Legal Drama, Music Business

Breaking News: Legal ‘Storm’ Brewing as Obi Asika’s Storm 360 “Fires” Company Director Olisa Adibua #NigerianCompanyLaw

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I’d be lying if I said I liked or was a fan of Olisa Adibua. I  do not care for the guy. This is solely based on his violent attack against a 99.9 Beat FM employee. The facts were aggregious and that employee was ultimately terminated while Adibua continues as an employee at the radio station. I have a problem with this and have been upfront that this kind of violence in the work place should not be tolerated and Adibua should have been  fired. The incident left a sour taste in my mouth. However, my liking or not liking of Adibua has no bearing on the case here. Indeed there is a need for a company to comply with the law, if it will remove its Director from its company. Accordingly, if Olisa Adibua’s statement issued to the press below is accurate, then this is just the beginning of what should be a drawn out bitter legal dispute between Adibua, Storm 360 & Obi Asika, unless the parties reach a settlement quickly.

I speak of the breaking news that Obi Asika has allegedly “sacked” or as we say in the USA “fired” Adibua as a director at Storm 360. We will get to the story soon. But before we do, assuming Asika can successfully remove Adibua as a director of the company, he still has not gotten rid of Adibua completely. Adibua is a co-founder of Storm and a shareholder in the company holding 20% of the company’s shares.  Shareholders are the legal owners of a company. So, I’m thinking to myself, “what’s really good?”

In any event, on to this case. What’s the latest legal fracas out of Nigeria’s music industry?

Storm 360’s Obi Asika allegedly released the following statement today circulating online ( I underline key points):

“Storm 360 confirms that Mr Olisa Adibua is no longer a director of the company. This decision was reached at a properly constituted company EGM. Mr Adibua was a non-executive director of Storm 360 and has never been involved in the management and operations of Storm 360. The company will not engage in public discussions about its internal business operations. Storm is facing forward and continues to build upon its position as a leading light in Nigeria’s entertainment industry and community.
Thank you, Board and Management of Storm 360 – Obi Asika.”

Olisa Adibua allegedly responded with his press release below also circulating online:

“‘As a director and founding shareholder of storm 360 Ltd, my attention has been drawn to certain unfounded statements in the media about my alleged removal as director of the company.

There is therefore need to clear the air and put right the mis-stated facts leading to the said publication.

Sometime in 2011 my attention as a director of the company was drawn to certain huge and unauthorized withdrawals running on the company’s Naira and Dollar accounts. Not having been supplied any explanation and having noted the fact that the debits were to the benefit of unauthorized persons, the matter was reported to d police for investigation.

All efforts to get the other members of the board to assist in the investigations proved futile and while the investigations were on-going, a meeting of the company was hastily called in which no notice was served on me and in which the deliberations was conducted in the most clandestine manner.

For failing to comply with legal requirements for such meeting, my solicitors have commenced the necessary legal process to contest the glaringly invalid removal and set same aside.

The investigations into the fraudulent misappropriation of the company’s funds are still on and upon conclusion will reveal all the perpetrators of the fraud against the company which I and the other well-meaning members of the company have striven to build.

The public is advised to ignore such unabashed campaign of calumny as both criminal investigations and judicial proceedings are on-going which will eventually set the records straight. For the avoidance if doubt, I still remain a member of the board of the company and any claims to the contrary are completely false – Olisa Adibua”

AML LEGAL COMMENTARY

The legal drama coming out of Nigeria never stops, does it? Wow! Serious legal drama here. If you don’t appreciate what’s going on here, let me help you really appreciate it.

What is the Area of Law? Nigerian Company Law

What Actual Statute Governs?  Companies and Allied Matters Act Chapter 59 Laws of the Federal Republic of Nigeria 1990 (“CAMA”).

What are the Key Legal Issues here?

