Company Law and Practice Course Outline Summary

COMPANY LAW AND
PRACTICE

COURSE OUTLINE

CORPORATE AFFAIRS COMMISSION (CAC)
FORMATION OF A COMPANY
Taking instructions from the client.
Preparation of the incorporation documents.
Filing and Registration at the CAC.
Effect of Incorporation.
3. ALIEN PARTICIPATION IN BUSINESS
Right of foreigners to do business in Nigeria.
Procedure for alien participation.
Permits and Approvals for alien
participation.
4. RELIEFS AND INCENTIVES FOR
DOING BUSINESS IN NIGERIA
5. ALTERATION OF MEMORANDUM
AND ARTICLES OF ASSOCIATION.
6. CONVERSION AND RE-
REGISTRATION OF COMPANIES.
7. PRELIMINARY MATTERS BEFORE
COMMENCEMENT OF BUSINESS.
Promoters
Nature of Company Contracts.
Pre-incorporation Contracts.
8. DIRECTORS
9. SECRETARY
10. MEMBERSHIP OF A COMPANY.
11. MEETINGS AND PROCEEDINGS
OF A COMPANY.
12. QUORUM FOR MEETINGS.
13. RESOLUTIONS
Ordinary
Special
14. MAJORITY RULE AND MINORITY
PROTECTION
15. COMPANY SECURITIES
Shares
Debentures (loans)
16. PUBLIC ISSUE OF SECURITIES
17. FINANCIAL STATEMENT AND
AUDIT
18. ANNUAL RETURN
19. UNIT TRUST
20. RECONSTRUCTION AND
AMALGAMATION OF COMPANIES
Arrangement on Sale of Companys
Property Section 538 of CAMA
Arrangement and Compromise
Sections 539 540 of CAMA.
Merger.
Take Over.
21. WINDING UP
PART B
22. PARTNERSHIP AND
REGISTRATION OF BUSINESS NAME
PART C
23. INCORPORATED TRUSTEES
HISTORY OF COMPANY LAW IN
NIGERIA
Strictly speaking, there was no local companys statute
in Nigeria before 1912. The English Common Law, the
Doctrines of Equity and the Statute of General
Application in so far as they applied to Company Law
were made applicable in Nigeria and have since formed
part of Nigerian Company Law subject to any later
relevant local statutes, for example, the concept of
separate legal personality as stated in the case of
SALOMON V. SALOMON (1897) AC 22, the doctrine of
ultra vires as stated in the case of ASHBURY RAILWAY
CARRIAGE AND IRON COMPANY V. RICHE (1875) LR
7HL 655 which has now been modified when so
received.
The first attempt to promulgate local
company legislation was made in 1912 when
Companies Ordinance of 1912 was promulgated.
This law was based on the UK Companies Act of
1908, which was then the current Companies
Statute in England. The Ordinance applied only
to the Colony of Lagos until 1917 when it was
amended and extended to apply to the whole
country by Companies Ordinance (Amendment
and Extension) Ordinance of 1917.
In 1922, the previous Ordinances were
repealed and replaced with the Companies
Ordinance of 1922. This Ordinance was
subsequently amended in 1929, 1941 and
1954.
In 1963, the 1922 Ordinance (as amended)
was re-designated Companies Act and
continued in operation until it was repealed and
replaced by the Companies Act of 1968. The
1968 Act was remarkable in certain aspects. For
example, it made provisions for accounts and
encouraged greater accountability and more
effective participation of shareholders in the
affairs of the company.
Nevertheless, it was still found to be
inadequate for so many reasons as a
result of which the Nigerian Law Reform
Commission was directed to undertake a
review and reform of the Nigerian
Companies Law in 1987.
The Law Reform Commission examined the existing
Company Law in Nigeria and the UK, the relevant
Common Law and Doctrines of Equity alongside laws of
several foreign countries, like Canada, India, Australia,
Ghana et cetera. The Report of the Commission was
considered by the Consultative Assembly on Company
Law in 1988 and subsequently the Companies Act of
1968 was reviewed and repealed and replaced with the
Companies and Allied Matters Decree of 1990 (No. 1 of
1990) which took effect from 1st January 1990 and
which was later to be found in Cap 59 LFN 1990 as
Companies and Allied Matters Act (CAMA) which is also
later referred to as Companies and Allied Matters Act
(Cap. C.20) LFN 2004.
The major reforms made by CAMA
include the following:
Codification of Common Law Rules and
equitable principles and modification of
same, where necessary, for example, the
doctrine of ultra vires, provisions relating
to promoters, existing laws pertaining to
pre-incorporation contracts were
modified.
The Act now incorporates Table A of the
Companies Act, 1968.
Provisions for Special Units like Business
Names and Incorporated Trustees are
now contained in the Act.
Provision was made for the Corporate
Affairs Commission (CAC).
The CAC was established as a distinct unit to
administer the CAMA. Before the enactment of
CAMA the administration of Companies Act was
vested in the Companies Registry which was a
unit within the Federal Ministry of Trade and
which made the administration of Companies Act
to be slowed down by unnecessary bureaucracy.
The Corporate Affairs Commission has its
Headquarters in Plot 565 Ndola Square, Wuse
Zone 5 Abuja.
Section 7(1)(b) of CAMA enjoins the
Commission to set up an office in each
State of the Federation. The Commission
has zonal offices now in the following
States:
Abuja, FCT Headquarters.
Asaba, Delta State.
Benin, Edo State.
Calabar, Cross River State.
Enugu, Enugu State.
Ibadan, Oyo State.
Ikeja, Lagos State.
Jos, Plateau State.
Kaduna, Kaduna State.
Kano, Kano State.
Maiduguri, Borno State.
Makurdi, Benue State.
Owerri, Imo State.
Port Harcourt, Rivers State.
Uyo, Akwa Ibom State.
Yola, Adamawa State.
Section 2 of the Act provides that the
Commission shall consist of 15 members
with the Chairman appointed by the
President. The Registrar-General must
have at least 10 years post-call
experience. Section 7 of the Act sets out
the functions of the Commission and they
are:
To administer the Act including the
regulation and supervision of formation,
incorporation, registration, management
and winding up of companies.
To establish and maintain a Companies
Registry and offices in all the States of the
Federation.
To arrange and conduct investigations into the
affairs of any company where the interest of
shareholders and the public so demands.
To perform such other functions as may be
specified by any Act or other enactments.
To undertake such other activities as may be
necessary or expedient for giving full effect to
the provisions of CAMA.
CODIFICATION OF NIGERIAN
COMPANY LAW

The Nigerian Company Law is essentially
codified in the sense that the entire
Chapter 17 as it appeared in the 1990
Companies and Allied Matters Act (CAMA)
has been omitted from the Act and re-
enacted under the Investments and
Securities Act (ISA), Cap 124, Laws of the
Federation of Nigeria, 2004
There are three functional parts of
CAMA. They are:
PART A
Part A deals with the incorporation,
management and winding up of
companies in Nigeria.

PART B
Part B deals with registration, management
and dissolution of sole proprietorship and
partnership.
PART C
Part C deals with Incorporated Trustees.
These are non-profit oriented outfits.
The Investments and Securities Act (ISA)
deals with securities in respect of merger,
takeover, acquisition of unit trust, public offer
and sale of shares, international agency
agreement and intellectual practice.
ACCREDITATION OF
PROFESSIONALS

In order to allow for the efficient
execution of its functions with regard to
Part A of CAMA, the following are the only
professionals allowed access to the CAC
upon accreditation:
Legal practitioners
Chartered Accountants
Chartered Secretaries
Of all these professionals, only legal
practitioners can single-handedly start and
complete a brief to incorporate a
company. With respect to the two other
professionals, they must obtain a form
which must be filed only by a legal
practitioner.
When a Chartered Secretary gets a brief,
he must still share a little part of his
earnings with a legal practitioner and that
places a lot of responsibilities on lawyers.
This is because a lawyer must be sound in
his reasoning and in the way he conducts
his business.
Note that accreditation is not necessary in
respect of Parts B and C of the Act which
deal with registration of Business Names
and Incorporated Trustees.
QUESTION

In respect of which part of CAMA do you
require accreditation?
ANSWER

It is only in respect of Part A. You do not
need accreditation with respect to other
parts, that is, Parts B and C.
PROCEDURE FOR
ACCREDITATION

A person applying for accreditation must
first apply for the accreditation form
which would be given upon the payment
of a prescribed fee, which for individuals
is N2,500 and N5,000 for firms.
A duly completed accreditation form
must be submitted with the following
documents:
Two passport photographs.
Evidence of payment of practicing fee for
the current year.
Qualifying certificate, that is, Call to Bar
Certificate, and
NYSC Discharge Certificate.
FORMATION OF A COMPANY
(SECTION 18 OF CAMA)

Section 18 of CAMA provides that any two
or more persons may form and
incorporate a company upon fulfilling the
statutory requirements of the Commission
for the particular type of company.
Section 19 of the Act provides that no
association or partnership consisting of
more than 20 persons shall be formed for
the purpose of carrying on any business
for profit or gain without being registered
as a company.
Section 35(3) of the Act provides that
responsibility for the formation of
companies is vested exclusively in legal
practitioners.
EXCEPTIONS TO THE RULE

The exceptions are with respect to the
following:
Corporate Societies registered under any
law and
Partnership involving qualified legal
practitioners or qualified Chartered
Accountants.
This is provided in Section 19(2) of the
Act.
Formation of a company involves the
following schedule:
Taking instructions from the promoters.
Preparing the incorporation documents,
and
Filing the incorporation documents with
the CAC and obtaining the Certificate of
Incorporation.
TAKING INSTRUCTIONS

Taking instructions involve obtaining
information about:
PERSONAL DETAILS OF CLIENTS
The personal details of the clients namely,
the full names, addresses, occupation and
age of the clients and every other
person(s) concerned in the promotion of
the company, for example, the
subscribers.
2. DATE FOR THE COMPLETION OF
REGISTRATION
The date for completion is necessary for the
purposes of charging the fees and tax. Note
also that CAC now makes provision for the
incorporation of a company on the same day the
necessary incorporation documents are delivered
to it. This is done for a fee of N50,000 outside
the normal statutory fees.
3. NAME OF THE COMPANY
You need to take instruction on the name to be
used along with alternative names. You must
get a minimum of two names from your clients
so that if one name is not available, you can
change to another name without having to go
back to them to ask for a name. In taking
instructions, note that the name, occupation and
address should not be abbreviated. The age of
subscribers would need to be clearly stated to
determine whether or not they have capacity.
Note that as a rule, individuals have
absolute right to trade in their personal
names provided it is not restricted by law.
It may be an individuals name or a
combination of names. It may be an
invented name. It may also be a
geographical or a generic name.
Note, however, the problems associated
with generic names. See the case of
LAGOS CHAMBER OF COMMERCE V. THE
REGISTRAR OF COMPANIES, VOL 14
WACA 197 where it was decided that you
cannot claim a monopoly on a generic
name. Therefore, it is not well advisable
to use it.
You are expected to conduct a search on
whether the proposed name is already in
use or not. A desk search can be
conducted using the Directory of
Registered Companies, published by the
CAC. A proper search for the availability
of the name must be conducted at the
CAC. The search for the availability of
names can now be done online.
The proposed names together with two
alternative names are fed into a computer
at the CAC and the details of the names
are then printed out from the system.
The printout is then used for payment at
the bank. The search fee is N200. The
receipt is submitted along with the
printout. The result of the availability
should ordinarily come out within 24
hours.
Where the name proposed is available for
use, a signed acknowledgement is given
to the applicant. But if the name is not
available, the application is returned
together with similar names to the
applicant.
RESERVATION OF NAME

Where the name is available, it will be
reserved for a period of 60 days to enable
the applicant file the incorporation
documents. See Section 32(1) and (2) of
CAMA.
Section 32(1) of CAMA provides that:
The Commission may, on written
application and on payment of the
prescribed fee reserve a name pending
registration of a company or a change of
name by a company.
such reservation as is mentioned in
Section 32(1) shall be for such period as
the Commission shall think fit, not
exceeding 60 days and during the period
of reservation no other company shall be
registered under the reserved name or
under any other name which in the
opinion of the Commission bears too close
a resemblance to the reserved name.
PROHIBITED AND RESTRICTED
NAMES

PROHIBITED NAMES (SECTION 30 OF
CAMA)
Section 30(1) of CAMA prohibits the
registration of a company with a name:
Which is identical with that of a company that is
already in existence or so nearly resemble that
name as to be calculated to deceive. See the
case of NIGER CHEMISTS LTD V. NIGERIA
CHEMISTS (1961) ALL NLR 171, the
plaintiffs contention was upheld and the
defendant was not allowed to register.
An existing company in the course of
being dissolved may signify its consent to
the use of its name.
A name that contains the words
Chambers of Commerce, unless it is a
company limited by guarantee.
A name which is capable of misleading as to the
nature or extent of the activities of the company
or undesirable, offensive or otherwise contrary
to public policy.
A name where in the opinion of the Commission,
would violate any existing trademark or business
name registered in Nigeria unless the consent of
the owner of the trademark or business has
been obtained.
RESTRICTED NAMES

No company may be formed with the
following names except the CAC consents
to it:
Name that includes the words such as
Federal, National, Regional, State,
Government or such other names that
may suggest government patronage, for
example, Ministry or Government
Department.
Names that contain the words such as
Municipal Chartered or suggest any
connection with municipality or local
authority.
Names containing the words Co-
operative or Building Society.
Names that contain the words Group or
Holding unless the permission of the
CAC has been obtained.
CAPACITY TO FORM A COMPANY

Section 20 of CAMA provides that an individual
shall not be eligible to incorporate a company if:
he is less than 18 years of age, unless there are
two other persons of full age and capacity who
have already subscribed to the Memorandum of
Association of the company.
A person who is of unsound mind and has been
so found by a Court in Nigeria or elsewhere.
A person who is an undischarged
bankrupt, and
A person who is disqualified under Section
254 of the Act from being a Director of a
company having been convicted.
Section 20(3) of the Act also provides that
a corporate body in liquidation shall not
join in the formation of a company under
the Act.
Section 20(4) of CAMA provides that an
alien may join in the formation of a
company provided he complies with the
provisions of any enactment regulating the
rights of aliens to engage in business in
Nigeria.
For example, Sections 19 and 20 of the
Nigerian Investments Promotion Council
Act provide that before an alien can join in
the formation of a company in Nigeria, he
is required to register with the Council,
among other requirements, failing which
such an alien will lack capacity as provided
under Section 20(4) of CAMA.
CLASSIFICATION OF
COMPANIES

There are three classes of companies.
They are:
CHARTERED COMPANIES
These are companies incorporated by the
grant of a Charter by the Crown under the
Royal Prerogative or a special statute, for
instance, BBC in England. In Nigeria, we
do not have such companies.
2. STATUTORY COMPANIES
These are companies incorporated by an
Act of Parliament or a National Assembly
and are normally formed to carry out
special public duties, for instance, the
Federal Mortgage Bank.
3. REGISTERED COMPANIES
We have Registered Companies incorporated
under the Companies Act. This is the most
common type of companies in Nigeria today and
the most suitable business organisation for
running an investment for profit.
For the purpose of our lecture, we shall be
concerned mainly with registered companies.
Basically there are three types of companies
provided in Section 21(1) of CAMA. These are:
Company Limited by Shares.
Unlimited Company and
Company limited by guarantee.
Any of these three companies may either
be a private or public company. From
this, this picture will emerge:
Public Company limited by shares.
Private Company limited by shares.
Public Company limited by guarantee.
Private Company limited by guarantee.
Public Unlimited Company and
Private Unlimited Company.
IMPLICATIONS OF EACH COMPANY
COMPANIES LIMITED BY SHARES
(SECTION 21(1)(A) OF CAMA)
When it is said that a company is limited by
shares, it means that the liabilities of the
members of the company is limited to the
amount unpaid on the shares held by the
Members. Liability attaches only to members
and not to the company.
This type of company is used for business
purposes and they constitute the largest type of
registered companies.
The limitation of liability enables the shareholder
to determine his level of involvement in a
company immediately the shares are taken.
UNLIMITED COMPANIES
(SECTION 21(1)(C) OF CAMA)
This is a company where the liabilities of
Members of a company, whether private
or public, are unlimited, that is, members
of the company may be personally liable
for the debts of the company.
This feature makes it unattractive for
business purpose. Unlimited company
may be used for working a patent or oil
prospecting.
PRIVATE COMPANIES
(SECTION 22(1) OF CAMA)
According to Section 22(1) of CAMA, it is a
company in which it is stated in its
Memorandum of Association that it is a
private company. It must by its Articles of
Association restrict the transfer of its
shares.
Section 22(3) of the Act provides that the
total number of its members of a private
company must not exceed 50
CONSEQUENCES OF DEFAULT IN COMPLYING WITH
CONDITIONS CONSTITUTING A PRIVATE COMPANY
(SECTION 23 (1) AND (2) OF CAMA)
A private company is prohibited from inviting the
public to subscribe to its shares or debentures or
to deposit money for a fixed period or payable
at call whether or not there is interest unless it
is authorised by law. See Section 22(5) of
CAMA. Where a private company fails to
observe this provision, it ceases to be entitled to
the privileges conferred on a private company as
such. Example of these privileges may include:
Exemption from Statutory Meeting.
Simpler mode of appointing over-aged
directors.
Passing of a formal written resolution.
The minimum share capital of a private
company is N10,000 as opposed to
N500,000 in the case of public companies.
PUBLIC COMPANY (SECTION
24 OF CAMA)
Section 24 of CAMA provides that a public
company is one other than a private
company and its Memorandum of
Association shall state that it is a public
company. Note, however, that a private
company may be re-registered as a public
company, vice versa.
SMALL COMPANY (SECTION
351 OF CAMA)
According to Section 351 of CAMA, a
company may qualify as a small company
in a year if for that year the following
conditions are satisfied:
It is a private company having a share
capital.
The amount of its turnover for that year is
not more than N2 million or such amount
as may be fixed by the CAC.
Its net assets value is not more than N1 million
or such amount as may be fixed by the CAC.
None of its members is an alien.
None of its members is a Government or a
Government corporation or agency or its
nominee, and
The directors between them hold not less than
51 per cent of its equity share capital.
HOLDING COMPANY (SECTION
338(5) OF CAMA)
A company shall be deemed to be the
holding company of another if the other
is its subsidiary.
A company shall be deemed to be a
subsidiary of another company if:
The company -
is a member of it and controls the composition of
its Board of Directors; or
holds more than half in nominal value of its
equity share capital.
DISTINGUISH BETWEEN PRIVATE
COMPANIES
AND PUBLIC COMPANIES
1. A private company can allot its shares
without any external control by the
Securities and Exchange Commission
(SEC). But by virtue of Section 45 of the
Investments and Securities Act (ISA), a
public company cannot allot its shares to
the public without the approval of SEC.
2. The name of a private company must end
with the word LTD whereas that of a public
company must end with the word PLC. See
Section 29 (1) and (2) of CAMA.
3. A private company shall not, unless
authorised by law invite the public to subscribe
to its shares and debentures or deposit money
for fixed periods whereas a public company is at
liberty to do so.
4. The total number of members of a
private company cannot exceed 50
whereas excluding persons who are bona
fide in the employment of the company or
who have retired as employees but still
continue to be members whereas the total
number of members of a public company
is unlimited.
5. Section 211 of CAMA provides that a
public company must hold its General
Meeting of the members, referred to in
the Act as Statutory Meeting and file a
statutory Report within 6 months of its
incorporation, failing which it may be
wound up whereas a private company is
not required to hold Statutory Meeting or
file a Statutory Report.
6. Section 234 of CAMA provides that all
resolutions of a public company must be
passed at a formal General Meeting for
those resolutions to be effective but by
virtue of a proviso to that Section, a
private company is entitled to pass a
written resolution signed by all the
members of the company but not in a
formal meeting.
7. A public company must give additional
notice by advertisement in at least two
daily newspapers to members at least 21
days before the General Meeting of the
company after members have been
notified individually but a private company
is not required to give this additional
notice.
Section 295 of CAMA permits a private
company to appoint anybody that
possesses the requisite knowledge and
experience as Company Secretary. With
respect to a public company, the Company
Secretary shall be a member of:
The Institute of Chartered Secretaries and
Administrators or
A legal practitioner within the meaning of
the Legal Practitioners Act, 1975 or a
Member of the Institute of Chartered
Accountants of Nigeria (ICAN) or
Any person who has held the office of the
Secretary of a public company for at least
three years of the five years immediately
preceding his appointment in a public
company.
9. A private company must by virtue of Section
22(2) of CAMA restrict the transfer of its shares
and because of this the directors of a private
company have absolute discretion without giving
any reasons to refuse to register any transfer of
shares whether or not the shares are fully paid
up. But the directors of a public company can
only refuse the transfer of shares only when the
shares are not fully paid up or there is a lien on
the shares.
10. The Articles of Association of a private
company always carries what is called
Pre-emptive Rights whereas that of a
public company does not carry such. If
the Articles of a public company carry pre-
emptive rights, it will be inconsistent with
the law.
11. A proxy can speak at a meeting of a
private company but not in a public
company.
12. No prospectus or a statement in lieu of
prospectus is required with respect to a
private company but a public company
must issue a prospectus before its shares
are floated.
DISTINGUISH BETWEEN COMPANIES
LIMITED BY SHARES
AND UNLIMITED COMPANIES
Whereas the liability of members of a
company limited by shares is limited to
their respective shareholdings in the
company, the liability of members of an
unlimited company is unlimited and they
may be liable to the full amount of the
companys debts in the event of
liquidation.
There are standard abbreviations
provided by Section 29 of CAMA for each
company whether a company limited by
shares or an unlimited company. With
respect to private company limited by
shares, its name must end with the word
Limited or Ltd whereas the name of an
unlimited company must end with the
word Unlimited or Ultd.
In the case of an unlimited company,
members guarantee the obligations of
the company without any limit on the
amount whereas members of an
incorporated company are not personally
liable for its debts since members
liability is limited by shares.
DISTINGUISH BETWEEN COMPANIES LIMITED BY
SHARES
AND COMPANIES LIMITED BY GUARANTEE
Whereas one of the objects of a
company limited by shares is to make
profit, a company limited by guarantee
must not carry on business for profit.
The income and property of the
company must be applied solely towards
the promotion of its objects and no part
of it must be paid and transferred either
directly or indirectly to the members.

