Buying property in Nigeria is a major financial decision. Unfortunately, a property can appear genuine on the surface and still be affected by defective title, competing ownership claims, government acquisition, forged documents, undisclosed encumbrances or an unauthorised seller. A seller may show you a Certificate of Occupancy, Deed of Assignment, survey plan or other title document. The existence of a document, however, does not by itself establish that the seller has a valid and transferable interest in the property. The Court has emphasised that merely producing a document of title does not automatically establish ownership of land. The circumstances surrounding the title and the root of the interest being claimed remain important. This is why a buyer should investigate the property, the title, the seller and the transaction before paying the purchase price. What Does It Mean for a Property to Be Genuine? A property is not “genuine” merely because there is a building on it or because the seller possesses a document bearing an official-looking stamp. For a property transaction to be reasonably safe, the buyer should be able to establish that: the property actually exists as described; the person offering it for sale has a legitimate interest in it; the seller has authority to transfer that interest; the title documents are authentic; the documents correspond with the actual property; the property’s ownership history is capable of being established; there is no undisclosed competing claim that prevents the sale; the property is not affected by an undisclosed encumbrance; the property is not being sold by someone without authority; the transaction is not affected by fraud or forgery; and the buyer can properly acquire and perfect the interest being purchased. A proper investigation therefore goes beyond checking one document. How to Check Whether a Property Is Genuine Before Buying 1. Confirm the Identity of the Seller The first question should be: Who exactly is selling this property? Ask the seller to provide satisfactory identification and documents establishing their interest in the property. Where the seller claims to be the owner, compare their identity with the name appearing on the title documents. Where the seller’s name differs from the registered proprietor, do not assume that the difference is harmless. The seller should explain and establish the legal basis for the sale. For example, the seller could be: a subsequent purchaser; an administrator or executor of an estate; an attorney acting under a Power of Attorney; a company authorised to dispose of the property; a representative of a family or community; or another person deriving an interest from the registered owner. Each situation requires its own investigation. Why Seller Verification Matters One of the common forms of property fraud is a person presenting himself as the owner when he has no authority to sell the property. Even where the property exists and the documents look authentic, the transaction can still be unsafe if the person receiving your money is not legally entitled to sell. 2. Ask for the Complete Title Documents Do not rely on a single document supplied by the seller. Ask for the documents upon which the seller’s ownership or interest is based. Depending on the property, these may include: Certificate of Occupancy; Deed of Assignment; Deed of Lease; Governor’s Consent; registered survey plan; Gazette; allocation letter; previous title documents; purchase receipts; probate or letters of administration; court judgments or orders; and other documents forming part of the chain of title. The precise documents required will depend on the history and nature of the property. The important point is to understand how the seller acquired the property, not merely what document the seller currently possesses. 3. Verify the Title Documents Documents presented by a seller should be independently verified. Do not assume that a document is genuine simply because: it carries a government logo; it has a registration number; it contains official-looking stamps; the seller’s lawyer produced it; the seller says it was issued by the government; or another buyer previously relied on it. The relevant government records should be investigated where applicable. For example, Lagos State provides property-related services through its e-GIS platform, including property search and applications for Certified True Copies. Where a document is alleged to be registered, the buyer should investigate the relevant registry records and compare the information in those records with the document presented. 4. Conduct a Search at the Relevant Land Registry A property search is one of the most important stages of property due diligence. The purpose is to investigate the official records relating to the property and determine matters such as: the registered proprietor; the nature of the registered interest; previous transactions; registered encumbrances; mortgages or charges; assignments; restrictions; and other interests affecting the property. In Lagos, the relevant land records are maintained through the State’s land administration system, with online property-search services available through the Lagos e-GIS platform. However, a registry search should not be treated as the entire due-diligence exercise. A search result must be properly interpreted and compared with the seller’s documents and the physical property. 