There
are various restrictions which the Companys Act imposes on appointment of
directors and these restrictions must be fulfilled for one to be
appointed as director.
(1) Appointment by Articles
Section
182(1) states that a person shall not be capable of being appointed
director of a company by the articles unless, before registration of the
articles, he has signed and delivered to the registrar for registration
a consent in wanting to act as a director and either: -
(a) signed the memorandum for a number of shares not less than his qualification shares, or
(b) taken from the company and paid or agreed to pay for his qualification shares
(c) Signed
and delivered to the registrar for the registration, an undertaking in
writing to take from the company and pay for his qualification shares.
These provisions do not apply to: -
(a) A company without share capital.
(b) A private company.
(c) A company which was a private company before becoming a public company.
(2) Qualification Shares
Under
Section 183 (1), it shall be the duty of every director who is by the
articles of the company required to hold a specified share qualification
and who is not qualified to obtain his qualification within 2 months
after his appointment or within the shorter time as fixed by the
articles.
Section
183(3) provides that the director shall vacate office if he fails to
obtain his share qualification or ceases to hold the required number of
shares
Case: R vs. Camps (1962) Court of Appeal for E.A.
The
respondent, in his capacity as a director of a company, had been
charged with several offences under the companies Act. Although the
directors of the company had under article 96 of the company’s articles
of association duly appointed him to be the director and he had acted as
such, he never acquired the required share qualification but in a
statutory return, subsequent to his appointment, he was shown as a
director which was fixed at one fully paid up share in his own right.
Article
87 which agrees with the terms of section 183(1) of the Act provided
that the office of the director shall be vacated if a director ceased to
hold the number of shares required to qualify him for office or fails
to acquire the same within 2 months after his appointment.
The
court held that as the respondent had never possessed or acquired his
qualifying share, his appointment was invalid and that there were no
cases for him to answer.
It
was also held that the respondent was never even a de facto director
and that in any event a de facto director was not criminally liable as a
director under the Company’s Act.
Against
that decision, the Attorney General appealed to the High Court and the
case was dismissed but on further appeal, the High Court held that: -
(i) The word “director” in the Company’s Act includes a de facto director.
(ii) The
respondent was duly and validly appointed a de jure director but he
ceased to be a de jure director two months later as he failed to acquire
his share qualification within that time.
(iii) If
the respondent acted as a director after the expiration of two months
from his appointment, he was then a de facto director and he was a
director for the purpose of those sections of the Company’s Act which it
was alleged he had contravened.
“Appeal allowed, acquittal set aside”.
Therefore
if a director does not vacate office but continues to act as a
director, he ceases to be a de jure director and becomes a de facto
director. Under Section 183(4), a de facto director is incapable of
being reappointed director of the company until he has obtained his
qualification shares and under Section 183(5), he is liable to a fine
not exceeding one hundred shilling for everyday that he acts as a
director of the company.
(3) Age Limit
Section 186 provides that no person shall be capable of being appointed a director if at the time of his appointment: -
(a) He has not attained the age of 21.
(b) He has attained the age of 70.
This
provision does not apply if the company’s articles provide otherwise or
a special notice of the resolution was given to the company.
Section
142 defines “special notice” as a notice given to the company not less
than 28 days before the meeting at which the relevant resolutions are to
be moved.
(4) Undischarged Bankrupts
Section
188 provides that if a person who has been declared bankrupt or
insolvent by a competent court and who has not received his discharge,
acts as a director of any company, shall be liable to imprisonment for a
term not exceeding 2 years or to a fine not exceeding Sh. 10,000 or
both.
(5) Fraudulent Persons
Section
189(1) empowers the court to make an order restraining a person from
being appointed, or act as a company’s director for a period not
exceeding 5 years if: -
(a) The person is convicted of any offence in connection with the promotion, formation or management of the company, or
(b) in course of winding up, it appears that the person had been guilty of fraudulent trading.
(6) Individual Voting
Section
184(1) provides that the appointment of directors of a company which is
not a private company is to be voted on individually, unless a motion
for the appointment of the two or more persons as directors by a single
resolution was agreed upon by the meeting without any vote against it.