Whereas Section 21(1)(a) of CAMA provides
that the liability of a member of a company
limited by shares to contribute to the
companys assets in the event of liquidation is
limited to the amount, if any, unpaid on his
shares, members of a company limited by
guarantee shall be personally liable in the
event of liquidation of the company and the
total liability of the members to contribute to
the assets of the company shall not at any
time be less than N10,000.
The Association Clause of a company
limited by shares is quite different from
the Association Clause of a company
limited by guarantee. The form of
Association Clause of a company limited
by shares is as follows:
We the several persons whose names
and addresses are subscribed are
desirous of being formed into a company
in pursuance of this Memorandum of
Association and we respectively agree to
take the number of shares in the capital
of the company set opposite our
respective names.
This is provided in Schedule 1, Tables B
and D whereas in the case of a company
limited by guarantee, the Clause ends at
the word Association since there are no
shares to take.
ASSIGNMENT
QUESTION
Look at the effect of Section 39(2) to
(4) of CAMA on the Common Law
doctrine of ultra vires and the
position before 1990 and after 1990
ANSWER
In answering this question, it is necessary to state the
provisions of Section 39(1) to (4) of CAMA 1990.
Section 39(1) of CAMA provides that a company
shall not carry on any business not authorised by its
Memorandum and shall not exceed the powers
conferred upon it by its Memorandum or the CAMA.
Section 39(2) is to the effect that where a company
engages in an ultra vires transaction, a member may
bring an action either under Sections 300 to 313 or
under Section 39(4) of the Act.
Under Sections 300 to 313 of the Act, on the
application of a member, the court may by injunction
or declaration restrain the company from the
following:
Entering into illegal or ultra vires transaction.
Committing fraud.
Benefiting from their negligence or from their breach of duty.
Section 39(4) makes provision for those who may sue
on ultra vires transaction. These are:
A member or a shareholder of the company.
A creditor or holder of a debenture secured by a floating
charge.
It should be noted that Section 39(3) of the
Act has whittled down the provision of Section
39(1) by encouraging a company to engage in
an ultra vires transaction since it declares that
the property can be kept under such
transaction.
The implication of these provisions is that ultra
vires acts can go on unabated in a company
until shareholders or creditors sue. However,
when they sue, the court can, by way of
injunction, prohibit such transaction not stated
in the object clause.
EFFECT OF ULTRA VIRES DOCTRINE
BEFORE PROMULGATION OF CAMA 1990
A person can neither sue nor be sued on an
ultra vires contract that is still executory.
If the ultra vires contract is executed, a
supplier of goods cannot sue to recover the
price. He can also follow the goods he had
supplied and recover them if he could still
identify them. But where the goods have been
consumed, then he is not entitled to anything
as was decided in the case of RE: JON
BEAUFORTE (1953) 1 CH. 131.
However, where he had lent the company money for
ultra vires purpose and the company used the money
to pay off an intra vires debt, on the authority of the
case of SINCLAIR V. BROUGHAM (1914) C 398, the
lender can recover any money lent if it is traceable by
seeking the equitable doctrine of restitution.
By the decision of the House of Lords in ASHBURY
RAILWAY CARRIAGE COMPANY LTD V. RICHE (1875)
LR HL 653, the act is null and void and not even the
unanimous consent of all the shareholders can revive
it.
EFFECT OF ULTRA VIRES
DOCTRINE
AFTER THE PROMULGATION OF
CAMA 1990
EFFECT OF ULTRA VIRES
DOCTRINE
It should be noted that the Companies and
Allied Matters Act (CAMA) 1990 has by the
enactment of Section 39(1) to (5) of the
Act removed the adverse effects of the
ultra vires doctrine as stated above.
Section 39(1) makes it mandatory that a
company shall not carry on any business
not authorised by its Memorandum and
shall not exceed the powers conferred
upon it by its Memorandum or the Act.
These harsh effects of the Common Law
doctrine of ultra vires have further been
dealt with by the enactment of Sections
300 to 313 of the Act. Section 39(2) now
provides that a breach of the prohibition
contained in Section 39(1) may be
asserted in any proceedings under
Sections 300 to 313 in order that the
minority rights of shareholders against
oppressive acts of the majority can be
protected.
Also, under Section 39(4), on the application of a
minority shareholder, the court may prohibit by
way of injunction the doing of any act or the
transfer of any property in breach of Section
39(1) of the Act. Section 39(5) of the Act
provides that if the transaction sought to be
prohibited under the proceedings are in respect of
a contract to which the company is a party, the
court may set aside the contract and prohibit its
performance and may allow to the company and
the other party compensation for loss or damage
sustained thereby.
Finally, Section 39(3) of the Act provides that
even if a company engaged in an ultra vires act, it
will not be declared invalid. Hence the third party
will be estopped from using the provision of
Section 39(3) of the Act as an instrument of
fraud. In CONTINENTAL CHEMIST V. IFEAKANDU
(1966) 1 ALL NLR 1, the Supreme Court held that
where the company sues for breach of contract, it
will not be in a better position than the third
party since ultra vires contract is void. The
IFEAKANDUs case will be decided differently
today.
OBJECTS OR BUSINESS OF THE COMPANY

The counsel would need to take instruction as to
the object(s) or business for which the company
is meant to undertake. Section 27(1) of CAMA
requires that the Memorandum of the company
must state the nature of the business which the
company is authorised to engage in. Note that
the object for which the company is formed
must be legal. The company is only entitled to
do what is stated as its object.
The next thing you have to take instruction
on is the Capital of the company.
CAPITAL OF THE COMPANY

Generally, the capital of a company
connotes the totality of its assets including
borrowed money, which is loosely called
loan capital. Specifically, however, the
capital of a company refers to the share
capital.
1. NOMINAL OR AUTHORISED SHARE
CAPITAL (SECTION 27(2) OF CAMA)
This is initial capital with which the
company is registered. It does not
change except the capital is increased or
reduced. It is, therefore, the share capital
of a company at any given time.
Section 27(2)(a) and Section 99 of CAMA
provide that the authorised minimum
share capital of a private company shall be
N10,000 while the authorised minimum
share capital of a public company is
N500,000.
The subscribers of the Memorandum must
together take shares of a value not less
than 25 per cent of the authorised share
capital. This is provided in Section
27(2)(b) of the Act. Note that the division
of authorised or nominal shares into
shares of a fixed amount must be stated
in the Memorandum of Association. See
Section 27(2)
Section 27(4)(b) of the Act provides that
the minimum total guarantee of a
company limited by guarantee is N10,000.

Section 99(1) to (5) of CAMA provides for
the enforcement of the minimum share
capital of a company and also spells out
penalty for breach. In the case of a
company, the fine is N2,500 and every
officer who is in default shall be liable to a
fine of N50 for every day during which the
default continues.
2. ISSUED SHARE CAPITAL
(S.99(4) OF CAMA)

According to Section 99(4) of CAMA, the
issued share capital is the percentage of
the authorised capital that must be issued
to members at incorporation.
2. ISSUED SHARE CAPITAL
(S.99(4) OF CAMA)

The issued share capital shall not be less
than 25 per cent of the authorised capital.
In other words, issued capital is the total
number of shares taken by the subscribers
as contained in the Memorandum.

3. PAID UP SHARE CAPITAL
This is part of the share capital which has
been issued to and paid for by subscribers
or shareholders of the company.
CLASSES OF SHARES
A company may, where authorised by its
Articles issue classes of shares. See
Section 118(1) of CAMA.
Shares represent the interest in the
companys share capital of a member who
is entitled to share in the capital or income
of such company.
A share is a transferable property. It
can be sold or mortgaged. See Section
115 of CAMA which provides that the
shares or other interests of a member in a
company shall be property transferable in
the manner provided in the Articles of

Subject to the above, a company may
issue shares having preferred,
founder/deferred or other special rights or
restrictions such as dividends or return on
capital. See Sections 119 and 144 of
CAMA.
1. ORDINARY SHARES
Ordinary shares usually attract no special
rights and carry no fixed rate of dividend
or interest. They bear the major financial
risk of the company and are, therefore,
often the equity shares of the company.
They carry the remaining of distributed
profits after the preference shareholders
have been paid their fixed dividend.
Therefore, they assume greater risk than
preference shares. When the business is
unsuccessful, ordinary shareholders bear
the loss.
2. PREFERENCE SHARES (SECTION 567
OF CAMA)
Section 567 of CAMA, the Interpretation
Section, defines preference share as a
share, by whatever name designated,
which does not entitle the holder of it to
any right to participate beyond a specified
amount in any distribution, whether by
way of dividend or on redemption, in a
winding up or otherwise.
Where dividend is declared, preference
shareholders are entitled to a specified
percentage even if dividend is not paid to
ordinary shareholders. They are more or
less creditors of the company.
As between ordinary shares, preference
shares and deferred shares, preference
shares are usually more expensive so that
if an ordinary share goes for N1.00, for
instance, a unit of preference share may
go for as much as N20.00.
Section 143(1) of CAMA provides that in
certain circumstances, a preference share
may carry more than one vote although
this section conflicts with Section
116(1)(b) of the Act which provides that
every share of a company must not carry
more than one vote from the date of
commencement of the Act.
Preference shares may be redeemable,
cumulative, participatory and convertible.
DEFERRED OR FOUNDERS SHARES
Deferred shares are so called because
payment of dividends and return of capital
are deferred until payment has been made
in respect of other classes of shares.
Deferred or founders shares are usually
taken up by the founders or the promoters
of the company. For instance, a promoter
of a company may sell his property to the
company in exchange for deferred or
founders shares which gives special rights.
Dividend must be paid to deferred
shareholders before ordinary shareholders
receive their own dividends. In other
words, it has priority over ordinary shares.
Note that Section 116 of CAMA has abolished
the issuance of weighted share or a share that
carries more than one voting right. Non-voting
share is a share that has no right of vote.
Before the enactment of CAMA in 1990, under
the 1968 Companies Act, it was permissible to
create shares that have no voting right.
Note also that the number of deferred shares
issued must be disclosed in the prospectus as
stipulated by Schedule 15 paragraph 1(a) of the
Act.
PAYMENT FOR SHARES

Sections 135 and 136 of CAMA provide
that shares of a company and any
premium on them shall be paid for in cash
but where the Articles permits, payment
may be made by a valuable consideration
other than cash or partly in cash and
partly by a valuable consideration.
APPOINTMENT OF AN INDEPENDENT VALUE

Note that if payment is to be made in
consideration other than cash in exchange for the
shares, the company must appoint an
independent valuer who will determine the true
value of the consideration. See Section 137 of the
Act.
For this purpose, a valuer means an auditor, a
surveyor, an engineer or a Chartered Accountant,
not being in the employment of the company.
SUBSCRIBERS

Subscribers are persons who sign the
Memorandum and Articles of Association of
the company for a number of shares.
Instruction must be taken as to the full
particulars of the subscribers and his interest
in the company.
By virtue of Section 20 of CAMA, subscribers
must have capacity to form a company and
must not suffer from any disability.
Also the subscribers must not be less than two
in number.
In addition, subscribers must subscribe
to at least 25 per cent of the authorised
share capital of the company.
If a subscriber is holding shares in trust
for another person, he must disclose the
fact and must also name the beneficiary
in the Memorandum.
Section 20(4) of CAMA provides that
aliens may join in forming a company.
However, such aliens must comply with
the under listed enactments regulating
their rights and capacities to engage in
any business in Nigeria. These laws
include:

Investments and Securities Act No. 45 of 1999 (ISA).
Companies and Allied Matters Act (CAMA).
Nigerian Investments Promotion Council (NIPC) Act No. 16 of
1995.
The National Office of Technology Acquisition and Protection,
which deals with (transfer of technology, trade marks, patent,
engineering drawings, machinery) in order to check price and
prevent abuse.
Immigration Act.
Foreign Exchange (Monitoring and Miscellaneous Provisions)
Act No. 17, Cap. F34 LFN 2004.
Industrial Inspectorate Act to obtain a Certificate of
Acceptance, and
Central Bank Act.
MEMBERSHIP OF THE COMPANY

The members may be either the
subscribers or every other person who
agrees in writing to become members of
the company after its incorporation. See
Section 79(1) and (2) of CAMA.
EXPATRIATES EMPLOYEES
(SECTION 8 OF THE IMMIGRATION
ACT)

If the company intends to employ
foreigners it has to obtain expatriate quota
on behalf of the employees. See Section
8 of the Immigration Act.
REGISTERED OFFICE OF THE COMPANY

Section 27(1)(b) of CAMA provides that
every company must have a registered
office. Post Office Box or Private Mail Bag
is not enough for this purpose. It must be
a street address which must be a place in
Nigeria
ARTICLES OF THE COMPANY
SECTION 33 OF CAMA)

Section 33 of CAMA provides that there
shall be registered with the Memorandum
of Association, Articles of Association
signed by the subscribers to the
Memorandum of Association and
prescribing regulations for the company.
APPOINTMENT OF DIRECTORS

Section 246 of the Act provides that the
company must have at least two
directors. You must also bear in mind
that the first directors are determined
and named by the subscribers or they
are named in the Articles of Association
of the company.
Section 246(1) of the Act provides that any
existing company having less than 2 directors
shall not later than 6 months after the
commencement of the Act have at least 2
directors.
Section 246(2) provides that where at any
given time the number of Directors of a
company falls below two, the company shall
appoint at least a director to make the number
to be at least two and that such a company
shall not carry on business one month after
the number of directors has fallen below two.
any director of member of a company
who knows that the number of directors
of that company has fallen below two for
more than six months shall be liable for
all liabilities and debts incurred by the
company during that period when the
company so carried on business.
You must bear in mind those that are
disqualified from being directors of a
company under Sections 254 and 257 of
CAMA. Section 254 deals with restraint
of fraudulent persons. By fraudulent
persons means:
Any person who had been convicted by a High Court of
any offence in connection with the promotion,
formation or management of a company.
Any person who has otherwise been guilty of fraud or
any breach of duty in the course of his duty as an
officer of a company.
Section 257 of CAMA deals with
disqualification for directorship on
ground of incapacity of:
an infant under the age of 18 years.
A lunatic or person of unsound mind.
An insolvent or an undischarged bankrupt person
as provided in Section 253 and Section 258
respectively.
A corporation.
CONTROL AND MANAGEMENT

Control and management of a company
may be achieved through the control over
the appointment of directors by the
appointment of one or more as life
directors. It can also be achieved through
the distribution of shares of the company.
MATTERS UPON WHICH TAX
RELIEF ARE CLAIMED
You must also take instruction with regard
to any mater upon which tax relief may be
claimed. For example, under the
Industrial Development Income Tax Relief
Act, pioneer status may be granted to
companies that are into agro-allied
products. Note that this should be
reflected in the Articles of Association of
the company.
PREPARATION OF
INCORPORATION DOCUMENTS

