The first Companies Ordinance was introduced in Southern Nigeria - Lagos in 1912. This was then ammended in 1917 to cover the whole country (Companies Amendment and Extension Act of 1917). Both acts were then repealed and replaced in 1922 by the Companies Act of 1922.
The 1968 Companies Decree replaced the 1922 Act. Currently, the Companies and Allied Matters Decree of 1990 regulates companies in Nigeria.
THE CORPORATE AFFAIRS COMMISSION.
The Company and Allied Matters Decree of 1990 is regulated by the Corporate Affairs Commission (the commission); the commission is itself a body corporate with perpetual succession and common seal.. Its main function 7 (1) is to administer advice including the regulation and supervision of the formation, incorporation, registration, management and winding up of companies registry and offices in all the state of the federation; arrange or conduct an investigation into the affairs of any company where the interest of the share holders and the public so demand, etc.
Characteristics of a Company.
The death of or transfer of a share holder does not affect the corporate existence. It enjoys perpetual succession.
It is managed by its duly elected Board of Directors or/and officers.
Individual share holders cannot bind the company by their act.
Enjoys limited liability - the debts of the company are its debts. Members are not liable personally for its debts.
A company cannot be constituted by mere agreement of the parties, it can only be created by or under legislative enactment (decree).
It can be dissolved only by or with the consent of the state.
It can only exercise powers expressly conferred and its to be reasonable implied from those conferred and its powers cannot be enlarged without the consent of the state.
A limited liability has the capacity to sue or to be sued in its own name.
FORMATION OF COMPANY.
Any two or more persons may form and incorporate a company. No company association or partnership consisting of more than 20 persons can be formed for the purpose of carrying on any business for profit or gain unless it is registered as a company (co-operatives and professional bodies, legal practitioners, Accountants etc. are exempt from this rule).
Capacity of individuals to form a company: (Section 20, 1)
An individual shall not join in the formation of a company if he/she:
* is less than 18 years of age (unless two other persons not disqualified by this section have subscribed to the memorandum)
* is of unsound mind.
* is an undischarged bankrupt.
* is disqualified under section 254 of the decree from being a director of the company.
(Section 254): if a person is convicted by a high court of any offence in connection with the promotion, formation or management of a company, or has been guilty while an officer of the of the company of any fraud in relation to the company or of any breach of his duty to the company)
A corporate body in liquidation cannot join in the formation of a company.
An alien or a foreign company may join in forming a company subject to the capacity of aliens to undertake or participate in trade or business.
CLASSIFICATION OF COMPANIES (Public or Prviate)
Company Limited by Shares:
the liability of its members is limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them.
Company Limited by Guarantee:
the liability of its members is limited by such amounts as the members may thereby undertake to contribute to the assets of the company in the event of its being wound up.It may not be incorporated with the object of of carrying on business for the purpose of making profits for distribution to its members.
When a company is formed for the purpose of promoting arts, science, religion, sports, culture, education, research, charity etc and the income and property of the company are to be applied solely towards the promotion of its objects and no portion is to be paid directly or indirectly to its members except as permitted by the decree, the company shall not be registered as a comapny limited by shares but as a company limited by guarantee.
no limit on the liability of its members. All unlimited companies shall be registered with a share capital from the date of the Decree of 1990. If an existing company is not registered with a share capital then the memorandum must be altered so that is becomes an ulimited company having a share capital not below the minimum share capital permitted under section 99 of the decree.
(Section 99, 1) If a memorandum states that the company is to be registered with shares and it is delivered after the commencement of the Decree, the the amount stated in the memorandum to be registered shall not be less than the authorised minimum share capital and not less than 25 per cent of that capital shall be taken by subscribers of the memorandum.
TYPES OF COMPANIES (Section 22, 1)
A company that has been stated in its article of memorandum to be private. The transfer of its shares is restricted. The total number of members shall not exceed 50, excluding bona fide employees of the company. It shall not allow the public to buy shares or debentures or deposit money for fixed periods or payable at call whether or not interest bearing.
If a company defaults on the provisions of section 22 of the decree, the company shall cease to be entitled to the privileges and exemptions conferred on private companies by or under the decree. The Decree shall then apply to the company as if it is not a private company.
Any company that is not a private company shall be a public company and its memorandum shall state so. Every public company shall have capital except those limited by guarantee-those formed for promoting commerce, arts, science, religion, culture, education, research, charity etc. The total liability of a company limited by guarantee shall not be less than N10,000.
THE MEMORANDUM OF ASSOCIATION.
A memorandum of association is a formal request from the company signed by at least two subscribers who are the companys first share holders, this document must state:
Name of the Company:
The name of a private company limited by share shall end with the word Limited.
The name of a public company limited by shares shall end with the words Public Limited Company or PLC.
The name of a company limited by guarantee shall end with the words Limited by Guarantee.
The name of an unlimited company shall end with the words Unlimited.
A company may use the abbreviations Ltd. PLC., (Ltd./Gtc) and ULtd. for the words Limited, Public Limited Company, and Unlimited.