5. Trace the Root and Chain of Title One of the most important questions in a property transaction is: How did the seller acquire the property? If the seller acquired the property from another person, your lawyer should investigate that previous transaction. If the previous owner acquired it from another person, the investigation may need to go further. This is known as investigating the root and chain of title. The objective is to determine whether the seller’s interest can properly be traced to a person or entity with a legitimate interest capable of being transferred. A buyer should not assume that a recent Deed of Assignment automatically cures problems in an earlier title. The Court of Appeal has recognised that registration does not create an interest in land where no valid interest existed in the first place. This is an important principle when investigating property transactions. 6. Confirm That the Property Described in the Documents Is the Actual Property The documents
How to Conduct Property Due Diligence Before Buying Property in Lagos
Buying property in Lagos is a major financial decision. Whether you are purchasing land, a house, an apartment, or commercial property, the fact that a seller possesses documents relating to the property does not, by itself, mean that the seller has a valid and transferable title. A property may be subject to government acquisition, an existing mortgage, litigation, family claims, competing interests, restrictions on transfer, or other legal issues that may not be apparent from the property itself. This is why property due diligence in Nigeria should be undertaken before paying the purchase price or committing substantial funds to a transaction. Proper due diligence helps a prospective buyer establish who owns the property, the nature of the seller’s interest, whether the title is genuine and transferable, whether the property is affected by government acquisition or other encumbrances, and whether there are legal or practical obstacles to completing the transaction. What Is Property Due Diligence? Property due diligence is the process of investigating the ownership, title, history, legal status and other relevant circumstances surrounding a property before purchasing it. The purpose is not merely to determine whether the seller has a document. It is to establish whether the seller has good and marketable title and whether the buyer can safely acquire the interest being offered. Depending on the property, due diligence may involve: examining title documents; conducting searches at relevant government registries; investigating previous transfers of the property; confirming the identity and capacity of the seller; checking for mortgages, charges and other encumbrances; investigating pending or threatened litigation; determining whether the property is affected by government acquisition; inspecting the physical property; confirming that the property being sold corresponds with the documents; and reviewing the proposed contract and transaction documents. Why Is Property Due Diligence Important in Lagos? Lagos has a highly active property market, but property transactions can involve complicated chains of title and competing interests. A buyer may encounter situations where: the person presenting the property is not the true owner; a property has been sold to more than one person; a family member purports to sell family property without the necessary authority; a property is subject to a mortgage or other encumbrance; the property is affected by government acquisition; the seller’s title is defective; the property is already the subject of litigation; the dimensions or location of the property do not correspond with the documents; the seller lacks authority to sell; or the transaction documents contain terms that expose the buyer to unnecessary risk. These problems can be extremely expensive to resolve after completion. The safest time to discover a title problem is before you buy the property. 1. Identify the Seller and Confirm Their Capacity to Sell The first question should be: Who exactly is selling this property, and what gives that person the authority to sell it? If the property belongs to an individual, the buyer should verify the seller’s identity and examine the documents establishing the seller’s interest. If the property is owned by a company, the company’s ownership and authority to dispose of the property should be investigated. If the property belongs to a deceased person’s estate, the buyer should determine who has the legal authority to deal with the property. Family property requires particular caution. A person who claims to be the family head or a family representative may not necessarily have unlimited authority to dispose of family land. The buyer should therefore investigate the ownership structure rather than relying solely on the seller’s representation. 2. Examine the Root of Title A critical part of property due diligence is identifying the root of title. The root of title is the document or transaction from which the seller’s interest can be traced. Depending on the circumstances, relevant documents may include: a Deed of Assignment; Certificate of Occupancy; Governor’s Consent; Deed of Conveyance; grant or allocation documents; court judgment; vesting assent; probate or letters of administration; customary documents; or other documents establishing the history of the property. A buyer should not simply look at the latest document. The history of the title may reveal defects or competing interests. For example, if A transferred the property to B and B is now selling to C, it may be necessary to investigate how A acquired the property in the first place. A defective root of title can affect subsequent transactions. 