The documents to be prepared for the
incorporation are:
THE MEMORANDUM AND ARTICLES OF
ASSOCIATION
In drafting the Memorandum and Articles
of Association you may see the model that
is provided in Schedule 1 of CAMA and
you may need a good precedent book as
well. The Memorandum must contain the
following clauses:
THE NAME CLAUSE (SECTION 27(1)(A) OF
CAMA)
The name of the company must be stated. For
a private company, the name must end with
limited or Ltd. For a public company, the
name must end with public limited company or
Plc. With respect to unlimited company, it
must end with unlimited or Ultd. For a
company limited by guarantee, it must end with
limited by guarantee or Ltd/Gte. This is
provided in Section 27(1)(a) of CAMA.
REGISTERED OFFICE CLAUSE (SECTION
27(1)(B) OF CAMA
The Memorandum must state that the
registered office shall be in Nigeria. Note
that the actual address is not stated in this
clause. This is provided in Section
27(1)(b) of the Act.
OBJECT/BUSINESS CLAUSE (SECTION
27(1)(C) OF CAMA)
You must also state in the Memorandum the object or
business of the company. It must state concisely and
precisely the nature of business or the object for which
the company is to be established. This is provided in
Section 27(1)(c) of the Act.
RESTRICTION CLAUSE (SECTION 27(1)(D) OF CAMA)
If any restriction(s) have been put on the powers of the
company pursuant to Section 27(1)(d) and Section 40 of
CAMA, such restrictions must be set down in this Clause.
Where there are no restrictions, this clause becomes
unnecessary.
STATUS CLAUSE
This status clause must state whether the
company is private or public.
LIMITATION OF LIABILITY CLAUSE
The Clause will state the liability of members,
whether limited by shares or limited by
guarantee. If the liability of the members is
unlimited, it must be so stated.
CAPITAL CLAUSE
The Capital Clause must state the amount of the nominal
share capital of the company. It must also show the
fixed amount of the shares and the amount on each.
For example, the share capital of the company shall be
N100,000 shares divided into N1 each. The share capital
must be a fixed amount.
SUBSCRIPTION CLAUSE
The subscribers together must take at least 25 per cent
of the share capital of the company. This subscription
clause contains a statement of the desire of the
subscribers to form the company and their agreement to
take up a certain number of shares in the company.
The subscription clause is followed by a box of
four columns. The first column will contain the
names and addresses of the subscribers. The
second column contains the description of the
subscribers. The third column contains the
number of shares taken by each subscriber while
the fourth column contains the signature of each
subscriber.
ATTESTATION CLAUSE
The Memorandum must be signed by each
subscriber in the presence of at least one
witness
QUESTION

You have been instructed by the promoters of a new company to be
known as Agro Allied Ventures Nigeria Limited which is intended
to explore the opportunities of the Federal Government incentive on
the exportation of Cassava product.
The authorised share capital of the company at inception will
be N1,000,000 to be taken in the ratio 3=3=4 by Emeka Okon, a
secondary school boy aged 12, Mrs. Amina Okon, a businesswoman
aged 45 and Mr. Olu Okon, a medical practitioner aged 50 and Head
of Okon Family. They intend to use their residence at No. 1 Civilian
Crescent, Asokoro, Abuja as the Registered Office of the company
when formed.
Prepare the Memorandum of Association in readiness for
stamping and filing at the Corporate Affairs Commission.
ANSWER

When you want to prepare your own
Memorandum of Association, it is not what
is entered in CAMA; CAMA is just an
introduction.
A Memorandum is usually commenced
with the heading and the heading is
usually made up of four lines and what
you are going to write should be in
blocked letters, that is, in upper case, viz:
FEDERAL REPUBLIC OF NIGERIA
COMPANIES AND ALLIED MATTERS ACT, 1990
PRIVATE COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF
AGRO ALLIED VENTURES (NIGERIA) LIMITED
The name of the company is
Agro Allied Ventures (Nigeria) Limited.
The registered office of the company will be situated in
Nigeria
The business for which the company is established is the
processing and exportation of cassava product.
The company is a private company.
The liability of the members is limited by shares.
The share capital of the company is N1,000,000 divided into
1,000,000 ordinary shares of N1.00 each.
We, the several persons whose names and addresses are subscribed
are desirous of being formed into a company in pursuance of this
Memorandum of Association and we respectively agree to take the
number of shares appearing against our respective names.
Names and AddressesDescription of Subscribers Number of
Shares taken by each SubscriberSignature of each subscriber1. Olu
Okon, 1 Civilian Crescent, Asokoro Abuja. Businessman
100,0002. Amina Okon, 1 Civilian Crescent, Asokoro Abuja.
Business woman 75,0003. Emeka Okon, 1 Civilian Crescent,
Asokoro Abuja. Business man 75,000
Total shares taken 250,000
DATED the
day
of
Witness to the above signature.

Salako Adebiyi, Nigerian Law School,
Bwari.
MEMORANDUM OF A COMPANY
LIMITED BY GUARANTEE

The Name Clause:
The name of the company must end with the
words limited by guarantee or Ltd/Gte.
The registered office clause will be situated in
Nigeria.
The Object/Business Clause:
The objects for which the company is
established are the carrying on of healthcare
and educational facilities in the rural areas.
The Status Clause:
The company is a private company.
The Limitation Liability Clause:
The liability of members is limited by
guarantee. The income and property of the
company shall be applied towards the
promotion of its object.
See Section 27(4)(a) of CAMA. For example,
the income and property of the company shall
be applied solely towards the promotion of its
objects and no portion of the income or
property shall be applied or transferred directly
to the members of the company except as
permitted by or under the CAMA.
Note also that each member of the company
limited by guarantee must undertake to
contribute to the assets of the company in the
event of its being wound up. See Clause 7 of
Table C.
Subscription Clause:
Names, Addresses, Description of the
subscribers. See Table C at page 374 of the
new CAMA.
Note that the Memorandum of a company
limited by guarantee must be authorised by
the Attorney General of the Federation.
MEMORANDUM OF AN UNLIMITED
COMPANY (SECTION 29(4) OF CAMA)

The Memorandum of an unlimited
company is similar to the Memorandum of
a company limited with shares but with
the following modifications. See Section
29(4) of CAMA. The name must end with
Unlimited or Ultd.
Liability Clause will state that the
liability of members is unlimited. See
Section 27 of CAMA on the Memorandum.
ARTICLES OF ASSOCIATION
Section 33 of CAMA provides that the Articles of Association of a
company must be signed by the subscribers to the Memorandum of
the company and it shall prescribe regulations for the company.
Section 34 of the Act provides for the form and content of the
Articles. See Table A of Schedule 1 of CAMA, Parts I, II, III and IV.

Part I provides for the Articles of a public company limited by
shares.
Part II is regulation for the management of a private company
limited by shares.
Part III is regulation for the management of a company limited
by guarantee.
Part IV is regulation for the management of an
unlimited company.
Note the following:
Articles of Association must be printed.
It must be divided into paragraphs and numbered
consecutively.
It must be signed by each subscriber in the presence of
at least one witness who shall attest to the signature.
The Articles generally provide for shares, meetings,
directors secretaries, Common Seal, audit, dividends,
accounts, winding up and indemnity.
The Articles shall bear the same stamp duty as if it were
a Deed.
THE EFFECT OF MEMORANDUM AND
ARTICLES OF ASSOCIATION (S.41(2)
OF CAMA)

Section 41(2) of CAMA provides that subject to
the provisions of the Act, the Memorandum and
Articles when registered shall have the effect of
a contract under seal between the company and
its members and officers, between the members
and officers themselves whereby they agree to
observe and perform the provisions of the
Memorandum and Articles as altered from time
to time in so far as they relate to the companys
members or officers as such.
In the case of WOOD V. ODESSA WATERWORKS
CO. (1889) 42 CH D 636, Starling J granted an
injunction at the instance of a member to
restrain the defendant company from
contravening the Articles. He held that the
Articles of Association and Memorandum
constitute a contract not merely between the
shareholders and the company but also between
each individual shareholders and every other.
The implication of this provision is that a
shareholder may, therefore, bring an
action to enforce any personal right
contained in the Articles.
Also a company is entitled to sue its
members for the enforcement of and to
restrain the breach by them of its Articles
and to treat as irregular anything which is
done in contravention thereof.
DOCUMENTS OF INCORPORATION

Memorandum and Articles of Association
This must be duly signed and stamped
as a deed. The stamp duty payable on
the Memorandum and Articles is N500.
Notice of Statutory Change of Registered
Address
DOCUMENTS OF INCORPORATION

This is referred to as Form CAC 3. Note that
a Post Office Box or PMB shall not be accepted
by the Commission as the registered office.
A statement in the prescribed form containing
the list and particulars together with the
consent of the persons who are to be the first
directors of the company.
Statement of Authorised Share Capital and
Return of Allotment of Shares
This is referred to as Form CAC 2. Two copies of the
statement must be filled and submitted with other
incorporation documents. It must be signed by at
least one director.
Particulars of First Directors or Any Change Therein
This is referred to as Form CAC 7.
Statutory Declaration of Compliance with the
Requirements of the CAMA
This is referred to as Form CAC 4. It is the legal
practitioner that makes this declaration.
Reservation and Availability of Name
This is known as Form CAC 1.
Any Other Document that may be
required by CAC pursuant to any law
relating to the formation of a company.
All these forms, apart from Reservation and Availability of Name,
are provided in Section 35 of CAMA and they must be delivered to
the Corporate Affairs Commission (CAC). But before the delivery
two copies of the statement of share capital and two copies of the
Memorandum and Articles of Association must be taken to the
Federal Commissioner of Stamp Duties who will assess the stamp
duties payable on the statement of share capital and return them
to you.
A bank draft payable to the Federal Board of Inland Revenue
(FBIR) (Stamp Duties Account) in the assessed amount must be
paid to a designated bank. The receipt must be submitted to the
Stamp Duties Office with the documents for the documents to be
duly stamped.
After stamping, one copy of the share capital will be returned to
you and a copy of the Memorandum and Articles shall be
submitted to the CAC with the other incorporation documents.
When you get to the CAC you will pay the filing fees and be
issued a receipt after which you have to await the response of the
CAC. Note that it is always better (though not a requirement of
the law) to get somebody there to monitor progress.
After the delivery of the documents and payment of the required
filing fees to the CAC an official examination of the documents
will be carried out by the CAC.
The CAC shall register the Memorandum and Articles and every
other document submitted. The CAC may refuse to register them
if in its opinion:
They do not comply with the provisions of
CAMA.
The business which the company is to carry on
or object for which it is formed or any of them
is illegal.
Any of the subscribers to the Memorandum is
incompetent or disqualified in accordance with
Section 20 of the Act which deals with capacity
of individuals to form a company.
There is non-compliance with the
requirement of any other law as to
registration and incorporation of a
company.
If the proposed name conflicts with or is
likely to conflict with an existing
trademark or business name registered
in Nigeria.
Section 36(2) of the Act provides that if the CAC, for
any of the above reasons, refuse to register the
company, any person aggrieved by the decision of the
CAC may give notice to the CAC requiring it to apply to
court for directions and CAC shall within 21 days of the
receipt of such notice apply to the court for the
directions.
After the official examination, the Registrar at the CAC,
if satisfied that the statutory requirements and of the
law generally have been complied with and that the
objects of the company are not illegal will accordingly
register the Memorandum and Articles and issue the
Certificate of Incorporation.
CERTIFICATE OF INCORPORATION
(EFFECT OF REGISTRATION)

Certificate of incorporation is a prima facie evidence that
all requirements of the Act in respect of registration and
of matters precedent and incidental thereto have been
complied with and that the Association is a company
authorised to be registered and duly registered under
the Act. It is a presumption of regularity.
In the case of WILT AND BUSCH LTD V. GOODWILL
AND TRUST INVESTMENT LTD (2004) 8 NWLR (PT. 894)
179, the court observed at page 199 that by virtue of
Section 36(6) of CAMA, a certificate of incorporation is
prima facie the evidence that the company is authorised
to be registered and it is duly registered under CAMA.

From the date of incorporation, the
company shall:
Become an independent corporate being
or entity and
Shall be capable forthwith of exercising all
the powers and functions of an
incorporated company including the power
to hold land.

Having perpetual succession and
A Common Seal.

In SALOMON V. SALOMON AND COMPANY
LTD (1897) AC 22, the House of Lords
unanimously reversed the decision of the
Court of Appeal and held that the
company was a separate and distinct
person. The House of Lords, in a
judgment delivered by Lord Machnaghten
inter alia said:

The company is at law a different person altogether from the
subscribers to the Memorandum and though it may be that after
incorporation the business is precisely the same as it was before
and the same persons are managers and the same hands receive
the profits; the company is not in law the agent of the subscribers
or trustees for them. Nor are the subscribers as members liable in
any shape or form except to the extent and in the manner provided
by the Act.
The concept of corporate personality, therefore, means that
once a company is registered, it becomes a separate person from
the individuals who are its members. It has capacity to enjoy legal
rights and is subjected to legal duties which do not coincide with
that of its members. It is always referred to as an artificial person
as opposed to a human being (a natural person).
QUESTION

1. An American multinational company
known as Pauline Computers has instructed
you to form and register a Nigerian subsidiary
of the company as a public company.
Draft the Name Clause of the Memorandum of
the proposed company.
State the formalities you need to undertake in
connection with the name of the company
after incorporation.
QUESTION

Itemise the documents you will deliver to CAC
in order to have the company registered.
2. You have been instructed to
incorporate a company to be called Baguada
Industries which will engage in the
manufacture of rugs and carpets. The
proposed authorised share capital of the
company is N2,000,000. The subscribers to
the Memorandum are:
Chief Ikeson Pebble aged 60 years.
His brother, James Pebble aged 50 years and
Okon Pebble aged 14 years of age
QUESTION

They are to take the shares in the proportion of 5: 3: 2
respectively. They are also to be the first directors of the
company.
3.
What further instruction would you take to enable you prepare the
Memorandum of Association?
What are the shares of each of the subscribers to be entered into
(the number of shares taken) column of the subscription clause?
What formalities do you need to comply with before you can use the
said name of the company?
What clauses would you insert in the Articles to give Chief Ikeson
Pebble upper hand in the management of the company? State the
purpose served by each Clause.
Under what circumstances can the CAC refuse to register the said
company and what is the remedy against non-registration? See
Section 36(1) and (2) of CAMA.
FORMALITIES AFTER INCORPORATION
BEFORE COMMENCEMENT OF BUSINESS
As soon as the certificate of incorporation
is issued by CAC, the company should do
the following:
Display its nameplate signBoard at its
office(s).
Print letterhead with the companys name,
registration number, address, names and
nationality of directors.
Make its Common Seal.
ALIEN PARTICIPATION IN
BUSINESS IN NIGERIA

Section 650 of CAMA defines an alien as a person or
association, whether corporate or incorporated, other
than a Nigerian citizen or association.
The germane question is: in what circumstances can
a person who is not a Nigerian or a company not
registered in Nigeria participate in running of a company
in Nigeria?
Section 20(4) of CAMA provides that subject to the
provisions of any enactment regulating the rights and
capacity of aliens to participate or undertake in trade or
business, an alien or a foreign company may join in the
formation of a company.
Every foreign company intending to carry on business in
Nigeria must take practical steps to be registered by the CAC as a
separate entity and until it is registered, the foreign company shall
not have a place of business in Nigeria for any purpose other than
the receipt of notices and other documents. Note Section 54(1) of
CAMA.
See also the case of UNIPETROIL NIGERIA PLC V. AGIP NIGERIA
PLC (2002) 14 NWLR (PT. 787) P. 312. Any act of the company in
contravention of Section 54(1) of the Act is void.
However, a foreign company may apply to the Federal
Executive Council for exemption from registration locally if it belongs
to any of the following categories:
A foreign company invited to Nigeria by or
with the approval of the Federal
Government to execute a specific project.
A foreign company which is in Nigeria for
the execution of a specific loan project on
behalf of the donor organisation or
agency.
A foreign company engaged solely in
export promotion activities.
Engineering consultants and technical experts engaged on any
specific project under contract with any of the governments of the
Federation or any of their agencies or with any person where the
Government has approved such contract.
The application for exemption is made to the Secretary to the
Government of the Federation (SGF) and must satisfy in sufficient
particulars with the provisions of Section 56(2) of CAMA.
The Federal Executive Council will normally grant the exemption if it
considers the circumstances of the case expedient. See Section
56(3) of the Act. The exempted company will normally have the
status of an unregistered company. This is provided in Section 58
of the Act.
Prior to 1995 there were lots of bottlenecks
militating against alien participation in enterprise in
Nigeria. Many of the statutory restrictions, particularly
those contained in Exchange Control Act and the
Nigerian Enterprises Promotion Act have now been
repealed.
An alien may now invest freely in the operations of
any enterprise in Nigeria except enterprises enumerated
in the Negative List. This is provided in Section 17 of
the NIPC Act, 1995. The Negative List as defined by
Section 17 is as follows:
Production of arms and ammunitions.
Production of and dealing in narcotic
substances and psychotropic substances
as well.
Production of military and paramilitary
wears including those of the Police and
Customs, Immigration and Prison Services,
and
Such other items as the Federal Executive
Council may from time to time determine.
The alien may operate alone or in joint venture
with Nigerians by means of a company, which
must have been registered by the CAC.
Before commencing business, the alien is
required to register with the NIPC. See Sections
19 and 20 of the NIPC Act. An alien may either
establish or run a business in Nigeria or he may
decide to buy shares through the instrumentality
of Foreign Direct Investment FDI.
If an alien wants to invest in the shares of a
company, whether public or private, he can do
so through Portfolio Investment PI.
Portfolio Investment can be effected with
foreign currency imported through an authorised
dealer and converted to Naira at the official
exchange rate. See Sections 12, 13 and 15 of
Foreign Exchange (Monetary and Miscellaneous)
Act No. 17 of 1995. The Act establishes the
Autonomous Foreign Exchange Market and
makes provisions for dealings and operations in
the market. The AFEM is a market where
transactions in foreign exchange are conducted
in accordance with the Act.
The CBN is empowered to issue guidelines for all
operations and transactions in the market. The
market is conducted in foreign currency,
travellers cheques, bank drafts, mails or
telegraphic transfers and such other money
market instruments as the CBN may from time
to time prescribe. The CBN may appoint a bank
or non-banking organisation or any other
corporate body which is well equipped to
operate as an authorised dealer.
Note that the authorised dealer through whom
foreign exchange or capital is imported must
take steps to issue a Certificate of Capital
Importation within 24 hours. This is provided in
Section 15(2) of the FOREX Act, 1995.
Note also that the imported capital is
guaranteed unconditional transferability or
reparation of funds with regard to both earnings
and capital. See Section 15(4) of the FOREX Act
and also Section 24 of the NIPC Act.
SUMMARY OF PROCEDURE FOR
ESTABLISHMENT OF BUSINESS

