The director position in the company is considered being most important because we all know that a company is only a legal person, unlike a living human being. In order to enable a company to achieve its objective and growth, it is necessary to depend on some agency, known as the board of directors.
Members of the Board of Directors of the company are known as directors, who manage the company. In brief, we can say that Directors are the brain of the company.
Your Comprehensive Guide on How to Become a Director of a Company
This guide consolidates the essential information for anyone aspiring to this critical position, covering the role, responsibilities, path to appointment, and necessary skills.
What is a Company Director?
A company director is an individual appointed to manage and oversee a company’s affairs. Directors sit on the Board of Directors, which is responsible for making strategic decisions, ensuring compliance with the law, and protecting shareholders’ interests.
Types of Directors
There are two main types of directors:
- Executive Directors: These are full-time employees involved in daily operations, such as a Managing Director or CEO. They handle management and report to the board.
- Non-Executive Directors (NEDs): Independent advisors who provide oversight, strategic guidance, and challenge without day-to-day involvement. They ensure good governance and often bring specialized expertise.
Under CAMA 2020, public companies must have at least three independent NEDs. All directors, executive or non-executive, share the same legal duties.
The Core Responsibilities and Statutory Duties of Directors
A director is tasked with promoting the success of the company in the interests of its members (shareholders), while also considering stakeholders like employees, customers, suppliers, and the community.
General Statutory Duties
Directors are fiduciaries; they must act honestly, responsibly, and in good faith. Key duties include:
- Act Within Powers – Directors must operate within the company’s Memorandum and Articles of Association (or constitution).
- Promote the Success of the Company – Decisions should advance the long-term growth of the business for shareholders, while considering employees, customers, suppliers, creditors, and the wider community.
- Exercise Independent Judgment – Directors must think and decide freely, without undue influence or personal bias.
- Apply Care, Skill, and Diligence – They must perform their role to a standard expected of a reasonably diligent professional with their level of knowledge and expertise.
- Avoid Conflicts of Interest – Any situation where personal interests conflict with the company’s interests must be disclosed and avoided.
- Ensure Proper Use of Company Assets – Directors must never use company property, information, or opportunities for personal gain.
Day-to-Day Responsibilities
Beyond statutory principles, directors’ practical responsibilities include:
- Strategic Direction – Setting business objectives, approving policies, and guiding long-term growth.
- Corporate Governance & Compliance – Ensuring adherence to company law, regulatory frameworks, and ethical standards.
- Financial Oversight – Approving budgets, overseeing accounts and reports, and ensuring timely filings with regulatory agencies (e.g., the Corporate Affairs Commission in Nigeria).
- Stakeholder Management – Maintaining constructive relationships with shareholders, employees, suppliers, regulators, and the community.
- Record Keeping – Ensuring proper maintenance of registers (directors, shareholders, charges) and financial records such as minutes, ledgers, and statutory filings.
- Board Accountability – Calling shareholder meetings, monitoring performance via KPIs, and ensuring transparency in decision-making.
Nigeria-Specific Obligations under CAMA 2020
In Nigeria, directors have additional duties and requirements, including:
- Ensuring at least one resident director for every company.
- Complying with gender diversity rules where applicable (e.g., some sectors require at least one female director).
- Filing annual returns and confirmation statements with the Corporate Affairs Commission (CAC).
- Maintaining financial and statutory records for prescribed periods (e.g., financial records for six years; registers permanently).
- Avoiding wrongful trading — directors must not allow the company to continue operations when insolvent.
Personal Liability and Risks
Directors can be held personally liable for:
- Fraud or Bribery
- Wrongful or Fraudulent Trading
- Breach of Health, Safety, or Environmental Laws
To mitigate risks, many companies secure Directors and Officers (D&O) liability insurance, which provides financial protection against certain claims.
Who Can Become a Director?
Most adults can become company directors, but the law sets clear eligibility and disqualification rules.
Eligibility
- Must be at least 18 years old.
- Must be of sound mind and legally capable.
- No formal qualifications are required, though relevant experience and skills are valuable.
- Under CAMA 2020:
- Private companies may have just one director, who can also be the sole shareholder.
- Public companies must have at least two directors.
- Foreigners can serve as directors, provided residency and immigration rules are observed.
Disqualifications
You cannot be a director if you are:
- An undischarged bankrupt.
- Convicted of fraud or offenses leading to imprisonment of six months or more.
- Disqualified by a court order.
- The company’s auditor (to ensure independence).
- A defaulting director of a company that failed to file returns or repay debts for three consecutive years.
- Prohibited by the company’s own Articles of Association.
How to Become a Director of a Company in Nigeria
Every company in Nigeria must have at least one director. The details of all directors are recorded with the Corporate Affairs Commission (CAC) and form part of the public company register.
1. Becoming a Director at Company Registration
When incorporating a company, the proposed director(s) must be listed in the CAC registration forms. At this stage, you will need to provide: Full legal name, Date of birth, Residential address, Nationality, Email address and phone number, and Means of identification (e.g. National ID, Passport, Driver’s Licence, Voter’s Card).
These details are filed with the CAC, and the individuals are formally recognized as the company’s first directors. A private company may have just one director, while a public company requires at least two.
2. Appointment of New Directors After Incorporation
After registration, a company can appoint new directors or replace existing ones in line with CAMA 2020 and its Articles of Association. This can be done through:
- Shareholders’ Resolution at a general meeting.
- Board Resolution to fill a casual vacancy.
- Regulatory requirements, such as appointing an independent or female director in certain companies.
Any changes must be filed with the CAC using the appropriate post-incorporation forms to update the company’s records.
3. Legal Requirements to Note
- A person must be at least 18 years old and of sound mind.