3. Conduct an Official Search One of the most important stages of property due diligence is conducting an appropriate search at the relevant land registry. For property in Lagos, a legal practitioner can conduct the necessary searches and examine the records available from the relevant authorities. The purpose of the search is to establish matters such as: whether the title exists in the relevant records; the registered owner or holder of the interest; the nature of the interest; whether the property has been transferred; whether there are registered encumbrances; whether there is a mortgage or charge; whether there are restrictions affecting the property; and other matters disclosed by the registry records. A search should be carried out before substantial payment is made, rather than after the transaction has already been completed. 4. Investigate Government Acquisition A property may appear perfectly normal on physical inspection and still be affected by government acquisition. This is particularly important in Lagos, where land may be affected by various government schemes, infrastructure projects, committed acquisitions or other planning considerations. A buyer should therefore investigate whether the property falls within an area affected by government acquisition or other restrictions. This is one reason why merely asking the seller for a Certificate of Occupancy is insufficient. The legal status of the particular property must be independently investigated. 5. Compare the Documents With the Physical Property Legal due diligence should not be conducted entirely from a desk. The property should also be physically inspected. The buyer should compare the description contained in the title documents with the actual property. Among other things, the investigation should consider: location; boundaries; dimensions; access; adjoining properties; existing structures; occupation;
Personal Liability of Directors for Company Debts and Wrongful Acts in Nigeria
One of the fundamental principles of company law is that a company is a separate legal entity from its shareholders and directors. Consequently, the fact that a person is a director does not ordinarily make that person personally liable for every debt incurred by the company. However, limited liability does not give directors immunity from personal liability. There are circumstances in which a director can be held personally responsible for a company’s debt, loss or wrongful act. These circumstances arise from legislation, the director’s own conduct, personal guarantees, breach of fiduciary duties, fraud and certain situations involving insolvency or misuse of company property. The Companies and Allied Matters Act 2020 (CAMA 2020) contains specific provisions dealing with the personal liability of directors and officers. In particular, section 316 imposes personal liability in specified circumstances where a company receives money or property for a specific purpose or project and, with intent to defraud, fails to apply it for that purpose. This article explains when a director can be personally liable for a company’s debt or wrongful acts in Nigeria, and when the separate legal personality of the company protects the director. Is a Director Personally Liable for a Company’s Debt in Nigeria? Ordinarily, no. A company incorporated under CAMA is a separate legal person. A debt incurred by the company is therefore ordinarily the debt of the company, not automatically the personal debt of its directors. The mere fact that a person is a director does not make that person a guarantor of the company’s obligations. This principle is important because the company structure exists precisely to separate the company’s liabilities from the personal liabilities of its members and officers. However, there are important exceptions. When Can a Director Be Personally Liable for a Company’s Debt? A director can become personally liable where, for example: the director personally guaranteed the company’s obligation; the director acted outside the protection of the corporate structure in circumstances recognised by law; the director committed fraud; the director misapplied company money or property; CAMA expressly imposes personal liability; the director breached a personal statutory or fiduciary obligation; the company’s business was carried on fraudulently or recklessly in circumstances covered by insolvency provisions; or the director personally committed the wrongful act giving rise to the claim. The precise basis of liability must therefore be established. Does a Director Become Liable Simply Because He Signed a Company Contract? No. Where a director signs a contract expressly on behalf of a company and acts within the authority of the company, the contractual obligation ordinarily belongs to the company. CAMA recognises the distinction between the company and its officers. Acts undertaken by the company’s authorised organs in the ordinary course of business can constitute acts of the company itself. A creditor therefore cannot automatically convert a company debt into the personal debt of a director merely because the director signed the contract. The position changes where the director signs in a personal capacity, gives a personal guarantee or commits an independent wrong. What Happens If a Director Personally Guarantees a Company Loan? This is one of the clearest