The federal government and the 11 electricity distribution companies are heading for a collision over the plan by the Federal Ministry of Power, Works and Housing to inaugurate and appoint two non-executive directors for each of the 11 Discos, THISDAY has learnt.
THISDAY gathered that the planned inauguration, which the discos have described as illegal, was supposed to take place on Monday at the Transmission Company of Nigeria (TCN) Building in Abuja but the event was abruptly cancelled at the venue and suspended indefinitely.
A chief executive officer of one of the Discos told THISDAY Monday on condition of anonymity that the planned inauguration was an act of illegality and not consistent with extant regulations.
He said the federal government might have cancelled the event when it realised its illegality at the last minute.
“The appointment of non-executive directors violates the Companies and Allied Matters Act (CAMA); Memorandum of Association and Articles of Association of the Discos; and the acquisition and privatisation documents executed by the Discos, the investors and the Bureau of Public Enterprise, that is, the shareholders’ agreements,” he said.
The CEO argued that CAMA is the principal statute regulating companies in Nigeria, stressing that CAMA specifies who has the power to appoint directors and the procedure for such appointments.
Citing Section 248 of CAMA, he added that it is the members in a general meeting or in the event of a casual vacancy, the board of directors of a company that has the powers to appoint new directors, according to Section 249 of CAMA.
“While we note that the BPE and MOFI (Ministry of Finance) are shareholders of the company, they may not unilaterally appoint new directors,” he argued.
According to him, this power can only be exercised collectively by a resolution decided by a simple majority vote of the shareholders present, in person or by proxy, at the general meeting.
He added that if a poll is demanded, this power can only be exercised by the number of votes for each ordinary share held by the shareholders voting in favour of the resolution.
“In addition, any person empowered by the Memorandum of Association and Articles of Association of a company may appoint directors in line with Section 41 (3)). Memorandum of Association and Articles of Association of each of the Discos do not give the President or the Ministry the power to appoint directors of Disco. So, the purported appointment of non-executive directors to the board of each Disco is not valid. The Memorandum of Association of Discos provides that unless determined by members in general meeting, directors shall not be more than 7 Directors. Section 249(3) CAMA says directors cannot exceed the number allowed by the articles,” he explained.
He also stated that the planned appointment of non-executive Directors by the federal government is not consistent with the Shareholders Agreement (SHA) between Bureau of Public Enterprise (BPE), Ministry of Finance (MOFI), investor and Discos
“SHA states that the number of directors in the Disco shall be no more than seven according to Clause 5.1. In addition, the SHA also provides that the investor shall nominate six directors, while BPE and MOFI shall nominate one in line with Clause 5.2. Any covenant adjustment to Clause 5.2 has to be in accordance with Clause 15.14 which requires that variations will only be valid if made in writing and signed by all parties. The proposed appointment is inconsistent with the provisions of the SHA,” he added.
He acknowledged that the World Bank is in partnership with the federal government on the Power Sector Recovery Plan.
He urged the World Bank neither to condone nor partake in what the discos described as “monumental illegality that is capable of discouraging potential foreign investors into the Nigerian power sector”.