It is a trite and settled principle under the Nigerian legal system that for a lawsuit to be validly instituted, the Plaintiff must have the capacity to initiate the same. The right to initiate a suit can be challenged, and invariably when challenged, it is a fundamental issue that goes to the competence of the Court/jurisdiction to entertain the suit.

As regards to the commencement of a lawsuit in the name of or on behalf of a corporate entity, it is imperative to note that the requisite authorization of the corporate entity, is a precursor and fundamental requirement. Generally, once a suit has been commenced in the name of a corporate entity, there is a rebuttable presumption of the requisite authority to commence such action until same is challenged by an adverse party. The pertinent question that comes to mind is what will suffice as requisite authority under the Nigerian Case laws and the Companies and Allied Matters Act, 2020 (CAMA, 2020)?

Before we delve into the substance of our discussion, it is important to lay emphasis on the importance of this discourse. It is essential to note that as much as a lack of requisite authority may not in all situations result to the dismissal of a suit, however, it is enough ground for the Court to strike out a suit thereby frustrating, delaying and wasting the efforts of a company to gain justice or get remedy for an injury suffered.

Very recently, precisely on 28 April 2023, the Court of Appeal in the case of Hasal Microfinance Bank Ltd v. BDA Ltd & Anor (2023) LPELR-60313 (CA) was faced with the question as to whether by law, the resolution of the board of directors of a company or members in general meeting is a pre-requisite to an action being filed in Court?¹ Whilst deciding this question placed before it, the Court of Appeal interpreted the provisions of sections 63(3) & (5), 65 and 66(1) of CAMA 1990 and held that the provisions of the law “are effulgent that the institution of legal proceeding in Court by a company has to be with authorization or resolution of the board of directors or the resolution of members in a general meeting.” The Court of Appeal aligned with the findings of the lower Court that the wider implication is that when it comes to a corporate body, particularly as regards to its proprietary interest, there must be a board resolution instructing the institution of an action in Court. A mere letter from an officer of the company will not suffice unless and except such letter of instruction is subsequently ratified by the Board either before or in the course of the pendency of the suit.

Hence, the recent position of the Court of Appeal is that an authority vide a resolution of the board of directors or members in a general meeting is the requisite pre-condition for commencement of a suit on behalf of a company.

However, the above recent decision of the Appellate Court slightly contradicts the position of the Supreme Court in the Haston Nigeria Ltd v. ACB Plc. (2002) LPELR – 1359(SC), the Apex Court affirmed the principle that authority is a precursor to the initiation of a suit on behalf of a company, yet when deciding whether the absence of a resolution authorizing the institution of an action on behalf of the company will render the suit a nullity, Hon. Justice of Michael Ekundayo Ogundare, J.S.C held that it is important for a company to have the requisite authorization, and relying on the provisions of sections 65, 244(1) and 279 of CAMA 1990, the Apex Court noted that the promoter of the instant suit being a chairman/director and the sole signatory of the company’s account, had the express and implied authority to act in the matter concerning the company’s account. Notwithstanding, the absence of a resolution, the mere fact that the promoter of the suit was a director of the company who in the manner and course of his duty is responsible for the company’s account, the Apex Court held that the suit was rightly commenced and competent. The underlying reasonings of this decision qualifying and validating the authorization are as follows:

1. A director/ chairman of the board has the duty to manage the affairs and manage the business of the company under section 244(1) of CAMA 1990;
2. A director by section 279(3) of CAMA 1990 owes the duty to act in the best interest of the company as to preserve its assets; and
3. By section 65 of CAMA 1990, the director acted in the express authority bestowed upon him by the board of directors to manage the company’s account.

It is essential to state that notwithstanding that the decision of the Court of Appeal is later in time, the decision of the Apex Court in Haston’s case remains valid and subsisting, as the decision of the Court of Appeal cannot take precedence over that of the Supreme Court which is the apex Court in Nigeria.

This discussion cannot be finely concluded without reference to the statutory position of the current law on corporate matters which is CAMA 2020. The position of the Nigeria statutory law can be deduced by a combined reading of Sections 89 and 90 of CAMA, 2020 (which is similar to sections 65 and 66 of CAMA, 1990 relied upon by the Courts) and it aligns with both positions the Courts i.e., the Court of Appeal and the Supreme Court.

Hence, in view of the recent and subsisting case laws and statutory provisions of CAMA 2020, the requisite pre-condition of an authority to institute a suit in the name of a company will be satisfied in any of the following circumstances:

1. Resolution of the board of directors
2. Resolution of members in a general meeting (sections 87(5)(b) and 89 of CAMA 2020)
3. By the Managing Director (section 89 of CAMA 2020)
4. Officer or agent of the company acting under the express/implied authority of the board of directors, members in a general meeting and the managing director (section 90(1)(a) of CAMA 2020)
5. Officer or agent of the company acquiesced by the board of directors, members in a general meeting and the managing director (section 90(2) of CAMA 2020).

Taking a cue from the decision of the Court of Appeal in the Hasal’s case, it is advisable that, before a legal action or proceeding is commenced in the name of a corporate entity or on its behalf, the suit sshould be included in the agenda of the board of directors’ meeting and same authorized and/or ratified by a resolution passed at the said meeting. By this, companies are protected from technical issues that can delay the prompt resolution of an action commenced in the name of a company or on its behalf.