciary duty is established, courts and regulators may “lift the corporate veil”, thereby holding directors personally accountable for their actions. 3.10 Payments to Directors/Officers The remuneration of non-executive directors is determined by the company in a general meeting. In practice, the board typically submits a proposed remuneration package to shareholders based on the recommendation of the committee responsible for nomination, governance and remuneration. In formu - lating such proposals, consideration is usually given to prevailing industry standards, the expected time commitment of directors, and the financial capacity of the company. The remuneration structure for non-executive directors is generally limited to directors’ fees and sitting allow - ances. These payments are required to be disclosed in the company’s annual report in line with applicable corporate governance and financial reporting require - ments. Importantly, non-executive directors are not permitted to receive performance-based compensa - tion, to preserve their independence and objectivity in oversight functions. Executive directors, who are also employees of the company, typically have their remuneration set out in their employment contracts or letters of appoint - ment. The Remuneration Committee is responsible for designing these packages to align with the company’s long-term objectives and ensuring they are structured to attract and retain competent leadership, without the involvement of executive directors in determining their own pay.
Their remuneration generally includes a fixed annual salary and benefits such as healthcare, housing, car, travel and telephone allowances, as well as perfor - mance-based incentives. These packages are subject to board approval and must be disclosed to share - holders in line with regulatory requirements. Executive directors are not entitled to directors’ fees or sitting allowances. In line with the NCCG 2018, companies are also required to implement clawback provisions, enabling the recovery of performance-based pay where finan - cial results are later found to be materially mis-stated. The relationship between a shareholder and a com - pany is fundamentally contractual in nature. It is gov - erned by the company’s constitutional documents (primarily the shareholders’ agreement and the mem - orandum and articles of association), which operate as binding covenants between the company and its members. Accordingly, shareholders are required to comply with the provisions contained in these govern - ing instruments. Shareholding confers a right of participation in the company rather than a direct proprietary interest in its underlying assets. While shareholders do not own the company’s assets, they are entitled, in proportion to their shareholding, to dividends from distributable profits and, upon winding-up, to any surplus assets remaining after all creditors have been fully satisfied. Generally, shareholders enjoy limited liability and are not responsible for the acts or obligations of the company. However, in exceptional circumstances, the corporate veil may be pierced, thereby imposing personal liability on shareholders where the company structure is abused or used for fraudulent or improper purposes. 4. Shareholders 4.1 Companies and Shareholders Information on a company’s shareholders and their respective shareholdings can typically be obtained from the company’s records, including its profile on the CAC portal.
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