circumstances in which a director can become personally liable. Suppose a bank lends ₦100 million to ABC Limited and the managing director signs a personal guarantee securing repayment. If ABC Limited defaults and the terms of the guarantee make the director liable, the bank can enforce the guarantee against the director in accordance with its terms. The liability in that situation does not arise merely because the person is a director. It arises because the director separately assumed personal liability as a guarantor. Can a Bank Sue a Director for a Company Loan? Yes, where the director has a legally enforceable personal obligation, such as a guarantee. The bank must establish the basis of the director’s personal liability. A director who has not guaranteed the company’s debt does not ordinarily become personally liable simply because he or she participated in obtaining or approving the company’s loan. The loan agreement, guarantee, security documents and circumstances of the transaction must therefore be examined. Can a Director Be Personally Liable for Fraud Committed Through a Company? Yes. The corporate structure does not protect a director from personal liability for the director’s own fraudulent conduct. For example, where a director deliberately makes fraudulent representations to obtain money personally or causes company funds to be diverted through fraudulent conduct, the director can face personal consequences. The fact that the fraudulent conduct was carried out through a company does not transform the director’s own wrongful conduct into an act for which the director is automatically immune. Can a Director Be Personally Liable for Misusing Company Money? Yes. Directors occupy fiduciary positions and are required to act in the interests of the company. CAMA provides that directors are trustees of the company’s money, property and powers and are required to account for money over which they exercise control and refund money improperly paid away. A director who improperly diverts or misapplies company money can therefore face personal liability to the company. This is different from saying that every company debt becomes a director’s personal debt. The liability arises from the director’s own breach of duty or wrongful handling of company property. What Does Section 316 of CAMA 2020 Provide? Section 316 is particularly important. It addresses circumstances in which a company: receives money by way of a loan for a specific purpose; receives money or other property as an advance payment for the execution of a contract or project; or with intent to defraud, fails to apply the money or property for the purpose for which it was received. Where the statutory conditions are satisfied, every director or other officer in default is personally liable to the person from whom the money or property was received for a refund of the money or property not applied for the specified purpose. The company’s own liability is not extinguished. This is an important statutory exception to the ordinary rule of
How to Remove a Director from a Nigerian Company
The position of a company director is not necessarily permanent. Under Nigerian company law, a director can be removed before the expiration of his or her tenure where the statutory requirements for removal are satisfied. The Companies and Allied Matters Act 2020 (CAMA 2020) provides a specific procedure for removing a director from office. The procedure is important because a company cannot simply remove a director informally or disregard the director’s statutory right to respond to the proposed removal. Section 288 of CAMA 2020 provides that a company may remove a director before the expiration of the director’s period of office by ordinary resolution, notwithstanding anything contained in the company’s articles or an agreement with the director. However, the Act requires special notice and gives the affected director an opportunity to be heard. This article explains how a director can be removed from a Nigerian company, who can initiate the process, the procedure that must be followed and what happens after removal. Can a Director Be Removed From a Nigerian Company? Yes. A company can remove a director before the expiration of the director’s tenure. Section 288(1) of CAMA 2020 expressly provides that a company may, by ordinary resolution, remove a director before the expiration of the director’s period of office. This power applies notwithstanding anything contained in the company’s articles or in an agreement between the company and the director. The existence of an employment contract or other agreement with a director therefore does not, by itself, prevent the company from exercising the statutory power of removal. However, removal from the office of director and termination of an employment relationship are separate legal questions. A director who is also an employee can have contractual rights that require separate consideration. What Resolution Is Required to Remove a Director? The removal of a director under section 288 requires an ordinary resolution. An ordinary resolution is generally passed by a simple majority of members entitled to vote and voting at the meeting, subject to the applicable provisions of CAMA and the company’s constitution. The important point is that the company does not require a special resolution merely to remove a director under section 288. However, the company must comply with the separate requirement of special notice. What Is Special Notice? Special notice is a statutory