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Companies and Allied Matters Act 2020 · Part B · Chapter 11

Section 305 Duties of directors

(1)
A director of a company stands in a fiduciary relationship towards the company and shall observe utmost good faith towards the company in any transaction with it or on its behalf.
(2)
A director owes fiduciary relationship with the company where—
(a)
a director is acting as agent of a particular shareholder ; or
(b)
though, he is not an agent of any shareholder, such a shareholder or other person is dealing with the company’s securities.
(3)
A director shall act at all times in what he believes to be the best interests of the company as a whole so as to preserve its assets, further its business, and promote the purposes for which it was formed, and in such manner as a faithful, diligent, careful and ordinarily skilful director would act in the circumstances and, in doing so, shall have regard to the impact of the company’s operations on the environment in the community where it carries on business operations.
(4)
The matters to which a director of a company is to have regard in the performance of his functions include the interests of the company’s employees in general, as well as the interests of its members.
(5)
A director shall exercise his powers for the purpose for which he is specified and shall not do so for a collateral purpose, and the power, if exercised for the right purpose, does not constitute a breach of duty, if it, incidentally, affects a member adversely.
(6)
A director shall not fetter his discretion to vote in a particular way.
(7)
Where a director is allowed to delegate his powers under any provision of this Act, such a director shall not delegate the power in such a way and manner as may amount to an abdication of duty.
(8)
No provision, whether contained in the articles, resolutions of a company, or any contract, shall relieve any director from the duty to act in accordance with this section or relieve him from any liability incurred as a result of any breach of the duties conferred upon him under this section.
(9)
Any duty imposed on a director under this section is enforceable against a director by the company.
Cite as: Companies and Allied Matters Act 2020, section 305

What this section means

From the guide: Directors’ duties under CAMA 2020: good faith, conflicts and care

  • A director stands in a fiduciary relationship with the company and must act in utmost good faith (section 305(1)).
  • A director stands in a fiduciary relationship with the company and must observe utmost good faith (section 305(1)).
  • He must act in what he believes to be the best interests of the company as a whole, as a faithful, diligent, careful and ordinarily skilful director would, and have regard to the company’s impact on the environment in the community where it operates (section 305(3)).
  • The interests of employees in general count as well as those of members (section 305(4)).
  • Powers must be used for the purpose for which they are given, not a collateral one (section 305(5)).
  • A director must not fetter his discretion to vote in a particular way, and must not delegate in a way that amounts to abdicating his duty (section 305(6) and (7)).

Read the whole subject

Source: Companies and Allied Matters Act 2020 (Act No. 3 of 2020), Official Gazette No. 124, Lagos, 10 August 2020. General information, not legal advice.