BY AN ALIEN

Preparation of Joint Venture
Agreement and other necessary
pre-incorporation contracts.
Formation and Registration of a
company by the CAC.
Application for registration with the NIPC.
Application to the Securities and Exchange
Commission for the registration of securities.
See Section 8(k) of the ISA, 1999.
Application for other permits including
application to the Nigerian Embassy or Consular
Office in the country of the investor for the
grant of a business visa, subject to the
regularisation.
Importation of capital through an authorised
dealer.
Please note also that the NIPC is charged with
the responsibility of co-ordinating, monitoring
and facilitating investments in Nigeria.
REGISTRATION OF SECURITIES
(SECTION 8(K) OF ISA)
Section 8(k) of the Investments and
Securities Act (ISA), 1999 provides that
the Securities and Exchange Commission
is required to keep and maintain separate
registers of foreign direct investments and
foreign portfolio investments.
PROCEDURE FOR PURCHASE OF
SHARES

The alien is first of all expected to apply for
the purchase of shares in a Nigerian
enterprise, whether public or private.
The directors of the company or the Board is
expected to pass a Resolution allotting the
shares to the alien subject, of course, to the
requisite approvals being obtained.
Application to SEC for registration of the
securities.
Importation of capital through an authorised
dealer.
PROCEDURE FOR APPLICATION
FOR BUSINESS PERMITS

Applications for business permits and expatriate quotas
are made to NIPC in NIPC Form 1. Where applications
for other permits such as pioneer status, technical
service agreement and other fiscal incentives are
desired, a separate application is normally completed.
Note that a non-refundable deposit of N10,000 in
bank draft is payable for each application. When
completed, the application is normally forwarded to the
NIPC in Abuja or State Ministries of Trade and Industry
for onward transmission to the NIPC Headquarters in
Abuja.
The application must necessarily include the
following:
A completed NIPC form 1.
A bank draft for the sum of N10,000.
Two photocopies of payment receipt for
the application form.
One copy of the Joint Venture Agreement
(where it is applicable).
Certificate of Incorporation of the
applicant company.
Certified true copy of the Memorandum
and Articles of Association.
Certified true copies of the returns of allotment
and particulars of directors.
Evidence of Capital importation from an
authorised dealer.
Tax Clearance Certificate.
Receipts evidencing payment of stamp duties on
the authorised share capital of the company.
Feasibility Report and Project Implementation
Plan.
Title Deeds of land evidencing land or business
acquisition for the companys operations.
Training programmes for the Nigerian staff of the
company as well as personnel policy of the company
incorporating management succession plan for qualified
Nigerians.
Names, Addresses and Nationalities of the proposed
directors of the company including non-resident directors
to be marked as NRD.
Job Title Designations of the Expatriate Quotas required
and the academic and working experience required for
the occupant of each position.
Information memo on the foreign companys permit.
PERMITS AND APPROVALS

A. BUSINESS PERMITS (SECTION 8(1)(B) OF IMMIGRATION
ACT)
This is the operational licence granted to an expatriate to enable
him carry on business activities in Nigeria. Section 8(1)(b) of the
Immigration Act, LFN, 1990 provides that no person other than a
Nigerian citizen shall, on his own account or in partnership with
any other person, practise a profession or establish or take over
any trade or business whatsoever or register or take over any
company with limited liability for any purpose without the written
consent of the Minister of Internal Affairs. The consent of the
Minister of Internal Affairs is issued in the form of Business
Permit.
Note that the permit is now issued through the NIPC.
B. EXPATRIATE QUOTA (SECTION 8(1)(A) OF THE
IMMIGRATION ACT)
This is the official approval granted to a company to enable it
employ individual expatriates to specifically designated jobs and
the quota must state its duration. Section 8(1)(a) of the
Immigration Act LFN 1990 provides that no person other than a
citizen of Nigeria shall accept employment, not being
employment with the Federal or a State Government, without the
approval of the Chief Federal Immigration Officer. The approval
is what is known as Expatriate Quota.
There are two types of expatriate quotas:
Permanent Until Reviewed (PUR), and
Temporary Quota (TQ).
(i) Permanent Until Reviewed
This is usually granted to the Chairman of the Board of a
company or the Managing Director. As the name implies, it is
permanent until there is a supervening circumstance, which will
necessitate its review.
(ii) TEMPORARY QUOTA
This is usually granted to the directors or other employees of the
company. The maximum time usually granted is 5 years subject
to renewal for another term of two years.
Note that the quota position attaches to a particular post hence
different persons can be covered by the same quota. It is the
duty of the company to apply for the quota and not that of the
employee. See the case of OIL FIELDS SUPPLY CENTRE LTD V.
JOHNSON (1987) 18 NSCC 725.
C. RESIDENCE PERMIT
An alien may enter Nigeria with a Tourist
Visa or Short Visit Visa and stay therein
for a period of three months without a
Residence Visa. However, any person
who is not a Nigerian citizen and who
desires to enter Nigeria for the purposes
of residence must first of all obtain a
Residence Permit.
The application for residence permit is made by the
employer company to the Nigerian Embassy or
Consular Officer in the country where the applicant
resides by way of a letter accompanied by a valid
passport of the alien from the company requesting
permission to employ the alien to the Immigration
Department (via Consular authorities). Also to be
attached is a letter of employment and the photocopy
of the Expatriate Quota.
On approval, the alien is then granted an STR Visa
which on arrival in Nigeria will be regularised and the
alien issued a work permit.
TRANSFER OF TECHNOLOGY
(SECTION 5(2) OF NOTAP ACT)
Every contract or agreement entered into by any person
in Nigeria with another person outside Nigeria involving
the transfer of foreign technology to Nigerian partners
shall be registered with the National Office of
Technology Acquisition and Promotion (NOTAP) in the
prescribed manner, that is, not later than 60 days from
the execution of the agreement. See Section 5(2) of the
National Office of Technology Acquisition and Promotion
Act.
An agreement involves transfer of technology if its
purpose or intent is, in the opinion of NOTAP, wholly or
partially connected with any of the following matters:
The use of trademarks.
The right to use patented inventions.
The supply of technical expertise in the
form of the preparation of plans,
diagrams, operating manuals or any other
form of technical assistance of any
description whatsoever.
The supply of basic and detailed
engineering.
The supply of machinery and plant, and
The provision of operating staff or managerial
assistance and the training of personnel. See
Section 4(d) of the Act.
Section 6(1) of the Act provides that every
application for the registration of a contract or
agreement shall be addressed to the Director of
NOTAP and shall be accompanied by such
number of certified true copies of such contract
or agreement and by all other related
documents and information as may be specified
in any particular case by the Director.
The director may refuse to register a
contract which falls within 18
specifications, for example:
Where its purpose is the transfer of the
technology freely available in Nigeria.
Where the price is not commensurate with
the technology in question.
EFFECT OF NON-REGISTRATION
Non-registration of a contract does not
render the contract void or unenforceable
between the parties but merely frustrates
transfer of any fees or payment due under
the contract to the account of the aliens
outside Nigeria. See BEECHAMSs case
(1985) 3 NWLR (PT. 12).
INTENTION TO INCUR CAPITAL EXPENDITURE
(SECTION 3(1) OF THE INDUSTRIAL INSPECTORATE ACT)
Section 3(1) of the Industrial Inspectorate Act provides
that any person proposing to start a new undertaking or
in the case of an existing undertaking, to incur additional
expenditure of not less than N20,000 must give to the
Director of the Industrial Inspectorate Division of the
Federal Ministry of Industry notice of his intention.
Application which is on Form 1 (2 copies) is obtainable
from the Federal Ministry of Industries, Inspectorate
Division.
If the Director is satisfied with the valuation for the
property, he issues a certificate of acceptance, which
binds other government agencies, for example, the
Board of Customs and Excise, the Federal Board of
Inland Revenue
RELIEF: TAX REBATE AND
CONCESSION
There are a number of fiscal incentives
and relief that are designed to boost
industrial and agricultural productions.
1. PIONEER STATUS (SECTIONS 1 AND
10 OF INDUSTRIAL DEVELOPMENT ACT)
Under the Industrial Development Act, Cap 179 LFN
1990, a company may be granted exemption for a period
of three years in the first instance and may be extended
for a further period of two years. To qualify the
applicant must be a public company.
2. Secondly, the investment must be in respect of
industry or products designated as pioneer, for example,
agro-allied or export goods and solid minerals.
3. The estimated cost of qualifying capital expenditure
on or before the production date is not less than
N50,000 for an indigenous company and N150,000 in
any other case. See Sections 1 and 10 of the Industrial
Development Act.
TAX RELIEF UNDER THE COMPANIES
INCOME TAX (CIT) ACT,
CAP 60 LFN, 1990
Under this Act, profits exempted from taxation
are profits made by cooperative societies,
religious or charitable organisations, sporting
activities, et cetera are all exempted from
taxation.
Also the profit made by a Nigerian company in
respect of goods exported from Nigeria are
exempted from taxation provided the proceeds
from such export are repatriated to Nigeria and
are used exclusively for the purchase of raw
materials, plants, equipment and spare parts.
Also to enjoy exemption from taxation is the profit of
a company for the first N6,000. See Section 29 of the
Companies Income Tax Act LFN, 1990.
Relief is also available where a Nigerian company is
liable to pay a Commonwealth Tax. See Section of the
CIT Act.
Also there is relief from payment of double taxation
if there are bilateral agreements with other countries.
See Sections 34 and 35 of the CIT Act. Note the
arrangement between the Government of the Federal
Republic of Nigeria and the Governments of Great Britain
and Northern Ireland.
Note that there is also tax exemption for
foreign loans not less than N150,000 granted to
a Nigerian company when it is not repayable
within 10 years. See Section 9(1) of the CIT
Act.
Interests payable on bank loan granted for
agricultural trade and business also enjoy tax
concession.
Bank loan granted to a company engaged in
agricultural business and fabrication of local
plant and machinery also enjoys concession.
Deposit accounts or domiciliary accounts of a
foreign non-residence company are also
exempted from taxation provided that the
account consists mainly of foreign currencies
imported into Nigeria on or after 1st January
1990 though the CBN or any other authorised
bank.
Bank loans for manufacture of goods for
export are also tax-free.
Please note that stocks and shares of any
description have been removed from the list of
assets liable to Capital Gains Tax (CGT).
DUTY DRAWBACK AND
SUSPENSION SCHEME
The Customs and Excise Management Act,
Cap 84, LFN 1990 and also the Customs Duty
Drawback Scheme/Regulation provides for the
refund of import duties on:
all imported goods used in manufacturing
goods meant for export. In such cases, 100
per cent refund of import duties is granted.
Papers used in the manufacture of goods
supplied for educational purposes to
educational institution recognised by the
Minister of Education. In such cases, 100 per
cent refund of import duty is granted.
Goods exported in the same States as
that in which they were imported.
Various other incentives are granted for:
Export. See Export Incentives and
Miscellaneous Act Cap 118 LFN, 1990.
Utilization of Associated Gas. Petroleum
Profit Tax Act.
Investments in Export Processing Zones.
Section 28(k) of CIT Act.
Investments in economically
disadvantaged areas. In such cases,
100 per cent rebate is normally granted
for a period of 5 years.
Local Raw Material Utilisation 30 per
cent concession is normally granted for
5 years to industries that attain the
minimum local raw material utilisation in
agro allied, engineering and chemical
industries.
Investments in solid minerals. Sections
18, 19 and 22(2) of the Minerals and
Mining Act No. 34 of 1999.
Research and Development carried out in
Nigeria. Sections 20 and 23(3) of the CIT Act.
Rural Investment Allowance. This allows for
graduated allowance for capital expenditure
on facilities such as electricity, water, tarred
roads and telephone located at least 20
kilometres away from such facilities provided
by the government under Section 28(j) of the
CIT Act.
QUESTION
An alien has instructed you to do a due diligence on him
in a financial services sector of the economy. He is
particularly interested in setting up an Investment Bank
to help finance the moribund investment industry in
Nigeria.
He has also advised you to lay special emphasis on
the provisions of the enabling laws. He wants to know
your opinion on the best type of company he can use as
an investment vehicle. He, of course, wants to take up
residence in Nigeria.
Please advise him.
_____________________
PROMOTERS
PROMOTERS, PROMOTION AND
PRE-INCORPORATION CONTRACTS
PROMOTERS (SECTION 61 OF
CAMA)
DEFINITION OF PROMOTERS
The idea of forming a company is usually conceived by a
person or group of persons who in furtherance of this
idea, will begin to take necessary steps to incorporate
the company. For example, they may have to source for
funds, find directors, acquire properties, prepare the
prospectus and may also have to pay for the printing
and all other expenses incidental in bringing the
company into the world. The law regard such persons
as promoters of the company.
Section 61 of the Companies and Allied Matters Act
(CAMA) defines a promoter as:
Any person who undertakes to take part in forming a company
with reference to a given project and to set it going and who takes
the necessary steps to accomplish that purpose, or who, with regard
to a proposed or newly formed company, undertakes a part in
raising capital for it, shall, prima facie be deemed a promoter of the
company:
Provided that a person acting in a professional capacity for persons
engaged in procuring the formation of the company shall not
thereby be deemed to be a promoter.
What the proviso to Section 61 of CAMA is saying is that a
solicitor or valuer does not become a promoter merely by acting in a
professional capacity to a promoter. The only exception is where a
solicitor negotiates property for the proposed company at a profit.
See the following cases:
In TWYCROSS V. GRANT (1877) 2 CPD
469, particularly at 541, Cockburn C.J said
that
a promoter is one who undertakes to form a company with
reference to a given project and to set it going and who takes the
necessary steps to accomplish that purpose. They framed the
scheme; they not only provisionally formed the company but were
to the end its creators. They found the directors and qualified
them. They prepared the prospectus, they paid for the printing and
advertise the undertaking before the world.
In ADENIJI V. STARCOLA LTD. (1972) 1 SC 202, Kazeem J.
described a promoter as:
Any person who undertakes to take part in forming a company or
who with regard to a proposed or newly formed company
undertakes a part in raising capital for it is prima facie a promoter of
the company provided he is not acting in his professional capacity.
Note that a person who instructs a solicitor to
prepare a Memorandum and Articles of
Association and register a company for him is a
promoter.
In SPICER (KEITH) LTD. V. MANSELL (1970) 1
WLR 333, the Court held that a person who
purchased a property expressly as trustee for an
intended company would by so doing be
deemed a promoter.
A person may become a promoter of a
company even after registration of a
company. For example, if he had assisted
in procuring capital for the company to
pay promotion expenses when the
company was newly formed.
Note also that an existing company may be a promoter
for another new company.
A solicitor who prepared the Articles and Memorandum
of Association and registered a company for his client
who paid him (the solicitor) his professional fees is not a
promoter. In RE: GREAT WHEAL POOLGOOTH LTD
(1883) 53 LJ CH 42, the Court said inter alia that a
solicitor who drafts the Memorandum and Articles of
Association in line with the promoters instructions and
the accountant who values the assets of a business to
be purchased are only giving expert or professional
assistance to the promoters and will be paid for their
services; they are not promoters.
If, however, the solicitor and accountant did
more by way of helping his client to obtain
directors for the company, they would be
regarded as promoters.
The law looks at the facts in determining
whether or not a person is a promoter. In the
case of GLUCKSTEIN V. BARNES (1900) AC 240
the court held that a person who purchased
property for his own use and later decided to
form a company to acquire the property became
a promoter only from the time when he took
steps to form the company.
Can a promoter be regarded as an agent or
trustee of a company? No. A promoter cannot
be regarded as an agent or trustee of a
company but he occupies a fiduciary relationship
with the company. That was the decision in
GARBA V. SHEBA INTERNATIONAL (NIGERIA)
LTD. (SUPRA) page 401.
From which point will a person be regarded
as a promoter of a company?
A person becomes a promoter from the very
moment he begins to take part in forming a
company or in setting it going.
CONTRACTS OF PROMOTERS
In contrast to the Common law rule, Section 72
of CAMA provides that a contract or other
transaction purporting to be entered into by the
company or by any person on behalf of the
company prior to its formation may be ratified
by the company after its formation and
thereupon the company shall become bound by
and entitled to the benefit thereof as if it has
been in existence at the date of such contract or
other transaction and had been a party thereto.
CONTRACTS OF PROMOTERS
Section 72(2) of CAMA provides that
Prior to ratification by the company, the
person who purported to act in the name
of or on behalf of the company shall, in
the absence of express agreement to the
contrary, be personally bound by the
contract or other transaction and be
entitled to the benefit thereof.
DUTIES AND LIABILITIES OF
CAMA)

Section 62(1) of CAMA provides that a promoter stands in a
fiduciary position to the company and shall observe the utmost good
faith towards the company in any transaction with it or on its behalf
and shall compensate the company for any loss suffered by reason
of his failure so to do.
Section 62(2) of CAMA provides that a promoter who acquired
any property or information in circumstances in which it was his
duty as a fiduciary to acquire it on behalf of the company shall
account to the company for such property and for any profit which
he may have made from the use of such property or information.
Because promoters stand in advantage position as against the
company, the law imposes a duty on promoters. Lord Cairns said in
ERLANGER V. NEW SOMBRERO PHOSPHATE COMPANY (1878) 3 AC
1218, particularly at page 1236 that:
CAMA)

Promoters have in their hands the creation and
moulding of the company. They have the power
of defining how and when and in what shape
and under what supervision it shall start into
existence and begin to act as a trading
corporation.
Statutory recognition has been given to the
duties and liabilities of promoters in Section 62
of CAMA which is summarised hereunder:
CAMA)

1. The promoter stands in a fiduciary
relationship to the company and must
observe utmost good faith in transaction
entered on behalf of the company.
2. The promoter must account for any
profit made from the use of information
on property acquired in the course of his
duty to the company.
CAMA)

3. The transaction between the promoter and the company can
be rescinded by the company except where after full disclosure by
the promoter, such transaction is ratified on behalf of the company
by either an independent Board of directors (that is, independent of
the promoter) or at a General Meeting at which such promoter
cannot vote. In ERLANGERs case, a syndicate of which he was the
head, purchased an island in the West Indies said to contain
valuable mines of phosphate for 55,000 pounds. He formed a
company to buy this island and a contract was made between X, a
nominee of the syndicate, and the company for its purchase at
110,000 pounds. It was held that there had been no disclosure by
the promoters of the profit they were making. Therefore, the
company was entitled to rescind the contract and recover the
purchase money from him and other members of the syndicate.
CAMA)

There is no limitation period for company
to sue promoter under this section but the
court may give relief from liability to the
promoter if it deems it equitable to do so.
REMEDIES FOR BREACH OF DUTIES
CAMA)

Basically, there are three major
remedies:
The company may sue the promoter for
damages for breach of his fiduciary
obligation to the company. That was the
decision in the case of RE: LEEDS AND
HANLEY THEATRE OF VARIETIES LTD
(1902) 2 CH 809.
CAMA)

The company may rescind the contract and recover the
purchase money paid where the promoter sold his own
property to the company. In ERLANGER V. NEW
SOMBRERO PHOSPHATE LTD. (SUPRA) the Court held
that the law requires the promoter to disclose such fact
before he can be relieved of any liability for failure to
disclose. Where he discloses such facts, it will no longer
be regarded as secret profit and he may be allowed to
keep it. Disclosure must be made to:
The Board of Directors who must be independent of the control
of the promoters or
Where no such Board exists then disclosure must be made to
the shareholders either in a General Meeting or in a circular or
prospectus issued by the promoters on behalf of the company.
CAMA)

The promoter may be compelled by the
company to account for any profit he
made. See the case of GLUCKSTEIN V.
BARNES (SUPRA).
REMUNERATION OF PROMOTERS
In the case of GARBA V. SHEBA (SUPRA), particularly at
page 401, the court held that it has always been the
case that a promoter has no right against the company
for payment of services rendered before the
incorporation of the company and that a promise to pay
him by the company is neither binding and nor
enforceable against the company because the
consideration is a past consideration.
The company can adopt the promise to pay the
promoter in which case the promoter can sue if the
company reneges. See Section 72(1) of CAMA.
PRE-INCORPORATION
CONTRACTS

Before a company is formally registered, a promoter may
have entered into some contracts on behalf of the
company. Such contracts are called pre-incorporation
contract.
At Common Law, an unformed company is incapable
of entering into a contract. The reason for this is that
such a company is not yet a person in the eyes of the
law. A pre-incorporation contract at Common Law is,
therefore, not binding on the company. In the case of
CALIGARA V. GIOVANNI LTD (1961) 1 ALL NLR 534, the
Court held that a company cannot ratify or adopt a
contract purported to have been entered into on its
behalf by its promoters prior to its incorporation.