- No person can serve as a director in more than 20 companies at once (and not more than 5 public companies).
- At least one director must be resident in Nigeria.
- Certain companies are required by law to appoint at least one woman director to promote board diversity.
- Disqualifications apply if the person is an undischarged bankrupt, convicted of fraud, disqualified by court, or a director of a defaulting company.
What Skills Are Needed to Become a Company Director?
While CAMA 2020 sets the legal requirements for who can serve as a director, success in the role depends heavily on a mix of leadership, technical, and interpersonal skills. Effective directors must go beyond compliance; they guide the company’s vision, safeguard its governance, and ensure long-term growth.
Key Skills for Directors
- Leadership & Strategic Thinking: Ability to set long-term goals, inspire others, and guide the company towards sustainable growth.
- Financial Literacy: Strong grasp of financial statements, budgeting, and compliance obligations to ensure sound decision-making.
- Corporate Governance Knowledge: Understanding of legal duties, risk management, and regulatory frameworks that shape company operations.
- Communication & Negotiation: Clear, persuasive communication with shareholders, board members, regulators, and employees.
- Decision-Making & Problem-Solving: Capacity to evaluate options under pressure, manage risks, and resolve conflicts effectively.
- Industry & Market Knowledge: Awareness of market trends, competitors, and opportunities within the company’s sector.
- Networking & Relationship Building: Building trust with investors, clients, regulators, and other stakeholders.
- Ethics & Integrity: Upholding transparency, accountability, and ethical standards to protect the company’s reputation.
How Much Do Company Directors Earn?
Director salaries vary widely depending on the country, industry, company size, and the director’s level of experience and qualifications.
Average Salaries
A Managing Director earns an average of ₦7,081,500 per year, with salaries typically ranging between ₦3,610,800 and ₦10,907,900.
Factors Influencing Pay
- Experience: Directors with 10+ years in leadership positions often earn significantly higher.
- Education: Those with advanced degrees (e.g., Master’s or MBA) can earn up to 40% more than those with only undergraduate qualifications.
- Industry & Location: Directors in banking, energy, ICT, and Lagos-based firms tend to earn more.
- Gender Gap: Male directors in Nigeria currently earn about 18% more than their female counterparts, though the gap is narrowing.
Benefits & Perks
In addition to salaries, directors often receive:
- Health and life insurance plans
- Paid leave and retirement benefits
- Performance-related bonuses and incentives
- Housing or transport allowances (especially in Nigeria)
Career Growth & Salary Progression
- Entry-level directors (0–2 years): ~₦4m annually
- Mid-level directors (5–10 years): ~₦7.4m annually
- Senior directors (15–20 years): ~₦9.6m annually
- Top executives (20+ years): ~₦10m+ annually
Why the Distinction Matters
Understanding the difference between directors and shareholders is critical for good corporate governance. Shareholders are the owners of the company, but they do not handle its daily operations. Directors, on the other hand, are managers and decision-makers, but they ultimately answer to the shareholders.
This separation ensures accountability. Shareholders invest their money and expect returns, while directors are entrusted with running the business in a way that protects and grows that investment. Without this distinction, companies risk conflicts of interest, lack of transparency, and weak checks on power.
In small private companies, the distinction often blurs because the same person may be both a shareholder and a director. But in larger or public companies, separating the roles is essential to maintain trust, attract investment, and comply with the requirements of CAMA 2020.
How SplashDict Helps with Director and Shareholder Services
At SplashDict, we provide trusted corporate compliance support to help Nigerian businesses stay fully aligned with CAMA 2020 and CAC requirements. Our services cover every stage of governance, ensuring your company operates smoothly and lawfully:
Company Incorporation – Set up directors and shareholders correctly at the point of registration.
Director Services – Manage appointments, resignations, and filing of director changes with the Corporate Affairs Commission.
Shareholder Services – Handle share transfers, transmissions, allotments, and updates to ownership records.
Corporate Secretarial Support – Maintain accurate statutory records, prepare resolutions, and ensure filings remain up to date.
With SplashDict as your compliance partner, you can focus on running and growing your business, while we handle the governance and legal obligations.
Frequently Asked Questions (FAQs)
Get answers on directors and shareholders in Nigeria:
1. Can one person be both a director and a shareholder?
Yes. Under CAMA 2020, the same individual can serve as both a director and shareholder. This is common in small private companies where the founder both owns and manages the business.
2. What is the difference between directors and shareholders?
Directors manage and control the daily operations and strategy of the company, while shareholders are the ultimate owners who provide capital and exercise control through voting rights.
3. Are shareholders required in every type of company?
No. Only limited companies use shareholders. In companies limited by guarantee (Ltd/Gte), guarantors replace shareholders.
4. Do directors own shares in the company automatically?
Not necessarily. A director may also be a shareholder, but holding shares is not a requirement for being appointed as a director.
5. Can shareholders interfere in the daily running of the company?
No. Shareholders cannot directly manage daily operations. Their control is indirect, exercised through general meetings where they appoint or remove directors and approve major corporate decisions.
6. What liabilities do shareholders and directors have?
Shareholders have limited liability, restricted to the value of their shares. Directors, however, can be personally liable if they breach their fiduciary duties or act improperly.
7. How does SplashDict assist with shareholder and director matters?
We handle incorporation, CAC filings, director appointments or resignations, share transfers, allotments, and maintenance of accurate statutory records, ensuring full compliance with CAMA 2020.
Keep your company records accurate by updating director details or appointments with CAC.
Change of Company DirectorFile notice of appointment, resignation, or removal of a director with the CAC.
Change in Particulars of DirectorUpdate Director’s details (name, address, gender, phone number) with CAC.