  1. Can Obi Asika and other members remove Olisa Adibua from his role as a director at its “Extra Ordinary General Meeting” aka EGM meeting?
  2. If Olisa Adibua can be removed, did Asika and his crew follow the law with compliance of notice requirements and the necessary due process to essentially “fire” Adibua?

Adibua has already given us heads up in his statement that this is what his lawyers will be fighting about. Also, Adibua is saying the answers to both questions is “no.” Based on the reported facts we have, is he right?

Let’s see.

When Don Jazzy and D’Banj broke up, I discussed company law and explained to you all that whether under Nigeria or U.S Laws, a company is a legal entity with its own independent identity from its owners/shareholders. Even though a company has its own independent legal identity, it still has to be managed. So, who are the boys and girls that manage these companies?

There are several persons that manage a company. They are the primarily the directors, the officers and agents.

What exactly does a director do? Who is a director?

Under §224(1) and §244(2) of CAMA, a director is a person duly appointed by the company to direct and manage the business of the company. The director helps with overseeing the day to day management of the company.

How Many Types of Directors Does a Company Have?

There are six types of directors under CAMA:

  1. Directors per se;
  2. Shadow Directors;
  3. Alternate Directors;
  4. Workers Directors;
  5. Executive Directors; and
  6. Non-Executive Directors.

Who are Non-Executive Directors, Per Asika’s Statement?

An article on Business Day Online from March 2011 does a good job of defining it albeit in a different context.

Executive and Non-Executive Directors
The Code (Corporate Governance Code) further attempts to clear the nebula and obscurity surrounding the duties and relationship between the Executive and Non-Executive Directors of a company. It clearly spells out the working relationship between the two, while outlining the distinction between them. This is a welcome development as it tends to clarify a confusion which may otherwise arise from a shallow interpretation of the Supreme Court’s sound reasoning in Longe V. First Bank of Nigeria Plc (2010) 6 NWLR (Pt 1189) 1 that executive and non-executive directors are both directors under the law as CAMA has not made a distinction between them.

The Code recommends that executive directors should be persons knowledgeable in relevant areas of the company’s activities. They should not be involved in the determination of their remuneration and should not be entitled to sitting allowances or other directors’ fees paid to non executive directors. On the other hand, non executive directors are to be provided with a conducive environment for the effective discharge of their duties and must be given adequate and comprehensive information on all board matters in a timely manner.” See Article.

What are the Duties of a Director to the Company?

This is an important question because you see Adibua explaining himself away. He is essentially saying, I have upheld my part in my role as a director. Someone is stealing or misappropriating company funds. I may be someone who can’t control my temper and beat people up but I am not a dishonest person. I need to find out who is fraudulently using company funds. My attempt to do so has been met with opposition and worse, many in my company ganging up to unlawfully kick me out of my position. So, to really get what he is saying, it is important to know what his duties are:

Directors have a:

  1. Fiduciary duty towards the company i.e. they are placed in a position of trust and as such should not breach that trust or do anything that harms the company. See CAMA §279(2). Do note that the duty can be extended, in certain instances, to the shareholders and/or investors;
  2. Duty to act in good faith. See CAMA §279(3);
  3. Duty to Act for Proper Corporate Purpose See CAMA §279(5);
  4. Duty not to fetter discretion (hashed out under case law);
  5. Duty to avoid conflict of interest See CAMA §280; and
  6. Duties of care, skill and diligence See CAMA §282.

Can a Company Remove a Director?

Yes. The shareholders of a company have a  right to remove a director, especially where there is misconduct that undermines the best interest of the company.

When & How Do You Remove a Director?

 §262 of CAMA spells out how to remove a Director.

The company needs an ordinary resolution before the expiration of the period of that director’s time in office. This is despite the articles of organization or an agreement providing otherwise.

What is an Ordinary Resolution? It is a resolution passed by a simple majority of votes cast by its members with the power to do so (whether in person or by proxy) at a general meeting.