notice required for specified corporate resolutions. Section 288(2) expressly requires special notice of a resolution to remove a director, or to appoint another person in place of the director proposed to be removed. The requirement protects directors from being removed without adequate procedural notice. Who Gives the Special Notice? The members proposing the removal must give the required notice to the company. The company’s subsequent responsibility is to communicate the proposed resolution to the director concerned and the members in accordance with CAMA. The procedure should therefore not be treated as an ordinary board decision. A board of directors cannot simply pass a resolution declaring that another director has been removed where the statutory procedure under section 288 is applicable. Does the Director Have to Be Told About the Proposed Removal? Yes. Once the company receives notice of the intended resolution to remove a director, the company must immediately send a copy of the notice to the director concerned. This applies whether or not the director is also a member of the company. The director is then entitled to be heard on the resolution at the meeting. This is an important procedural safeguard. Does a Director Have a Right to Defend Himself? Yes. The director proposed to be removed has a statutory right to make representations concerning the proposed removal. The director is also entitled to be heard orally at the meeting where the resolution is considered. The purpose is to ensure that members have an opportunity to consider the director’s response before voting on the proposed removal. Can the Director Make Written Representations? Yes. Where the director makes written representations concerning the proposed removal and requests that they be communicated to the company’s members, the company is required to take the steps prescribed by section 288. The representations must not exceed a reasonable length. Subject to the statutory requirements concerning timing, the company must state in the notice of the resolution that representations have been made and send copies of the representations to members who are being sent notice of the meeting. This prevents the company from presenting only one side of the dispute to shareholders. What If the Company Fails to Circulate the Director’s Representations? CAMA provides protection for the director where the representations are not circulated because they were received too late or because of the company’s default. The director can require the representations to be read out at the meeting, without prejudice to the director’s right to be heard orally. However, the court can intervene where it is satisfied that the statutory right concerning representations is being abused. Does the Company Need a Court Order to Remove a Director? No, not ordinarily. Where section 288 applies, removal is effected through the company’s statutory corporate procedure. The company does not ordinarily need to obtain a court order merely to exercise the power of removal. The essential requirements are compliance with CAMA, including the special-notice requirement and the ordinary resolution. However, a court can become involved where the validity of the removal is challenged or where another legal dispute arises concerning the process. Can the Board of Directors Remove Another Director? This requires an important distinction. The statutory power under section 288 is a power of the company exercised through an ordinary resolution, rather than simply a power of the board to remove one of its members. Therefore, where the objective is to remove a director from the office of director under section 288, the statutory procedure involving the members’ resolution must be followed. The board should not substitute an internal board decision for the statutory removal procedure. Can Shareholders Remove a Director? Yes. Shareholders can exercise the company’s power to remove a director
Minority Shareholder Rights Under Nigerian Law
Owning a minority shareholding in a Nigerian company does not mean that a shareholder has no legal protection. Although majority shareholders generally have greater voting power, Nigerian company law recognises that majority control cannot be used without legal limits to unfairly prejudice minority shareholders. The Companies and Allied Matters Act 2020 (CAMA 2020) provides various protections and remedies for members of a company, including remedies against oppressive, unfairly prejudicial or discriminatory conduct. Minority shareholders can therefore challenge certain decisions and conduct that unlawfully interfere with their rights or unfairly prejudice their interests. This article explains the principal minority shareholder rights in Nigeria, the situations in which those rights can be enforced and the remedies available under Nigerian company law. Who Is a Minority Shareholder? A minority shareholder is generally a shareholder who does not possess sufficient voting power to control the company’s decisions. For example, if four shareholders collectively own 80% of a company’s shares and another shareholder owns 20%, the 20% shareholder is a minority shareholder. Being a minority shareholder does not mean that the shareholder has fewer legal rights simply because the shareholder has fewer shares. The shareholder retains the rights attached to the shares held, subject to the company’s constitution and applicable law. What Rights Does a Minority Shareholder Have in Nigeria? Depending on the