What board of directors means
The board of directors is the collective body responsible for managing the company.
Directors individually hold an office and owe duties. The board is what they constitute together, and the company's powers of management are exercised by the board rather than by any director acting alone.
That distinction matters. A single director signing a contract may bind the company through actual or apparent authority, and internally the decision to enter it should have been the board's.
The board acts through meetings and resolutions. It meets on notice, requires a quorum, votes, and records what it decided in minutes. A written resolution signed by all the directors is the alternative where the articles permit it.
What the board decides is bounded by two things: the articles, which set out its powers and how it operates, and the matters reserved to shareholders by company law or by agreement.
How it is used
In a functioning company the board handles a recognisable set of decisions.
Opening and operating bank accounts and setting mandates.
Approving significant contracts and expenditure.
Appointing officers and delegating authority, including to a managing director.
Allotting shares where it has authority, and approving share transfers.
Creating security over company assets.
Recommending dividends.
Approving accounts before they go to members.
And anything the shareholders agreement requires the board to decide.
The mechanics are simple and frequently ignored. Notice of the meeting to all directors. A quorum as the articles require. Declarations of interest by any director with an interest in a matter, who then does not vote on it. A record of what was decided, signed and kept in the minute book.
CAMA 2020 permits private companies to hold general meetings electronically in accordance with their articles, and board meetings by electronic means are common practice for companies whose directors are dispersed.
Key features
- The collective body managing the company
- Acts through meetings and resolutions, not through individual directors
- Requires notice and a quorum as the articles provide
- Directors with an interest must declare it and not vote
- Decisions must be minuted to be provable
- Bounded by the articles and by matters reserved to shareholders
How this works in Nigeria
The gap between the legal model and the practice is wide in most Nigerian private companies, and it costs them at exactly two moments.
The first is banking and regulatory. A bank opening a corporate account, a regulator granting a licence, or a counterparty conducting due diligence asks for the board resolution authorising the transaction. A company that decided things in conversation has nothing to produce, and the process stops while a resolution is created after the fact.
The second is a dispute or an investment. A founder asserting that the board approved something, with no minute, is asserting rather than proving. An investor asking to see the minute book and receiving nothing draws conclusions about everything else.
The fix is proportionate. A small company does not need monthly board meetings. It needs a resolution for each significant decision, dated and signed, kept together. Where the articles permit written resolutions signed by all directors, that is usually the practical route for an owner managed company.
CAMA 2020 also matters here. It codified directors' duties, and those duties are owed by each director to the company, not to the shareholder who appointed them. A director instructed by a dominant shareholder to approve a transaction against the company's interests is personally exposed, and the instruction is not a defence.
Conflicts are the third point. A director with an interest in a transaction should declare it and abstain, and the declaration should be in the minutes. Handling it informally is what creates the problem during due diligence.
Board decision vs shareholder decision vs delegated authority
Three levels at which a company decides, and using the wrong one creates a defect.
A board decision is taken by the directors collectively at a meeting or by written resolution. It covers management: contracts, banking, appointments, allotments where authorised, and recommending dividends.
A shareholder decision is taken by the members in general meeting or by written resolution. It covers constitutional matters: amending the articles, changing the name, increasing share capital, removing a director, and approving a dividend.
Delegated authority is what the board confers on an individual, typically a managing director, within stated limits. A person acting within it binds the company; a person acting beyond it may still bind the company externally through apparent authority while being exposed internally.
A decision requiring shareholder approval that was only taken at board level can be challenged, which is why the articles and the shareholders agreement should be checked before, not after.
Limits and risks
In owner managed companies the board and the shareholders are the same people, which makes the separation feel artificial and leads to it being ignored.
Board control is also limited by shareholder power. Directors can be removed by the members following the statutory procedure, so a board that resists a majority shareholder has limited durability.
Minutes record what was decided, not whether it was wise, and a well documented bad decision is still a bad decision.
And apparent authority means the company may be bound by an individual acting beyond internal limits, so governance protects the company internally rather than against third parties.
Worth knowing
Pass a written board resolution for every significant decision and keep them in one place. Nigerian companies stall bank account openings, licence applications and funding rounds while somebody drafts resolutions for decisions taken three years ago in a conversation.
Questions people ask
What does the board of directors do?
Manages the company collectively. It approves significant contracts and expenditure, operates banking mandates, appoints officers and delegates authority, allots shares where authorised, and recommends dividends.
Can one director make decisions alone?
Company powers of management are exercised by the board, though a director may bind the company externally through actual or apparent authority. Internally, significant decisions should be board decisions with a resolution.
Do we need formal board meetings?
A small company does not need frequent meetings, but it does need a resolution for each significant decision, dated and signed. Written resolutions signed by all directors are usually the practical route where the articles permit them.
What if a director has an interest in a transaction?
They should declare it and not vote on the matter, and the declaration should appear in the minutes. Handling it informally is what creates the problem during due diligence.
Who does a director owe duties to?
The company, not the shareholder who appointed them. CAMA 2020 codified those duties, and an instruction from a dominant shareholder to act against the company's interests is not a defence.
What is the difference between a board and a shareholder decision?
The board manages: contracts, banking, appointments and allotments. Shareholders decide constitutional matters: amending the articles, changing the name, increasing share capital, removing a director and approving dividends.