CAMA Protects Directors With Basic Due Process Rights: You cannot just remove a director anyhow.  §259 of CAMA says:

  1. The company must give notice to that Director that you seek to remove.
  2. The company must also be explicit and clear on the basis of why it wants to remove the director.

It breaks down as follows under CAMA:

Step one – A company must call a general meeting.

Step two  – A company must have an ordinary resolution prepared i.e. we no longer want you here. Pack your bags and keep it moving.

Step three –A company must have the appropriate person in the company draft a SPECIAL NOTICE of the ordinary resolution and give it to the company.

Step four – Once  the company receives notice of the intended resolution to remove a director, then it MUST serve a copy of that notice to the director.

Step five – The director under CAMA §262(2) then has a right to be heard i.e. due process right to explain why he should not be kicked out.

If the rules are not followed, then the so called removal is NULL and VOID. This is Adibua’s position.

Adibua from what I can gather from his statement is basically saying STORM 360’s Obi Asika, and the rest of the company members who want him out, did NOT comply with therules. It is why he has engaged his lawyers and wants to make them follow the law, according to his statement.

What Kind of Claims Can Adibua Bring Against Storm 360 & Obi Asika et al. Assuming this is True?

As a director, based on the limited facts released so far, if true, Adibua might be able to bring a claim of breach of contract, among other claims. He can also ask to be compensated for any damages he may have suffered including damage to his reputation since Asika also released the aforementioned statement saying he was removed.

One final thing on the “EGM” meeting mentioned by Obi Asika. If you run a company, the meetings you have with your members is where you hear people say what they want to say, vote and pass resolutions. So, meetings are very important. Under CAMA, there are three key meetings held by a company. They are statutory meetings, annual general meetings and extraordinary aka EGM meetings.

Statutory meetings must take place within 6months after you form your company. At least 21days before this meeting, directors have to forward a statutory report that has several important things shareholders would want to know about their business.

Annual meetings are held each year and not more than 15months should elapse the date of one annual general meeting and the next.

Finally, there is the extraordinary meeting which is more like an emergency meeting, It is meant to deal with urgent matters. Even though an extraordinary meeting was called here, it still seems per the language of the law, that Asika would still be required to give notice to Adibua per my explanation above.

CONCLUSION

There is a lot going on here and in the coming days and weeks ahead, it may or may not unfold. Either way, it doesn’t take a genius to read between the lines that there is intense distrust, anger and strong feelings of betrayal that has built up over time and now exploded in the Storm 360 camp. The best resolution in situations like these, is not to further aggravate things but instead seek the help of mediators (mediation through a court system) to sort things out, especially given there are family ties involved. However, if all else fails, then the courtroom is definitely the place for legal mudslinging and indeed, may the best man win.

Cheers,
Uduak
@Uduaklaw

Photocredit: Thenetng.com

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Africa Music Law™

AFRICA MUSIC LAW™ (AML) is a pioneering music business and entertainment law blog and podcast show by Fashion and Entertainment Lawyer Ms. Uduak Oduok empowering the African artist and Africa's rapidly evolving entertainment industry through brilliant music business and entertainment law commentary and analysis, industry news, and exclusive interviews.

Credited for several firsts in the fashion and entertainment industry, Ms. Uduak is also a Partner and Co-Founder of Ebitu Law Group, P.C. where she handles her law firm’s intellectual property law, media, business, fashion, and entertainment law practice areas. She has litigated a wide variety of cases in California courts and handled a variety of entertainment deals for clients in the USA, Africa, and Asia.

Her work and contributions to the creative industry have been recognized by numerous organizations including the National Bar Association, The American University School of Law and featured in prestigious legal publications in the USA including ABA Journal and The California Lawyer Magazine. She is also an Adjunct Professor at the prestigious Academy of Arts University in San Francisco.
For legal representation inquiries, please email (uduak@ebitulawgrp.com). For blog related inquiries i.e. advertising, licensing, or guest interview requests, please email (africamusiclaw@gmail.com). Thank you for visiting Africa Music Law™.

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