PRE-INCORPORATION
CONTRACTS

In the case of KELNAR V. BAXTER
(SUPRA), it was held that at Common
Law, a pre-incorporation contract was not
binding on the company because there
was no principal on behalf of whom an
agent could have contracted and that the
company was not permitted to ratify or
adopt it.
PRE-INCORPORATION
CONTRACTS

Where the promoter signed the contract for and on
behalf of the company, he is personally liable. See the
case of KELNAR V. BAXTER (Supra) but where the
promoter signed the contracts in the proposed name of
the company, then there is no contract at all. In the
case of NEWBOURNE V. SENSOLID (GREAT BRITAIN)
LTD 1954 1 QB 45, it was held that the contract was not
made with the plaintiff but with a non-existing limited
liability company. Therefore, the contract was a nullity
and the plaintiff could not adopt it and sue upon it as his
own contract.
But Section 72 of CAMA has now modified this rule.
It provides that
PRE-INCORPORATION
CONTRACTS

Any contract or other transaction
purporting to be entered into by the
company or by any person on behalf of
the company, prior to its formation, may
be ratified by the company after its
formation and thereupon the company
shall be bound by and entitled to the
benefit thereof as if it has been in
existence at the date of such contract.
PRE-INCORPORATION
CONTRACTS

In other words, the company can ratify after formation
as if it were in existence when the contract was enter
into. The company then becomes bound and entitled to
the benefits therein.
The question whether or not the insertion of a pre-
incorporation contract in the object clause of a
memorandum of a company would make it binding on
the company came up in the case of EDOKPOLOR AND
COMPANY LTD V. SAINT EDO WIRE INDUSTRIES (1984)
15 NSCC 553. The apex court per Nnamani, JSC stated
the position in the following way:
PRE-INCORPORATION
CONTRACTS

The object Clause is no more than a list of the
objects the company may lawfully carry out.
They are certainly not objects that the company
must execute. The inclusion of the terms of the
pre-incorporation contracts in the Memorandum
of a company is an indication of a strong
desire that the proposed company after
incorporation should execute the terms of the
agreement so included.
PRE-INCORPORATION
CONTRACTS

On when can pre-incorporation contract be binding,
the court stated in the case of GARBA V. KIC LTD (2005)
5 NWLR (PT. 917) page 160, particularly at page 117
that before a company can become bound by any
contract or transaction entered on its behalf before its
formation, there must be evidence of ratification by the
company upon its formation.
Before such ratification, any person who claims to have
entered into a contract on behalf of a company before
its formation is presumed to have done so personally.
That was the decision in the case of ET AND EC NIGERIA
LTD V. NEVICO (NIGERIA) LTD (2004) 3 NWLR (PT.
860) page 327, particularly at page 347.
SUBJECT OF PRE-
INCORPORATION CONTRACT

The following may be the subject of pre-
incorporation contract:
Joint Venture agreement especially between
Nigerians and aliens.
Payment of Promoters expenses.
Directors service contract.
Shareholders agreements.
Agreement for the acquisition of business or
property.
Conversion of partnership to incorporated
companies.
COMPANIES CONTRACTS

Section 71 of CAMA provides for the permissible form in which a
company can enter into a contract. The section provides that where
a particular format is required of an individual to enter into a
contract, the company too should adopt the same format. Such
contracts entered into by the company binds it and its successors
and all the parties to it and the contract may be varied or
discharged in the same manner it is made.
By virtue of Section 38 of the Act, a company has all the powers of
a natural person with respect to execution of its object.
Furthermore, Section 71 of the Act amplifies the provision of Section
38 by providing that a company may enter into a contract like a
natural person.
At common law, there are no special formalities required for the
creation of a contract by an individual hence a contract can be
made -
Orally (Parol).
In writing or
COMPANIES CONTRACTS

By seal or deed.
Under CAMA, Section 71 provides that a
company can enter into any of the three
types of contract:

1. Oral or Parol Contract
2. Written Contract
3. Contracts Under Seal
COMPANIES CONTRACTS

1. ORAL OR PAROL CONTRACT (SECTION 71(1)(C)
OF CAMA)
Section 71(1)(c) of CAMA provides that a company may
make, vary or discharge a contract orally when it is
legally possible for an individual to do so. However,
unlike an individual, a company cannot act in person; it
acts on behalf of its officers and agents. In TRENCO
NIGERIA LTD. V. AFRICAN REAL ESTATE AND
INVESTMENT CO LTD. AND ANOR (1978) 3 SC 9, the
Supreme Court held that a company can enter into an
oral contract through its agent or officers, as the case
may be.
COMPANIES CONTRACTS

2. WRITTEN CONTRACT (SECTION 71(1)(B) OF CAMA)
A company can enter into a contract in writing pursuant to Section
71(1)(b) of CAMA. There are certain contracts, which by law must
be in writing. For example, Bills of Exchange, promissory notes,
contracts for the transfer of shares, contract of marine insurance as
well as hire purchase contract. Besides this, there are other
contracts which need to be evidenced in writing for it to be enforced
by action at law. Such contracts include contract of guarantee,
contract for the sale or disposition of land and moneylenders
contract. This is provided for in Section 4 of the Statute of Fraud,
1677. See also Section 3(1) of the Contracts Law, CAP 25, Laws of
Western Nigeria, 1959.
3. CONTRACTS UNDER SEAL (SECTION 71(1)(A) OF CAMA)
COMPANIES CONTRACTS

Section 71(1)(a) of CAMA allows a
company to enter into a contract under
seal. A contract under seal or by deed is a
contract in writing which is signed, sealed
and delivered. In this case, the seal has
to be the seal of the company impressed
on the contract.
COMPANIES CONTRACTS

Any contract can be under seal. However,
certain contracts are required by law to be
under seal. For instance, a conveyance of land
or a lease exceeding three years must be made
under seal. See Section 77(1) of the Property
and Conveyancing Law (PCL) and Section 3 of
the Law of Real Property Act, 1845.
Note that when a company contracts under seal,
the companys seal must be affixed in
accordance with the formalities laid down in the
Articles of the Association. See Schedule 1, Part
1, Table A, Article 11 of CAMA.
COMPANIES CONTRACTS

It is usually the practice for the Articles to
provide that the document on which the
seal is affixed must be signed by a
director and counter-signed by the
secretary or a second director.
COMPANIES CONTRACTS

A company writing under seal may
empower any person as its attorney either
generally or for a specific purpose to
execute deed on its behalf in any place
within or outside Nigeria and a deed
executed by such a person binds the
company as if the document were sealed
by the company.
COMPANIES CONTRACTS

Also note that a company may provide otherwise for the use of its seal in its
Articles of Association. See Section 34(1) of CAMA. Where a company is a
party to a contract either under seal or in writing, the contract must be
validly executed. For instance, it will be invalid execution where the proper
phrase like Ltd or Plc or Limited by Guarantee, that is, Ltd/Gte is not
added to the name; that will be an invalid execution. See Section 29(1) to
(5) of CAMA and also see the case of WESTERN NIGERIAN FINANCE
CORPORATION V. WEST COAST BUILDERS LTD. (1971) 1 UILR 93. In this
case, the plaintiff claimed from the defendant a sum with respect to a
contract purportedly entered into by the defendant. The defendant averred
that the agreement was not binding on it as it was not executed by the
company but by West Coast Builders which was not before the court. It
was held that there can be no valid execution of an agreement by a limited
company unless the agreement bear the word Limited or Ltd as the last
word of its name and the Common Seal and that the defendant West Coast
Builders, having not executed the agreement as required by the Companies
Act, could not be held liable under the agreement.
OTHER TRANSACTIONS OF A
COMPANY
BILL OF EXCHANGE AND PROMISSORY NOTE
A person acting pursuant to a companys
authority can make, accept or endorse a Bill of
Exchange or a Promissory Note on behalf of the
company provided such transactions is disclosed
to have been done under the companys
authority. See Section 73(1) of CAMA.
COMMON SEAL AND OFFICIAL SEAL FOR USE
ABROAD
(SECTIONS 74 AND 75 OF CAMA
RESPECTIVELY)
COMPANY
Section 74 of CAMA requires every company to
have a Common Seal. The use of the Common
Seal shall be regulated by the Articles.
In addition where a company is permitted by its
object to transact business in foreign countries,
subject to the Articles of Association, the
company may make provision for an Official Seal
which may be used in countries outside Nigeria.
AN OFFICIAL SEAL
COMPANY
An Official Seal is a facsimile or a replica of the Common Seal
with the addition on its face of the name of the country where it is
to be used.
Pursuant to Section 76 of CAMA, a company may under its Common
Seal appoint an attorney to execute deeds on its behalf within or
outside Nigeria. See the case of POWELL V. LONDON AND
PROVINCIAL BANK (1873) 2 CH D. 555.
Section 77 of CAMA provides that a document or proceeding
requiring authentication by a company may be signed by a director,
secretary or other authorised officer of the company. Such
document need not be under the companys seal. See the case of
SHELL PETROLEUM DEVELOPMENT COMPANY NIGERIA LTD V.
ALAKUTA (2005) 9 NWLR (PT. 931) 475.
AUTHENTICATION AND SERVICE OF
DOCUMENTS
Section 77 of CAMA provides that a document or
proceedings requiring authentication by a
company may be signed by a director, secretary,
or other authorised officer of the company and
need not be under its Common Seal.
A court process shall be served on a company in
line with rules of court while other documents
may be served by post or by leaving it at the
registered office or head office of the company.
See Sections 77 and 78 of CAMA and also
Supreme Court case of MARK V. EZE (2004) ALL
FWLR (PT. 200) 1455.
QUESTION
Mr. Davis Martins began a scheme which
was designed to form a company for the
purpose of canning fruits. He informed
Alhaji Usman, an estate valuer, of his
plans and Alhaji Usman promised him to
secure a property for the company to take
off, and he did so.
QUESTION
Alhaji Usman also spoke to his wife, Hajia Usman
who is an Accountant about the companys need for a
qualified director and Hajia Usman obtained one director
for the company. Barrister Udo assisted in providing the
funds needed for the incorporation of the company. He
also prepared the Memorandum and Articles of the
company and also registered the company.
Mr. Davis Martins, Alhaji Usman, Hajia Usman, Mrs.
Jane Makanju subscribed to the Memorandum and
Articles of the company and also became the first
directors of the company. The questions before the
court are:
QUESTION
Who among the aforementioned parties could
be regarded as a promoter and why?
It was discovered that 10 years earlier, Alhaji
Usman bought the property he bought for the
company for N5,000,000 and sold it to the
company for N10,000,000. What is your advice
to the company in this situation?
Assuming Mr. Davis Martins, Alhaji Usman and
Hajia Usman have jointly sued the company for
the payment of promotion expenses, what
would be your advice to the company?
QUESTION
Would your answer be different assuming the agreement
to pay for promotion expenses was incorporated into the
object clause of the Memorandum of the company?
Would your answer also be different if the company in
fact ratifies the agreement to pay all promotion
expenses in its first annual General Meeting which all the
members of the company attended and also voted?
Assuming the fruits Mr. Davis Martins bought on credit
for the first production of canned fruits before the
issuance of certificate of incorporation to the company
has not been paid for up till now, what will be your
advice to the seller of the fruits?
QUESTION
Assuming Mr. Davis Martins signed the
contract for the fruits as the agent of the
company, would your answer be different?
Assuming Mr. Davis Martins signed the
contract for the fruits as the company
itself and in fact affixed the proposed
Common Seal of the company, would your
answer be different?

CONVERSION AND RE-
REGISTRATION OF COMPANIES
A company may decide to change its status and
this may be done without having to incorporate
a new company. The Companies Act provides
for how the change of status can be carried out.
The major reason for re-registration of a
company, among others, is due to the rise or fall
in the fortunes of the company. Where, for
example, the business of a private company
grows, it may be re-registered as a public
company.
CONVERSION AND RE-
Under CAMA, the conversion of companies is
permissible under the following:
A private company limited by shares may be
converted to a public company by following the
procedure laid down in Section 50 of the Act.
A company limited by shares may be converted
to an unlimited company by following the
procedure laid down in Section 51 of the Act.
CONVERSION AND RE-
An unlimited company may also be re-registered
as a company limited by shares by complying
with Section 52 of the Act.
A public company may be converted to a private
company under Section 53 of the Act.
Upon the re-registration of a company, the CAC
will grant the new company a new certificate of
incorporation showing the new status of the
company and the certificate is prima facie
evidence that:
CONVERSION AND RE-
The requirement of the Act in respect of
re-registration and of matters precedent
and incidental thereto have been complied
with;
CONVERSION AND RE-
The company has acquired the new status.
That a company changes its status does not
mean it has changed its legal personality or that
its rights and liabilities under the former status
are now extinguished. The legal personality
rights and liabilities of the old company are
continued in the new status. Therefore, any
debt, obligation incurred, contract entered into
or legal proceedings by or against the company
will continue.
RE-REGISTRATION OF A PRIVATE COMPANY TO
A PUBLIC COMPANY (SECTION 50 OF CAMA)
Section 50 of CAMA provides that a private limited
company may be re-registered as a public limited
company, subject to the following conditions:
The company must pass a Special Resolution that it be
so re-registered as a public company. The Special
Resolution must effect necessary alterations in the
Memorandum and Articles of Association of the
company.
An application for re-registration together with the
prescribed document must be delivered to the CAC. The
Special Resolution must effect the following changes:
A.
i) The Memorandum must state that the
company is a public company. See Section
50(2)(a) of the Act.
ii) Necessary changes must be made in the
Memorandum of Association of the company to
bring it in line with the Memorandum of a public
company as provided under Section 27 and
Section 29(2) and (5) of CAMA, that is, the
name of the company will now end with Public
Limited Company or Plc.
iii) The Capital Clause must be altered to
state an amount not less than N500,000
required for public company and the
subscribers must take not less than 25 per
cent of the authorised capital.
B. In the Articles
i) The clause restricting transfer of share
must be removed.
ii) Any clause permitting appointment of
directors without age limit must be
amended.
In the Articles, any provision permitting
written resolution must be removed.
There may also be the need to make the
retirement of directors rotational.
PROCEDURE FOR RE-REGISTRATION OF
A PRIVATE COMPANY
TO A PUBLIC COMPANY
Application must be made to the CAC in
the prescribed form and must be signed
by at least a director and the secretary.
A PRIVATE COMPANY
TO A PUBLIC COMPANY
A printed copy of the Memorandum and
Articles of Association as altered in
pursuance of the resolution.
A copy of the written statements on
Oath by the directors and secretary
showing the paid-up capital of the
company which, as at the date of the
application, is not less than 25 per cent
of the authorized share capital.
A PRIVATE COMPANY
TO A PUBLIC COMPANY
A copy of the Balance Sheet of the company as
at the date of the resolution or the preceding
six months, whichever is later.
A statutory declaration in the prescribed form
by a director and secretary that:
A Special Resolution required under Section 50(1)
and (2) of the Act has been passed and
that the companys net assets are not less than the
aggregate of its paid-up capital and the
undistributed reserves.
A PRIVATE COMPANY
TO A PUBLIC COMPANY
A copy of any prospectus or statement in
lieu of prospectus delivered by the
company within the last 12 months to
the Securities and Exchange Commission
(SEC). See Section 50(3)(e) of the Act.
A copy of the printed notice of the
companys resolution. This is not a
statutory rule; it is a matter of practice.
RE-REGISTRATION OF A COMPANY LIMITED BY
SHARES
TO UNLIMITED COMPANY (SECTION 51 OF
CAMA)
A company limited by shares may, with the
assent of all the members, be re-registered as
an unlimited company. See Section 51 of CAMA.
The situation presents the most potential danger
to members. Hence, their assent is required for
the conversion.
The application for conversion must be made in
the prescribed form and signed by a director and
the secretary of the company. The documents
to be lodged with the CAC include the following:
SHARES
CAMA)
The application for re-registration.
The prescribed form of assent to the company being re-
registered as an unlimited company subscribed by or on
behalf of all the members of the company. See Section
51(6)(a) of CAMA.
A statutory declaration by the directors of the company that the
persons by whom or on whose behalf the form of assent is
subscribed constitute the entire members of the company.
If any of the members of have not subscribed to the form
themselves, that the directors have taken all reasonable steps to
satisfy themselves that each person who subscribed to the form
on behalf of a member was lawfully empowered to do so.
SHARES
CAMA)
A printed copy of the Memorandum and Articles
of Association incorporating the alterations set
out in the resolution. See Section 51(6) of
CAMA for the documents generally.
If the Commission is satisfied that the company
may be re-registered, it will retain and register
the application and issue a certificate of
incorporation to reflect the new company.
SHARES
CAMA)
Note the following:
That an unlimited company that is re-registered
as a limited company cannot revert back to be
registered as an unlimited company under
CAMA. See Section 51(2) of CAMA.
A public company or a company which has
previously been re-registered as an unlimited
company, shall not be re-registered under
Section 51(3) of the Act.
RE-REGISTRATION OF UNLIMITED TO
A COMPANY LIMITED BY SHARES
An unlimited company, that is, a company registered
with unlimited liability, may be re-registered as a
company limited by shares.
To effect re-registration, the company must pass a
Special Resolution to that effect and lodge the resolution
together with an application for re-registration signed by
the director and secretary of the company. See Section
52 of CAMA. The Special Resolution must state the
proposed share capital and make necessary alterations
in the Memorandum and Articles of Association to meet
the requirements of a company limited by shares.
The specific requirements are as
follows:
The application for re-registration.
A printed copy of the Memorandum and
Articles of Association as altered, and
The Special Resolution.
Note that the documents must be
lodged with the Commission (CAC) within
15 days of the passing of the resolution
provided that the application must be
lodged not earlier than the day in which
the resolution was filed if it was filed
pursuant to Section 237 of CAMA.
Also note the following:
That an unlimited company cannot re-
register as a public company or a
company limited by guarantee.
A company limited by shares but re-registered
as unlimited cannot re-register as a limited
company under this section. See Section 52(2)
of CAMA.
Re-registration under this Section does not
affect the rights and liabilities of the company in
respect of any duty or obligation incurred or any
contract entered into by or on behalf of the
company before re-registration. See Section
52(9) of the Act.
RE-REGISTRATION OF A PUBLIC
COMPANY TO
A PRIVATE COMPANY (S. 53 OF CAMA)
Section 53 of CAMA permits a public company to convert
its status to that of a private company on the following
conditions:

The company must pass a Special Resolution to that
effect.
Application in the prescribed form and duly signed by a
director and secretary must be delivered to the CAC and
The application must be accompanied by the printed
copy of the Memorandum and Articles of Association as
altered by the Special Resolution.
COMPANY TO
Before the application is made, the time
for the application for cancellation must
have either expired or must have
otherwise been dealt with. See Section
53(1)(c) of CAMA.
Note that the resolution must alter the
Memorandum and Articles to show that
the company is a private company instead
of a public company.
COMPANY TO
The law makes provision for members to object to the
re-registration of a public company as a private
company. The objection is made by way of allegation to
court for cancellation of a Special Resolution. See
Section 53(3) of the Act. The persons entitled to make
the application are:
Holders of not less in the aggregate than 5 per cent in
the nominal value of the companys issued share capital,
or any class thereof; or
not less than 5 per cent of the companys members but
not by a person who has consented to or voted in favour
of the resolution.
PROCEDURE FOR MAKING
OBJECTION
The application must be made within 28 days of the
passing of the Special Resolution.
The applicant must immediately inform the CAC of the
fact that they have applied to the court. The duty to
inform the CAC of the application is on the applicant.
When the application is heard, the court may make an
order either cancelling or confirming the resolution.
The company shall within 15 days from the courts
order or such other period as the court may direct,
deliver to the CAC a certified true copy of the order of
court. See Section 53(6) of the Act.
OBJECTION
Where no application for cancellation of the Special Resolution is
made, the company can apply to register the resolution after the
end of the 28 days allowed for making the application and in case
the delivery to the CAC is found satisfactory, the CAC will retain
and register the application and the company will be issued with a
certificate of incorporation as a private company.
Note that conversion of a public company to a private company
is optional pursuant to Section 53 of CAMA. However, where a
company registers the share capital and the court confirms the
reduction, if such reduction brings the share capital of the
company before the statutory minimum prescribed for a public
company, then conversion becomes compulsory.
OBJECTION
On the issue of the certificate, the company
becomes a private company and the alteration in the
Memorandum and Articles set out in the resolution will
take effect accordingly. See Section 53(9) of CAMA.
The certificate is prima facie evidence that the
requirement of Section 53 of the Act in respect of re-
registration and of matters precedent and incidental to
it have been complied with and that the company is
now a private company. See Section 53(10) of CAMA.
The company must alter its seal, nameplate and
other documents of the company to show that it has
converted to a private company.
QUESTION
Bagauda (Nigeria) Ltd is a private company
that operates in Tiga/Bebeji Local
Government of Kano State. The company is
engaged in road construction. At the General
Meeting of the company held on 11th June
2004 at Rock Castle Hotel, Tiga, the following
Resolution was proposed and duly passed.
That the company be re-registered as a
Public Company by the name Bagauda
(Nigeria) PLC.
QUESTION
As the Company Secretary, state the
procedure to re-register the company
(including all documents to be filed).
State two consequential alterations to be made
in the Memorandum of Association of the
company to bring it in line with that of a public
company.
State two consequential alterations to be made
in the Articles of Association to bring it in line
with the Articles of Association of a public
company.
ALTERATION OF CONDITIONS OF
THE MEMORANDUM AND
ARTICLES OF ASSOCIATION
ALTERATION OF THE MEMORANDUM

(SECTIONS 31 OF CAMA)
(SECTIONS 100 TO 111 OF CAMA)
Except in cases and in the manner and to
the extent expressly provided for in CAMA,
a company may not alter the conditions in
its Memorandum of Association. This
means a company cannot go outside the
express provisions of the Act to alter the
conditions in its Memorandum of
Association.
Section 45 of CAMA makes provision for how each
condition can be changed. With respect to the name of
the company, Section 31 must be complied with in its
alteration. Section 31 provides that if a company is
registered under a name identical with that by which a
company in existence is previously registered or so
nearly resembling it as to be likely to deceive, the first
mentioned company may, with the approval of the
Commission, change its name and if the Commission so
directs within six months of its being registered under
that name, the company concerned shall change its
name within a period of six weeks from the date of the
direction or such longer period as the Commission may
allow.
As regards the business or object clause of the
company, its alteration must be in accordance with
Section 46 of the Act which provides that notice must be
given to members by Special Resolution.
With respect to the alteration of any restrictions on
the powers of the company, you have to comply with
Section 46 of the Act.
For the alteration of capital, Sections 100 to 111 of
the Act must be complied with. These sections deal with
alteration of share capital by consolidation, conversion
and subdivision of shares, cancellation and reduction of
shares etc.
CHANGE OF NAME
There are three situations whereby the name of the company can
be changed.
SITUATION 1
Change the name which conflicts with an existing registered name.
See Section 31(1) of the Act.
Where a company is registered under a name, which is
identical with that of a company in existence, or so nearly resembles
that name as to be calculated to deceive, the new company may
change such name with the approval of the CAC. Or alternatively if
the CAC so directs within six (6) months of the registration of the
company, the company must change its name within 6 weeks from
the date of the direction or any extension of time granted by the
CAC.
SITUATION 2
CHANGE OF NAME
Voluntary Change of Name
This is a situation where a company in
existence is desirous of changing its name
for one reason or the other.
PROCEDURE FOR VOLUNTARY CHANGE
OF NAME
CHANGE OF NAME
There must be a resolution of the directors authorising
the change of name and also directing the Company
Secretary to take steps to have the name of the
company changed.
The Secretary will search for availability of name and, if
necessary, seek reservation of the name.
The Secretary will convene a General Meeting or an
extraordinary meeting of the company giving 21 days
notice of such meeting and specifying in the notice an
intention to pass a Special Resolution to change the
name of the company in the meeting. Generally, the
resolution will be reproduced on the notice of the
meeting.
CHANGE OF NAME
After the passing of the resolution by the
company, the following documents must be
delivered to the CAC.
A notice of the Special Resolution.
A letter to the CAC requesting its consent to the
change of name.
The original certificate of incorporation.
Memorandum and Articles of Association of the
company as altered to reflect the new name.
CHANGE OF NAME
SITUATION 3
The Name may be changed at the instance of
the CAC
The name of the company may be changed if it
is discovered to conflict with an existing
trademark or business name registered in
Nigeria. The change here is at the instance of
CAC which may require such change unless
there is evidence that the owner of the
trademark or business name has consented to
the use of it.
CHANGE OF NAME
Note that when a company changes its name, CAC
must enter the new name on the Register in place of the
former name and issue a new certificate of incorporation
showing the new name which is in accordance with
Section 31(5) of the Act.
Note that the change of name does not affect the
rights and obligations of the company before the change
of name.
Note also that legal proceedings commenced before
the change may be continued or a new one commenced
against the company in its new name. This is provided
in Section 31(6) of CAMA.
STEPS TO BE TAKEN BY THE
COMPANY AFTER
SUCCESSFUL CHANGE OF NAME
OR
POST-REGISTRATION PROCEDURE
Alteration of the Common Seal, Share
Certificates, letter heads, nameplates
and other documents of the company to
reflect the new name.
Any Memorandum or Articles issued after
the alteration must reflect the change of
name.
The change of name shall be advertised in a
daily newspaper circulating nationwide.
It is prudent for persons dealing with the
company to be notified directly of the change
of name of the company.
It is now the duty of the CAC to advertise the
change of name in the Official Gazette of the
Federation as provided in Section 31(7) of the
Act.
NOTE