circumstances, minority shareholders have rights relating to: voting; participation in general meetings; receiving notices of meetings; receiving dividends when lawfully declared; receiving relevant corporate information; inspection of certain company records; challenging unlawful corporate acts; protection against oppressive conduct; protection against unfairly prejudicial conduct; bringing derivative proceedings in appropriate circumstances; seeking relief where their membership rights have been infringed; and receiving their lawful entitlement when the company is wound up. The precise scope of each right depends on CAMA, the company’s articles and the circumstances of the particular company. Does a Minority Shareholder Have Voting Rights? Yes. A minority shareholder is entitled to exercise the voting rights attached to the shares held, subject to the company’s constitution and the applicable provisions of CAMA. For example, a shareholder holding 20% of the ordinary shares does not lose the right to vote merely because another shareholder owns 80%. The majority shareholder will ordinarily have greater voting power, but the minority shareholder’s voting rights remain legally recognised. Can Majority Shareholders Do Whatever They Want? No. Majority voting power is not an unlimited licence to act unlawfully or oppressively. The majority can ordinarily determine matters according to the voting structure of the company, but decisions must still comply with: CAMA 2020; the company’s memorandum and articles; applicable resolutions and procedures; directors’ duties; and other relevant laws. Where majority control is exercised in a manner that unfairly prejudices minority shareholders, the minority can seek appropriate legal relief. Can a Minority Shareholder Challenge an Unlawful Company Decision? Yes. A minority shareholder can challenge an unlawful decision where the shareholder has a legally recognised basis for doing so. The appropriate remedy depends on the nature of the decision. For example, a shareholder can challenge a corporate act that violates the shareholder’s personal rights or seek appropriate relief where the company’s affairs are being conducted in an oppressive or unfairly prejudicial manner. A shareholder should, however, distinguish between an unlawful decision and a decision that the shareholder simply considers commercially unwise. Courts do not ordinarily substitute their commercial judgment for that of properly constituted corporate organs. What Is Minority Shareholder Oppression? Minority shareholder oppression occurs where the affairs of a company are conducted in a manner that unfairly subjects a member or members to oppressive treatment. CAMA 2020 provides a statutory remedy where the company’s affairs are conducted in a manner that is oppressive, unfairly prejudicial or unfairly discriminatory against a member or members. This protection is particularly important where majority shareholders use their control of the company to unfairly disadvantage minority shareholders. What Is Unfairly Prejudicial Conduct? Conduct can be unfairly prejudicial where it causes unfair harm to the interests of a shareholder in circumstances recognised by law. Examples can include: exclusion from management contrary to established arrangements; diversion of company benefits to majority shareholders; manipulation of shareholding; withholding information improperly; using corporate powers to unfairly dilute a minority interest; treating similarly situated shareholders differently without lawful justification; or using control of the company to advance the interests of the majority at the expense of the minority. Whether particular conduct is oppressive or unfairly prejudicial depends on the facts. Can Majority Shareholders Dilute a Minority Shareholder’s Shares? A company can lawfully issue additional shares in accordance with CAMA and its constitution. However, the power to issue shares must not be abused for an improper purpose. A purported share issue designed principally to destroy a minority shareholder’s voting power or unfairly alter control can be challenged where the facts establish a legal basis for doing so. A minority shareholder who suspects an improper dilution should promptly obtain the relevant corporate records and examine the circumstances surrounding the share issue. Can a Minority Shareholder Challenge a Transfer of Shares? A shareholder can challenge a share transfer where there is a legal basis for doing so. The company’s articles and CAMA can regulate transfers, particularly in private companies. A minority shareholder should examine: the articles of association; the share transfer documentation; board resolutions; relevant shareholder agreements; pre-emption provisions; the company’s register of members; and the circumstances surrounding the transfer. The mere fact that a shareholder dislikes a transfer does not make it unlawful. Does a Minority Shareholder Have a Right to Dividends? A shareholder does not acquire an automatic right to a dividend merely because the company has made a profit. Dividends must be lawfully declared in accordance with CAMA and the company’s constitution. Once a dividend is properly declared and becomes payable, the shareholder’s entitlement becomes enforceable in accordance with the applicable law. A majority shareholder cannot simply divert a lawfully declared dividend belonging to a minority shareholder. Can Majority Shareholders Refuse to Pay Minority Shareholders Dividends? The answer depends on