Sola Adun | October 20, 2014
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 Both acts were then repealed and replaced in 1922 by the Companies Act of 1922.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
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. Unlimited Company: 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 company’s first share holders, this document must state:
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.