Please, learn how to draft a letter to the
CAC for change of name of a company.
EXAMPLE
BAGAUDA NIGERIA LIMITED
NO. 2 LAKESIDE ROAD,
BAGAUDA, KANO.
11th May 2006
The Corporate Affairs Commission,
Plot 565 Ndola Crescent,
Wuse Zone 5,
Abuja,
Sir,
REQUEST FOR APPROVAL TO CHANGE THE NAME OF
BAGAUDA NIGERIA LTD
I am directed by the Board of Directors of the above company to apply for approval of the
Commission for the name of the above company to be changed to BAGAUDA FISHERIES
LIMITED.
2. I enclose herewith a printed copy of a Special Resolution of the company duly passed on
the 8th day of May 2006 sanctioning the proposed change of name.
3. The name is being changed so as to reflect the nature of the main object of the company.
Yours faithfully,
SALAKO ADEBIYI,
COMPANY SECRETARY
Encl.
ALTERATION OF THE BUSINESS/
OBJECT CLAUSE IN THE MEMORANDUM
(SECTIONS 45 AND 46 OF CAMA)
The business or object clause in a
companys Memorandum may be altered
by Special Resolution. See Sections 46(1)
and 45(2) of CAMA.
By giving 21 days notice of meeting and
specifying in the notice the intention to pass a
resolution as a Special Resolution. The notice of
meeting must be sent to all members of the
company and to all holders of debentures
secured by floating charge of the company.
At the meeting, a Special Resolution must be
passed by of members voting in person or by
proxy.
Application for cancellation of Resolution
shall be made to the Federal High Court
within 28 days of the passing of the
Resolution by holders of 15 per cent in
nominal value of the companys issued
share capital or holders of not less than 15
per cent of the companys debentures
secured by a floating charge. See Section
46(2)(a) and (b) of CAMA.
Note that any member who voted in
favour or consented to the resolution
cannot apply for cancellation.
Note also that it is not stated in the
CAMA the ground for application for
cancellation. It follows from this that an
applicant may apply for cancellation on
any ground at all as long as he can
convince the court.
NOTIFICATION TO CAC
WHERE AN APPLICATION IS MADE TO
COURT FOR CANCELLATION
The company must forthwith give
notice of making such application to the
CAC. After the notice and within 15 days
of making an order by the court and in the
case of refusal to confirm the resolution, a
certified true copy of the order must be
delivered to the CAC.
NOTIFICATION TO CAC
In the case of confirmation of the resolution,
the company shall deliver a certified true copy of
the order with a printed copy of the
Memorandum as altered. A notice of the Special
Resolution must also be delivered.
WHERE NO APPLICATION IS MADE TO THE
COURT
Where no application is made to the court
within the specified 28 days, a copy of the
Special Resolution must be delivered to CAC
within 15 days from the end of the 28 days
waiting period.
NOTIFICATION TO CAC
If CAC is satisfied with the resolution then a printed
copy of the memorandum as altered will be delivered to
it. See Section 46(8)(a) of CAMA.
But if, on the other hand, CAC is not satisfied, it will
notify the company in writing of its dissatisfaction and
the company has 21 days from the date of receipt of the
notice to appeal against the decision of the CAC. If, for
any reason, the company fails to serve the notice
required by Section 46(8)(a) of the Act within the
stipulated time, it may apply to court for an extension of
time to deliver the document. See Section 46(8) of the
Act.
NOTIFICATION TO CAC
The circumstances in which such application
can be made is when the company fails to notify
CAC of the order of the court made upon
application for cancellation.
Note that where the alteration has not been
properly made application may be made to the
court within 21 days of the passing of the
resolution to have the alteration declared invalid.
Any member can apply to have the
resolution declared invalid notwithstanding the
number of shares he has subscribed to.
ALTERATION OF THE CAPITAL CLAUSE
Section 45(4) of CAMA provides that Capital
Clause may be altered by Ordinary Resolution in
accordance with Sections 100 to 111.
By virtue of Section 100(a) of the Act, a
company may consolidate and sub-divide its
shares into larger amount. For example, if a
company has 10,000 shares of N1.00 each, it
can consolidate the shares to 5,000 shares and
sub-divide it to N2.00 each.
ALTERATION OF THE CAPITAL CLAUSE
Now, Section 100(1)(b) of the Act provides
that a company on sub-dividing its shares or any
of them into shares of smaller amount, for
example, 5,000 shares of N2.00 each can again
be sub-divided into 10,000 shares of N1.00
each.
Section 100(1)(c) of the Act allows a
company to convert paid-up shares into stock
and to also reconvert stock into paid-up shares.
CANCELLATION OF UNISSUED
SHARES
(SECTION 100(1)(D) OF CAMA)
Section 100(1)(d) of the Act makes for
cancellation of an unissued shares. The
company may cancel shares which have
not been issued because so long as the
shares have not been issued to members,
no member is committed to pay for them
and if the shares are cancelled, no
member will be prejudiced by so doing.
CANCELLATION OF UNISSUED
SHARES
(SECTION 100(1)(D) OF CAMA)
Note that where a company takes any
of these steps in Section 100 as shown
above, it must give notice to the CAC
specifying, as the case may be, the shares
consolidated, divided, converted, sub-
divided, cancelled or the stock re-
converted within one month of so doing.
INCREASE IN CAPITAL
Another alteration which may be made by
Ordinary Resolution is increase of capital
which is provided under Section 102 of
CAMA.
A company limited by shares may in
General Meeting and not otherwise
increase its share capital by creating new
shares. This is done by Ordinary
Resolution.
PROCEDURE FOR INCREASE
There must be a Board resolution to the
effect that the capital of the company be
increased and also authorising its
Secretary to take necessary steps to
effect the increase.
Notice of meeting must be given to
members who are entitled to attend the
General Meeting of the company.
A General Meeting will be convened where an Ordinary Resolution
to increase the capital of the company will be passed.
After the resolution is passed and within 15 days of the passing of
the resolution permitting the increase the following documents
must be delivered to the CAC.
A copy of the resolution authorising the increase.
A notice of increase stating the class or classes of shares involved
and special rights attached to them, if any.
A statement of increase duly stamped. Note that two copies of
statement of increase must be taken to the Federal Commissioner of
Stamp Duties. The stamp duty to be paid is calculated at the same
rate with the stamp duty paid on the authorised capital when
incorporating the company originally. The Commissioner for Stamp
Duty will retain a copy of the statement of increase and return a
stamped copy to you, which you will include in the documents to be
filed with the CAC.
Within 6 months of giving the notice of increase to the CAC, you
must ensure that not less than 25 per cent of the share capital
including the increase has been issued and unless this is done,
the increase cannot take effect. See Section 103 of CAMA.
After issuing the share capital, up to 25 per cent of the directors
of the company must deliver to the CAC a statutory declaration
that the shares of the company have been issued up to 25 per
cent of the authorised capital of the company. And unless this is
done, the increase will not take effect.
A certificate of increase must be obtained from the CAC.
A copy each of the resolution and certificate of increase must be
annexed to the Memorandum of the company.
REDUCTION OF CAPITAL
Section 105 of CAMA provides for restriction on
reduction of issued capital except in accordance
with the procedure laid down in CAMA.
A company limited by shares may reduce its
capital by Special Resolution if authorised by its
Articles and subject to confirmation by the court.
See Section 106(1) of CAMA.
Section 106(2) of the Act provides that a
company may:
REDUCTION OF CAPITAL
Extinguish or reduce the liability on any of its shares in
respect of share capital not paid up; or
Either with or without extinguishing or reducing liability
on any of its shares, cancel any paid-up share capital
which is lost or unrepresented by available assets; or
Either with or without extinguishing or reducing liability
on any of its shares, pay off any paid-up share capital
which is in excess of the companys wants, and the
company may, if and so far as is necessary, alter its
memorandum by reducing the amount of its share
capital and of its shares accordingly.
PROCEDURE FOR REDUCTION
OF CAPITAL
Directors must meet to resolve that the
share capital be reduced.
The scheme of reduction will be prepared.
The General Meeting has to be convened.
The Notice of Meeting should be
accompanied by explanatory circular and the
scheme of reduction.
OF CAPITAL
At the meeting, a Special Resolution must
be passed reducing the capital and
approving the scheme of reduction.
OF CAPITAL
Application must be made to court to
confirm the reduction and also approve the
Scheme of Reduction. If the court is
satisfied that the creditors have duly
consented or that adequate provisions have
been made to discharge or secure their
debts or claims or that the debts as
determined and the capital does not by this
reduction fall below the authorised
minimum, it may by order confirm the
reduction. See Section 108(1) of the Act.
OF CAPITAL
Note that creditors who would be entitled to make a
claim on the company are entitled to object to the
reduction. See Section 107(2) and (3) of the Act.
After the order of the court confirming the reduction, a copy
of the order and a copy of the minutes approved by the courts
showing particulars of the capital as altered must be delivered
to CAC.
A certificate of registration of the order and Minutes will be
obtained from the CAC.
The approved Minutes and order of reduction shall be annexed
to the Memo of the company. Note that the Minutes are
deemed to be substituted for the corresponding part of the
companys memorandum as well as an alteration of the memo
of the company. See Section 109(5) and (6) of CAMA.
ALTERATION OF THE
REGISTERED OFFICE CLAUSE
There is no specific provision in the CAMA for
the alteration of the Registered Office clause.
Note that any other provisions in the
Memorandum of Association of the company the
alteration of which is not specifically provided for
in the Act may be altered by complying with
Section 46 of CAMA unless there is a provision to
the contrary. See Section 45(5) of the Act.
General provisions for alteration of clauses in the
Memorandum or Articles not specifically
contained in the Act.
ALTERATION OF THE
REGISTERED OFFICE CLAUSE
Note that if the Memorandum states
that the registered office will be situated
in Nigeria then there is no need for it to
be altered but if the Memorandum states
that the registered office should be
situated in a particular place or state, for
example, Lagos or Kaduna, the clause
may need to be altered if such a place or
State is changed.
ALTERATION OF THE RESTRICTION OF
THE POWERS OF THE COMPANY CLAUSE
This clause is alterable in the same
manner as the object or business
discussed earlier. See Section 45(2) of
the Act.
ALTERATIONS OF PROVISIONS IN THE MEMORANDUM
WHICH MIGHT LAWFULLY HAVE BEEN CONTAINED IN THE
ARTICLES
Examples of this provision is the restriction
on the powers of directors. This can be
altered by Special Resolution but if
application is made to the court for the
alteration to be cancelled, it will not have
effect except in so far as it has been
confirmed by the court. See Section 47(1)
of the Act.
PROCEDURE FOR ALTERATION
OF CANCELLATION
The procedure to be adopted for alteration (or
cancellation) here is that under Section 46
earlier discussed with the exceptions of the
provisions under Section 46 of the Act relating to
debenture holders, that is, Section 46(2)(b), (5),
(6) and (10).
However, the provision in Section 47 will not
apply where the Memorandum provides or
prohibits the alteration of those provisions.
ALTERATION OF ARTICLES OF
ASSOCIATION
Section 48 of CAMA gives a company power to alter or
add to its Articles by Special Resolution but subject to
the provisions of the Act and to the conditions or other
provisions contained in the Memorandum of the
company. Any alteration so made shall be as valid as if
originally contained therein and be subject in like
manner to alteration by Special Resolution. See Section
48(1) and (2) of the Act. In the case of ANDREWS V.
GAS METER COMPANY (1897) 1 CH 361, the original
Articles contained no provision to issue preference
shares but the company, by Special Resolution, altered
its Articles so as to have power to issue preference
shares accordingly. The alteration was held to be
effective.
OF ARTICLES
There must be a Board meeting whereby
a resolution will be passed to alter the
Articles.
A notice of 21 days must be given to the
Members accompanied with the
proposed Special Resolution.
A general meeting will be convened
whereby a Special Resolution to alter the
Articles will be passed.
OF ARTICLES
The printed copies of the Articles and printed copy of the Special
Resolution must be delivered to the CAC within 15 days of the
passing of the resolution. See Section 237(1)(4)(a) of the Act.
The resolution must be annexed to every copy of the Articles
issued after the passing of the resolution.
Note that the alteration must not go contrary to the Act,
particularly Section 49 which provides that a member of a
company shall not be bound by any alteration made in the
Memorandum or Articles of the company requiring him on or after
the date of the alteration to
take or subscribe for more shares than he held at the date on which
he became a member or
increase his liability to contribute to the share capital of the
company; or
pay money by any other means to the company.
RUNNING THE COMPANY
PRELIMINARY MATTERS BEFORE
COMMENCEMENT OF BUSINESS
As a solicitor you must draw the attention
of your client to the need of a nameplate
which must be legible and conspicuously
placed outside the business place or office
of the company. The nameplate must also
have on it the companys (CAC) registered
number.
RUNNING THE COMPANY
There is a need to tell your client to
write the name and the registered number
of the company on all documents and all
official publications of the company.
The company must also have a
Common Seal with its name and
registered number on it.
RUNNING THE COMPANY
The company is also expected to keep some
statutory books which are:
REGISTER OF MEMBERS (SECTIONS 83 AND 84 OF
CAMA)
This is provided under Sections 83 and 84. The register
is supposed to contain the names, addresses,
descriptions of all the members and the number of
shares and class of shares held by each member. The
amount paid on the shares, how the amount was paid,
for example, by cash or other consideration. The
register must also contain the date, the particular name
of a shareholder and when he was registered as a
member.
RUNNING THE COMPANY
It should be noted that the name of a member must be
registered within 28 days of his acquiring the shares and
in the case of a subscriber within 28 days of
incorporating the company.
INDEX OF MEMBERS( SECTION 85 OF CAMA)
The purpose of the Index of Members is to list out the
names of members and the page. The name can be
found on the Register of Members. Where the company
arranged that the Register of Members also include an
index, there will be no need for a separate book as
Index of Members.
RUNNING THE COMPANY
Note also that the index of members is only
required where the membership of the company
is more than 50.
THE REGISTER OF SUBSTANTIAL INTEREST IN
SHARES OF THE COMPANY (SECTIONS 95 AND
97 CAMA)
Note that this is only required for public
companies. Its purpose is to register those who
have up to 10 per cent and above of the total
shares of the company.
RUNNING THE COMPANY
REGISTER OF DIRECTORS
SHAREHOLDING (SECTION 275 OF CAMA)
This register is a must for all companies,
whether private or public.
REGISTER OF DIRECTORS AND
SECRETARIES (SECTION 292 OF CAMA)
RUNNING THE COMPANY
This is also for all companies. It must contain
the names, usual residential address, nationality,
date of birth and particulars of other directorship
held by them.
REGISTER OF CHARGES (SECTIONS 191 AND
197 OF CAMA)
Securities or debentures charged on the
properties of the company either on land,
machinery or unpaid shares of the company or
book debt of the company have to be included
on the register. See Sections 191 and 197 of
the Act.
RUNNING THE COMPANY
REGISTER OF DEBENTURE HOLDERS -
The register shall contain the names and
addresses of the debenture holders, the
principal of the debenture and the
debentures held by each of them, et
cetera.
ACCOUNTING RECORDS (SECTIONS 331
AND 332 OF CAMA)
RUNNING THE COMPANY
This is also a must for all companies and it shall show
and explain the transactions of the company, the
financial position of the company and its assets and
liabilities. Section 331 to 332(1) of the Act.
THE MINUTES BOOK (SECTIONS 241 AND 242(1))
This is also a must for all companies and it must contain
the minutes of proceedings of general meetings,
Directors (Board) meetings and Minutes of its Managers
Meeting. This Minutes Book shall prima facie be
evidence of the proceedings.
DIRECTORS (S. 244 OF CAMA)
Directors are persons appointed to direct and manage
the business of the company. See Section 244 of CAMA.
Directors need not be shareholders except where there
is share qualification in the Articles of Association. S.251
Every company registered under CAMA must have a
minimum of two directors. See Section 246 of CAMA.
There is no statutory maximum but the company may by
its Articles provide for maximum number of directors.
In the case of RE: FOREST OF DEAN COAL MINING
COMPANY, Sir Jessel M. R. stated as follows:
DIRECTORS (S. 244 OF CAMA)
Directors have sometimes been called trustees or
commercial trustees and sometimes they have been
called managing partners. It does not matter what you
call them so long as you understand what their true
position is, which is that they are really commercial men
managing a trading concern for the benefit of
themselves and all other shareholders in it
Section 244(2) of the Act provides that there shall
be every rebuttable presumption that all persons who
are described by the company as directors whether as
Executive or otherwise, have been duly appointed.
APPOINTMENT OF FIRST
DIRECTORS (S.247 OF CAMA)
The first directors of a company are appointed in writing
by the subscribers to the Memorandum of Association or
a majority of them. The first directors may also be
appointed by naming them in the Articles of Association.
See Section 247 of CAMA. Subsequent directors are
appointed by members in a General Meeting.
The Articles of Memorandum may also empower
other person or officer to appoint subsequent directors
and where such power exists, it may be enforced by a
third party or a conferee may enforce the power even
where he is not a member of the company. See Section
41(3) of the Act.
DISQUALIFICATION FOR
DIRECTORSHIP (S.257 OF
CAMA)
By virtue Section 257 of CAMA, the
following persons cannot be appointed as
directors, that is, they are disqualified
from holding positions as directors:
An infant, that is, a person under 18 years of
age.
A lunatic or a person of unsound mind.
Any person disqualified under Sections 253,
254 and 258 of the Act.
DIRECTORSHIP (S.257 OF
CAMA)
Recall that Section 253 relates to insolvent
persons while Section 254 relates to
persons convicted of fraud in relation to
management of a company and Section
258 relates to circumstances where a
director should vacate his office.
A corporation, that is, a company other than a
person appointed to represent a company on
a Board.
TYPES OF DIRECTORS
Although there is no legal classification of
directors, it is possible to identify different
types of directors. These include:
(a) SHADOW DIRECTOR (SECTION 245
OF CAMA)
TYPES OF DIRECTORS
Section 245 of CAMA provides that directors include any person
at whose instructions or directions directors are accustomed to act.
Accordingly, where a person is in the habit of giving instructions or
directions to directors and the directors are in the habit of obeying
such instructions or directions, that person is deemed to be a
shadow director.
What this shows is that a shadow director is never appointed by
anybody. His existence is by the operation of the law and only for
the purpose of making him liable in the circumstances provided by
CAMA. He is not entitled to benefits, rights and responsibilities of
directors generally.
Directors shall include any person on whose instructions and
directions the directors are accustomed to act. Thus, the Chairman
and proprietor of the company is a director for the purpose of the
Act.
TYPES OF DIRECTORS
b. EXECUTIVE OR SPECIAL DIRECTOR
The Articles of Association of a
company usually give the directors or the
company power to appoint executive,
special or alternate directors.
TYPES OF DIRECTORS
In practice, an executive or special director is an
employee of the company whose status has been raised
to that of a director but who continues essentially as
such employee, for example, Sales Director. His status
is usually limited by the Articles but he may eventually
be elevated to full directorial status.
c. ALTERNATE DIRECTOR
An alternate director is appointed by a Director to sit
on the Board in place of an Executive or Special Director.
The power to make such an appointment must be
provided in the Articles and details of the relation
between the director and his alternative director, the
remuneration and other matters should also be clearly
stated in the Articles.
NUMBER OF DIRECTORS
First, it is a requirement of the law under
Section 246 of CAMA that every company
registered after the commencement of the 1990
Act must have at least two directors. Those
registered before the commencement of the
Act, that is, before 1st January 1990, with one
Director were given six months from that day to
regularise their position or face the consequence
in Section 246(3), that is, loss of the privilege of
limited liability status for the culpable director or
member and the lifting of the veil to affix
personal liability on the members who are aware
of the breach.
NUMBER OF DIRECTORS
the directors may increase the number of
directors so long as it does not exceed the
maximum allowed by the Articles but the
General Meeting shall have power to
increase or reduce the number of directors
generally and may determine in what
rotation the directors shall retire.
FIRST DIRECTORS (SECTIN 247 OF CAMA)
First Directors are appointed in two ways:
The number of the directors and the names of the
first directors shall be determined in writing by the
First subscribers to the Articles and Memorandum of
Association of a company or majority of them, or
The First Directors may be named in the Articles.
This is provided in Section 247 of the Act.
2. SUBSEQUENT APPOINTMENT OF
DIRECTORS (SECTION 248(1) OF
CAMA)
the members at the Annual General
Meeting shall have power to re-elect or
reject directors and appoint new ones.
In the event of all the directors and shareholders
dying, any of the personal representatives of the
shareholders may apply to the court for an order to
convene a meeting of all the personal representatives of
the shareholders entitled to attend and vote a general
meeting to appoint new directors to manage the
company.
Section 248(2) of the Act provides that if the
personal representatives of the shareholders fail to hold
a meeting, the creditors if any, may do so. This is a
clear manifestation of the perpetual succession of a
company as shown in the case of SALOMON V.
SALOMON CO. LTD. (SUPRA) and Section 37 of the Act.
RETIRING DIRECTORS
Reappointment of retiring directors is one of the
ordinary business at an Annual General Meeting.
where a director presents himself for re-election,
a record of his attendance at the meeting of the
Board during the preceding one year must be
made available to the members at the annual
meeting where he is to be re-elected.
CASUAL VACANCIES OF DIRECTORS
(S.249(1) & (2) OF CAMA)
Section 249 (1) and (2) of the Act
provides that casual vacancies arising out
of death, resignation, retirement or
removal may be filled by the Board of
Directors. The person(s) so appointed
shall hold office till the next AGM.
ROTATION OF DIRECTORS
Unless otherwise provided by the Articles of
Association of a company, at the first AGM, all
directors shall retire from office and at the AGM
in every subsequent year, one third of the
directors for the time being, or if their number is
not three or a multiple of three, then the
number nearest to one third shall retire from
office as provided in Section 259(1) of the Act.
A retiring director who offers himself for re-
election is deemed to have been re-elected
unless:
ROTATION OF DIRECTORS
Another person is elected to fill his place;
or
It is expressly resolved at the meeting not
to fill the vacancy created by his
retirement; or
A resolution for his re-election has been
put to the meeting and lost. See Section
259(3) of the Act.
VACATION OF OFFICE OF
DIRECTORS (S 258 OF CAMA)
Vacation of office of a director may arise from death,
appointment of a liquidator, disqualification, resignation,
retirement or removal. A person appointed director shall
vacate his office:
if he ceases to be a director for failure to hold qualification
shares;
if he becomes an undischarged bankrupt;
if he is prohibited by any order of the court made under Section
254 of the Act by reason of his being fraudulent;
if he becomes of unsound mind, or
if he resigns his office by notice in writing to the company.
DIRECTORSHIP
The following persons are disqualified
from being directors:
An infant under the age of 18 years.
A lunatic or person of unsound mind.
DIRECTORSHIP
An insolvent person disqualified under
Section 253 of CAMA. Where the
provision of the section of this Act is
violated, the person shall be tried and if
found guilty, shall be sentenced to a fine
of N500 or an imprisonment term of not
less than six months or more than 2 years
or both.
DIRECTORSHIP
If he becomes prohibited from becoming a
director by an order of a High Court for a period
not less than 10 years as provided under Section
254 of the Act in the following circumstances:
where he has been convicted of an indictable offence
in connection with the promotion, formation or
management of a company;
in the winding up of a company, it is found that he
has been guilty of fraudulent trading under Section
513;
he has been guilty while an office of the company of
any fraud in relation to the company or a breach of
duty towards it.
DIRECTORSHIP
Failure to hold qualification shares. Where
the Articles of Association require one
before one can become a director, such
office will be vacated where the Director
fails to obtain such qualification shares
within a period of two months.
A corporation other than its representative
appointed to the Board for a given period.
See Section 257 of CAMA.
AGE LIMIT OF DIRECTORS
Section 255(a) of CAMA provides for the minimum age
of appointment of a person as a director which is 18
years and above.
Generally, there is no maximum age for appointment
as directors except that restriction has been placed in
respect of a director of a public company who is 70
years or more. A person may be appointed a director of
a public company notwithstanding that he is 70 years or
more of age but Section 256 of the Act provides that
special notice of the resolution approving the
appointment of the director must be given to the
company. The notice to the company and to the
members must state the age of the director.
AGE LIMIT OF DIRECTORS
Section 252(1) of the Act provides that any
person who is appointed or to his knowledge
proposed to be appointed director of a public
company and who is 70 or more years old shall
disclose this fact to the members at the General
Meeting.
Failure of any to so do as required under
Section 252(2) of the Act shall constitute an
offence and that person shall be liable to a fine
of N500.
LIFE DIRECTOR
Sometimes, the Articles appoint a person life director. In
such a case, it is not necessary to re-elect him and the
Articles usually expressly exclude him from the operation
of the clause relating to retirement by rotation. He is
normally given wide powers of management and in
practice, he will probably be a major shareholder in the
company. He is, however, subject to removal under
Section 262 of the Act, that is, by an Ordinary Resolution
of which special notice is given as provided under
Section 255.
Note that a life director is not subject to retirement by
rotation.
MODE OF VOTING ON APPOINTMENT OF
DIRECTORS
Unless the Articles of a company
otherwise provide, appointment of
directors is by Ordinary Resolution.
MODE OF VOTING ON APPOINTMENT OF
DIRECTORS
A private company can and usually appoints
its directors by a single resolution.
A public company is required to appoint each
director by a separate resolution. However, a
public company may appoint two or more
directors by a single resolution if the meeting
unanimously passes a resolution that it should
be so made. See Section 261(1) of the Act.
REMOVAL OF DIRECTORS
The Articles of a company or the contract
appointing a director may provide for his
removal from office. However, Section 262(1)
of the Act provides that a company may, by an
Ordinary Resolution of which Special Notice is
given, remove a director before the expiration
of his period of office notwithstanding anything
in its Articles or in any agreement between it
and the director. The intention of this provision
is explicit. The shareholders must have power
to remove the Board.
But the director retains his right to claim
compensation or damages for wrongful
termination of his employment.
LONGE V. FIRST BANK OF NIGERIA
PLC.
YALAJU AMAYE V. AREC. LTD (1990)
4 NWLR (PT. 145) 422.
OLUFOSOYE V. FAKOREDE
Special notice is required also of any resolution to
appoint as director some other person instead of the
director so removed at the meeting at which he is
removed. See Section 262 of the Act.
The notice of resolution must be forwarded forthwith
upon receipt to the director who is entitled not only to
be heard on the resolution at the meeting but also to
make representation of reasonable length to be
forwarded at his request to the members who are given
notice of the meeting.
A vacancy created by the removal of
the director if not filled at the meeting at
which he is removed may be filled as a
casual vacancy.
Any person so removed is entitled to compensation
or damages payable to him by reason of his termination
of appointment as a director or of any appointment, for
example, as Managing Director. See Section 262(6) of
the Act.
A director who was unlawfully removed could still be
properly removed despite the improper notice and
procedure adopted earlier, since the company has a
statutory right to remove anybody from its Board
although that person may apply for a winding up order
of the company on the ground that it is just and
equitable for the court to make such an order. That was
the decision in AREC LTD. V. YALAJU AMAYE (1986)
NWLR 653.
PROCEDURE FOR REMOVAL OF
DIRECTORS UNDER S.262 OF CAMA
Check to find out if direct and simpler power
of removal other than Section 262 is provided
by the Articles or contract and apply it if
available.
The person(s) wishing to remove the director
must issue(s) notice of the resolution to the
company at least 28 days before the date of
the meeting. See Section 236 of the Act.
Section 236 of CAMA provides as follows:
Where by any provision contained in this Act, special
notice is required of a resolution, the resolution shall
not be effective unless notice of the intention to move
it has been given to the company not less than twenty
eight days before the meeting at which it is to be
moved and the company shall give its members notice
of any such resolution at the same time and in the
same manner as it gives notice of the meeting or if
that is not practicable, shall give them notice thereof,
either by advertisement in a newspaper having an
appropriate circulation or in any other mode allowed
by the Articles, not less than twenty one days before
the meeting:
Provided that if, after notice of the
intention to move such a resolution has
been given to the company, a meeting is
called for a date twenty eight days or
less after the notice has been give, the
notice though not given within the time
required by this section shall be deemed
to have been properly given for
purposes thereof.
Upon receipt of the notice, the Secretary to the company will:
send a copy of it to the director concerned;
issue notice of the meeting at least 21 days before the date of the
meeting. The notice will be accompanied by any representations
made by the director and state the fact of the representations having
been made.
At the meeting:
give audience to the director and read to the members his
representations if they were received too late or were not sent to the
members owing to the companys default.
Pass ordinary resolution removing the director.
File form of particulars of directors and of any changes therein, that
is, Form CAC 7 to the CAC to reflect the removal within 14 days of
remove.
Enter the fact of removal in the Register of Directors and where
necessary also amend the Register of Directors Shareholding.
See YALAJU-AMAYE V. AREC LTD
(SUPRA).
DUTIES OF DIRECTORS
Directors occupy a key position in the management of a
company and are, therefore, subject to certain
obligations. Directors are both trustees and agents of
the company they represent. All the normal rules of
agency apply. A directors duties are not capable of
precise definition although CAMA has attempted a
codification of the duties but they are by no means
exhaustive.
Broadly speaking, directors owe two duties namely:
Fiduciary duties and
Duties of care and skill.
1. FIDUCIARY DUTIES
DUTIES OF DIRECTORS
(a) Directors as Trustees (Section 283(1)
of CAMA)
Section 283(1) of the Act provides that directors
are trustees of the companys moneys,
properties and their powers and as such must
account for all the monies over which they
exercise control and shall refund any moneys
improperly paid away and shall exercise their
power bona fide and for the benefit of the
company and not in their own interest.
(b) Directors as Agents (Section 283(2)
of CAMA)
DUTIES OF DIRECTORS
Section 283(2) of the Act provides that directors may,
when acting within their authority and the powers of the
company, be regarded as agents of the company. Like
other agents, directors incur no personal liability and are
accountable for any secret profit made. But if directors
exceed their authority, they may become liable for
breach of warranty and they will also be liable if they
contract in their own names.
(c) Fiduciary Relationship of Directors
i) The Director shall observe the utmost good faith
towards the company in any transaction with it or on its
behalf.
DUTIES OF DIRECTORS
ii) The fiduciary duties of a director also
include where he is acting as agent of a
particular shareholder.
iii) Where even though the director is not
an agent of any shareholder such a
shareholder or other person is dealing
with the companys securities. See
Section 279(2)(b) of the Act.
DUTIES OF DIRECTORS
iv) A director shall act at all times in
what he believes to be in the best
interests of the company as a whole so as
to preserve its assets, further its business
and promote the purposes for which it
was formed and in such manner as a
faithful, diligent, careful and ordinarily
skilful director would act in the
circumstance. See Section 279(3) of the
Act.
DUTIES OF DIRECTORS
v) The matters to which the director of a company is to
have regard in the performance of his functions include
the interests of the companys employees in general as
well as the interests of its members. See Section 279(4)
of the Act.
vi) A director shall exercise his powers for the purpose
for which he is specified and shall not do so for a
collateral purpose and such power, if exercised for the
right purpose, does not constitute a breach of duty if it
incidentally affects a member adversely. See Section
279(5) of the Act.
DUTIES OF DIRECTORS
vii) A director shall not fetter his discretion to vote in a particular
way. They may not, however, use their voting control to ratify their
own fraud. See the case of COOK V. DEEKS (1916) AC 544.
viii) Where a director is allowed to delegate his powers under any
provision of this Act, such a director shall not delegate the power in
such a way and manner as may amount to an abdication of duty.
ix) No provision, whether contained in the Articles or Resolutions
of a company or in any contract, shall relieve any director from the
duty to act in accordance with this section or shall relieve him from
any liability incurred as a result of any breach of the duties
conferred upon him under this section. See Section 279(8) of the
Act.
DUTIES OF DIRECTORS
x) Any duty imposed on a director under this
section shall be enforceable against the director
by the company.
(d) Conflicts of Duties and Interests of Directors
(i) Section 280(1) of CAMA provides that the
personal interest of a director shall not conflict
with any of his duties as a director under this
Act. This may arise in various ways:
DUTIES OF DIRECTORS
(a) The golden rule is that a director must not, without
the consent of the company, make any profit out of his
position in the company beyond his agreed
remuneration. That was the decision in BOSTON DEEP
SEA FISHING CO. V. ANSELL (1888) 39 CH. D. 339
(b) The duty of a director not to misuse information
obtained from the company by virtue of his position
continues even after he has ceased to be a director or
officer of the company. See Section 280(5) of the Act.
See also the case of INDUSTRIAL DEV.
CONSULTANTS LTD (IDCL) V. COOLEY (1972) 1
WLR 443 where the director resigned but was still held
liable to account.
DUTIES OF DIRECTORS
(c) The director must not use the companys property to
make secret profit or achieve other unnecessary
benefits.
(d) By virtue of Section 281 of the Act, holding of
multiple directorship by a person does not preclude him
from derogating from his fiduciary duties to each
company of which he is a director. Therefore, he is not
permitted to use the property, opportunity or
information obtained in the course of the management
of one company for the benefit of the other company or
to his own or other persons advantage.
2. DUTY OF CARE AND SKILL
DUTIES OF DIRECTORS
COMMON LAW POSITION
The Common Law position of a directors duty of care
and skill was considered at length by ROMER J. in RE:
CITY EQUITABLE FIRE INSURANCE CO. LTD.
(1925) CH. 407 where he held inter alia that in
discharging his duty, a director must act honestly. He
was not bound to give continuous attention to the affairs
of the company but ought to attend meetings when
reasonably able to do so. Hence, only the Chairman was
liable for the losses. Any negligence of others was not
wilful and they were excluded by the Article.
Romer J. then laid down the following proposition after
considering all the earlier authorities on the issue.
DUTIES OF DIRECTORS
A director need not exhibit in the performance
of his duties a greater degree of skill than may
reasonably be expected from a person of his
knowledge and experience.
What this means is that a director will be judged
by the skill (low or high) which he holds out
about himself.
The case of SHONOWO V. ADEBAYO (1969)
2 ALR COMM.. 419 is a classic example of a
company destroyed by the incompetence and
carelessness of its directors.
DUTIES OF DIRECTORS
In the case of RE: BRAZILIAN RUBBER
PLANTATION ESTATE LTD. (1911) 1 CH. 425,
Neville J. said:
A director is not bound to bring any special qualification
to his office. He may undertake the management of a
rubber company in complete ignorance of anything
connected with the rubber without incurring
responsibilities for the mistakes which may result from
such ignorance while if he is acquainted with the rubber
business, he must give the company the advantage of
his knowledge when transacting the companys business.
DUTIES OF DIRECTORS
A director is not bound to give continuous attention to
the companys affairs. His duties are of intermittent
nature to be performed at periodical Board meetings and
at meetings of any Committee of the Board upon which
he happens to be placed. He is, however, bound to
attend all such meetings though he ought to attend
whenever in the circumstances he is reasonably able to
do so.
Thus, at Common Law, a director may safely be
ignorant, inexperience and lacking in judgment so long
as he is honest.
THE POSITION UNDER CAMA
DUTIES OF DIRECTORS
The duty of care and skill expected of a
director is now clearly stated in Section
282 of CAMA.
DUTIES OF DIRECTORS
Section 282(1) of the Act provides that every director of
a company shall exercise the powers and discharge the
duties of his office honestly, in good faith and in the best
interests of the company and shall exercise that degree
of care, diligence and skill which a reasonably prudent
director would exercise in comparable circumstances.
If he fails to observe that degree of care and diligence,
he may be liable for negligence and breach of duty as
provided in Section 282(2) of the Act. The same
standard of care is required for all directors unless there
is justification for exception. See Section 282(4) of the
Act.
DUTIES OF DIRECTORS
But in the case of an Executive Director,
additional liability and benefit may arise
under the contract of employment
(express or implied) between such
executive director and the company.
DUTIES OF DIRECTORS
In order to deal with a situation where a director
deliberately shirks his responsibility, Section 282(3) of
the Act provides that a director is individually responsible
for the actions of the Board in which he participated and
absence from the Boards deliberation, unless justified,
will not relieve a director of such responsibility.
In effect, the new law under CAMA is to the effect that
the standard of care required from a director is an
objective one, that is, it is a fixed standard depending on
the skill and knowledge a reasonable, prudent director of
his class would exercise if faced with similar
circumstances.
ENFORCEMENT OF THE DUTIES
OF DIRECTORS
INTRODUCTION
As a general rule, it is the companys responsibility
to enforce the directors duties but because of the
powerful administrative machinery of the company at
the disposal of directors, it is not easy for the company
to enforce the duties and so the usual way of doing so is
by removing the directors under powers given by Section
262(1) of the Act which provides that a company may,
by ordinary resolution requiring special notice, remove a
director notwithstanding the provision in the Articles or
even in the agreement between the company and the
director.
OF DIRECTORS
It should be noted that in several companies, directors would normally
be the controlling shareholders, a situation which makes their removal
difficult and sometimes impossible. In such a case, the following remedies
are available to shareholders:
Petition for winding up the company on the ground that it is just and equitable to
do so. See Section 408(e) of CAMA.
Relief on the ground that the affairs of the company are being conducted in an
illegal and oppressive manner. See Sections 311 to 313 of CAMA.
To commence misfeasance proceedings against a director or other officers of a
company. Misfeasance means compromised integrity. See Section 507 of the
Act. This section provides a remedy against the unlawful acts of directors and
other officers and is available only when the company is in liquidation. Where a
director (or a manager or liquidator or any officer of the company) has
misapplied or retained or has become liable for any money or property of the
company or is guilty of any misfeasance or breach of duty in relation to the
company which would involve civil liability at the suit of the company, an
application may, after investigation, be made to the court to compel him to
repay or restore the money or property or contribute by way of compensation
towards restoring the companys assets.
Investigation of the companys affairs by the CAC under Sections 314 and 315 of
CAMA
OF DIRECTORS
Under Sections 314 and 315 of the Act,
application may be made to the
Commission for an investigation into the
affairs of the company and if satisfied that
there is good ground for this, it will direct
the appointment of an inspector.
REGISTER OF DIRECTORS AND
SECRETARIES
Section 292(1) of CAMA provides that every company must keep at
its registered office a Register of its Directors and Secretaries.
The Register must contain the following particulars with respect to
each director, namely,
(a) his present forename and surname;
(b) any former forename and surname;
(c) his usual residential address;
(d) his nationality;
(e) his business occupation, if any;
(f) particulars of any other directorships held by him and
(g) the date of his birth.
This is provided in Section 292(2) of the Act.
REMUNERATION OF DIRECTORS
(S 267 OF CAMA)
Section 267 of CAMA provides, inter alia, that:
(1) The remuneration of the directors shall from time to
time be determined by the company in general meeting
and such remuneration shall be deemed to accrue from
day to day.
(2) The directors may also be paid all travelling, hotel
and other expenses properly incurred by them in
attending and returning from meetings of the directors
or any Committee of the directors or general meetings of
the company or in connection with the business of the
company.
(S 267 OF CAMA)
where the Articles fix the remuneration, it
can only be altered by a special resolution.
(S 267 OF CAMA)
The company is not bound to pay remuneration to
directors but where the company agrees to pay, the
directors must pay such remuneration out of the funds
of the company and such payment is apportionable. See
Section 267(4) and (7).
Where a company goes into liquidation before it has
determined the remuneration of the director as provided
in Section 267(1) of the Act, the director is not entitled
to any remuneration. Nor are directors entitled to
preferential payments of fees in winding up since they
are not servants of the company.
REMUNERATION OF MANAGING
DIRECTOR - (S.268 OF CAMA)
Although the remuneration of the Managing
Director is regulated by Section 268 of the Act, it
shall be determined by the directors. Section
268 of CAMA provides as follows:
268(1): A Managing Director shall receive such
remuneration (whether by way of salary,
commission or participation in profits or partly in
one way and partly in another) as the directors
may determine.
REMUNERATION OF MANAGING
DIRECTOR - (S.268 OF CAMA)
268(2): Where the Managing Director is
removed for any reason whatsoever under
Section 262 of this Act, he shall have a
claim for breach of contract if there is any
or where a contract could be inferred from
the terms of the Articles.
268(3): Where he performs some services
without a contract, he shall be entitled to
payment on a quantum meruit.
LIABILITY OF DIRECTORS
1. Liability in Contract
When a director contracts as agents on behalf of
the company, like any other agent, he is not
personally liable on the contract. See Palmers
Company Law, paragraph 62-02 at page 922.
This is an application of the general principles of
agency and under this principle, the director
may be personally liable where he contracts in
such a way as to assume personal liability.
Note that where a director contracts in his own
name without disclosing that he is acting for a
principal, he may be personally liable to third
parties on the contract. That was the decision
in the case of ELKINGTON AND CO. V.
HURTER (1892) 2 CH. 452.
Even where he contracts as a director but
without using words that bind the company, he
will be personally liable.
2. Liability in Tort
Any director who personally commits a fraud or
any other tort in the course of his duties is liable
to the injured party. This is based on the
principle that whoever commits a wrong is liable
for it himself and nonetheless so that he was
acting as an agent or servant on behalf, and for
the benefit of another. See Palmers Company
Law, paragraph 64-65 at page 972.
A director who has not authorised a fraud
committed by his co-directors cannot be
held responsible for it.
Where there is a breach of the duty of care as
explained earlier, the director will be liable to the
company for any loss sustained and action may
be brought by the company to restrain him from
committing or continuing the breach, and if the
breach has been committed, proceedings may
be taken for damages or compensation for
restoration of the property of the company, if
traceable, for rescission of the contract in
question or for an account of any profits made.
In addition, the director may be dismissed
summarily.
PERSONAL LIABILITY OF
DIRECTORS
Section 290 of CAMA is apparently
intended to deal with the rampant
complaints about directors who obtain
loans or advance on behalf of the
company for specific projects and divert
them to their personal use. The section
deals with cases
(a) where a company receives money by
way of a loan for specific purposes, or
DIRECTORS
(b) where it receives money or other
property by way of advance payment for
the execution of a contract or project.
DIRECTORS