# Restrictions on Company Names
# The Articles of Association
# Foreign Companies
* Restrictions on Company Names
* The Articles of Association
* Foreign Companies
RESTRICTIONS ON COMPANY NAMES
Companies cannot be registered (except with the consent of the commission) with a name that includes the words :
Chamber of Commerce (unless limited by guarantee), Federal , National, Regional, State, Government, Group, Holding, Co-operative, Building Society, Municipal, Chartered or any other word which in the opinion of the commision suggests or is calculated to suggest that it enjoys the patronage of the government of the federation or a state.
* The registered office of the company shall be situated in Nigeria.
* The nature of the business of business which the company is authorized to carry on or if the company is not formed to carry on a business, then the nature of the objects or objects for which it is established
* The restrictions if any on the powers of the company.
* If the company is a private or public company.
* If the liability of the members is limited by share or by guarantee or is unlimited.
If a company has a share capital, the memorandum shall state the amount of authorized capital, not less than N10,000 for a private company and not less than N500,000 for public company.
* The subscribers to the memorandum shall take share amongst themselves not less than 25% of the authorized share capital.
* The memorandum shall be stamped as a deed.
* If a company is limited by garauntee, then its memorandum shall also state that:
The income and property of the company shall be applied solely towards the promotion of its objectives and no portion shall be paid or transferred (directly or indirectly) to the members of the company except as permitted by the decree.
THE ARTICLES OF ASSOCIATION.
These are rules which provide for the internal organization of the company. (Sec. 31,1):
the form and contents of the articles of association of a public company having a share capital, a private company having a share capital, a company limited by guarantee and unlimited company shall be as in parts I, II, III, and IV respectively of Table A in schedule 1 with such additions, omissions of alterations as may be required in the circumstances.
# Statutory Requirement:
Restriction on transferability of shares on membership and on public subscription for private companies.
# Share structure or class of shares:
# Insurance and classification of shares.
This is influenced by sec. 141 of the decree.
b. Rights attaching to shares
c. Transfer and transmission of shares
d. Increase and reduction of shares
# Commission and Brokerage
a. Types of Meetings
b. Notice for meetings
c. Attendance and proceedings, proxy, voting, and quorum.
Upon complying with all the requirements, the commission shall register the company unless:
a. they do not comply with the decree
b. the business which the company wants to carry on or the objects for which it is formed or any of them are illegal
c. any of the subscribers to the memorandum is incompetent or disqualified in accordance with Sect. 20 or non-compliancy with any of the law as to incorporation.
d. the proposed name conflicts with or is likely to conflict with existing trade mark or business name registered in Nigeria. Certificate of incorporation shall be the prima facie evidence that all the requirements of the decree have been met.
Sec. 37 stipulates that from the date of incorporation mentioned in the certificate of incorporation the subscriber of the memorandum together with such other persons as may, from time to time become members of the company, shall be a body corporate by the name contained in the memorandum capable forthwith of exercising all the powers and function of an incorporated company including the power to hold land, and having perpetual succession and common seal but with such liability on the part of members to contribute to the success of the company in the event of its being wound-up as mentioned in the Act.
The Act further provides in (Sec. 41,1):
subject to the provisions of this Act, the memorandum and articles when registered, shall have the effect of a contract under seal between the company and its members and officers and between the members and officers themselves whereby they agree to observe and perform the provisions of the memorandum and articles, as agreed from time to time in so far as may relate to the company members, as officer as such.
FOREIGN COMPANIES (54,1)
Every foreign company that is incorporated outside of Nigeria and has the intention of carrying out business in Nigeria shall register a separate entity in Nigeria. Until the separate entity has been registered, the company shall not carry on business, exercise any of the powers of a registered company or have a place of business in Nigeria. Befor incorporation in Nigerai the foreign company can only have an address for the receipt of documents and other notices.
Foreign companies can apply (to the National Council of Ministers) for exemption from the requirements stated above if they;
a) have been invited to Nigeria by or with the approval of the Federal Government to execute a specific project.
b) are in Nigeria to execute a specifc loan project on behalf of a donor country or international organisation.
c) are companies owned by foreign governments and are engaged solely in export promotion activities
d) are enengineering consultants and technical experts engaged in any specialised project under contract with any of the governemnts in the federation or any of their agencies.
An application for exemption shall be in writing and addresses to the Secretary of Government and should include:
# The name and place of business of the foreign company outside Nigeria
# The name and place of business or the proposed name and place of business of the the foreign company in Nigeria.
# The name and address of each director, partner or other principal officer of the foreign company.
# A certified copy of the charter, statutes, or memorandum and articles of association of the company or any other documents that defines the constitution of the company. If the document is not in English then a certified translation is required.
# The names and addresses of one or more person resident in Nigeria that are authorised to accept notices on behalf of the foreign company.
# The business or proposed business of the foreign company in Nigeria and the duration of such business.
# The particulars of any project previously carried out by the company as an exempted foreign company
# Any other particulars that may be required by the Secretary to the Government
The National Council of Ministers may at anytime revoke any exemption granted to any foreign company, if it is of the opinion that the company has failed to fulfil any condition contained in its exemption order or for any other good or sufficient reason.