In any of these cases, if the company, with
intent to defraud, fails to apply the money or
other property for the purpose for which it was
received, every director or other officer of the
company who is in default is personally liable to
the party from whom the money or property
was so received and not applied for the purpose
for which it was received. But this provision
does not affect the liability of the company itself,
and so, it may be joined in any action against
the directors.
BREACH OF SECTIONS 93 AND
246 OF CAMA
A director may also be personally liable where
the company carries on business without having
at least 2 members as provided in Section 93 of
the Act or without having 2 directors as provided
under Section 246 of the Act. If the company
carries on business for more than 6 months after
the membership has fallen below 2, every
director or officer who knows that it so carries
on business is liable jointly and severally with
the company for the debts of the company
contracted during the period.
BREACH OF SECTIONS 93 AND
246 OF CAMA
With regard to the number of directors,
Section 246(3) of the Act provides that a
director or member of a company who
knows that the company carries on
business after the number of directors has
fallen below 2 for more than 60 days is
liable for all liabilities and debts incurred
by the company during that period.
PROCEEDINGS OF DIRECTORS
BOARD MEETINGS (SECTION 263 OF
CAMA)
The directors may meet for the
despatch of business, adjourn and
otherwise regulate their meetings, as they
think fit. See Section 263 of CAMA.
PROCEEDINGS OF DIRECTORS
The first meeting of the directors must
be held not later than 6 months after the
incorporation of the company. Questions
at meetings shall be decided by a majority
of votes, and the Chairman has a casting
vote in case of equality of votes.
A director may and the secretary on
the requisition of a director shall, at any
time, summon a meeting of the directors.
THE CHAIRMAN OF BOARD
MEETINGS
The directors may elect a Chairman of
their meetings. This Chairman will
naturally become the Chairman of the
company and determine the period for
which he is to hold office. If no Chairman
is elected or if at any meeting he is not
present within five minutes after the time
appointed for the holding of the meeting,
the directors present may choose one of
their number to be Chairman.
DELEGATION BY THE BOARD
The maxim delegates non potest delegare
applies to directors in the same way as to
all agents. A person to whom a function
has been delegated may not himself
delegate it further without the consent of
his principal.
Section 64 of CAMA, however, provides
that Directors may delegate any of their
powers to a managing director or to
Committees consisting of such member or
members of their body as they think fit
and such Committees must conform to the
directors regulation. Thus, a Committee
may consist of a single director.
A Committee has power to elect its
own chairman and a substitute in his place
where he is absent. This Chairman also
has a casting vote. The Committee
regulates its own conduct of meeting as it
thinks proper.
There are, however, situations when
the Board can dispense with holding
meeting. Section 263(8) of CAMA
provides that:
A resolution in writing, signed by all the
directors for the time being entitled to
receive notice of a meeting of the
directors, shall be as valid and effectual as
if it had been passed at a meeting of the
directors duly convened and held.
In all the directors meetings, each
director shall be entitled to one vote.
QUORUM AT BOARD MEETINGS
Unless the Articles expresses a contrary
intention, the Quorum necessary for the
transaction of business of directors shall
be 2 where they are not more than 6 but
where they are more than 6, the Quorum
shall be one third to the nearest number
where the number of directors is not a
multiple of three.
QUORUM AT BOARD MEETINGS
The Board fixes the Quorum of
Committee appointed by it and where it
fails to do so, the whole Committee shall
meet and act by a majority. Where the
Board cannot act because a Quorum
cannot be formed, the general meeting
may act in its place and the Board also
acts in place of the Committee where the
Committee cannot form a quorum.
NOTICE OF DIRECTORS
MEETINGS
Every director shall be entitled to receive notice
of the directors meetings unless he is
disqualified by any reason from acting as
director under the Act.
Unless the Articles otherwise provide
(1) 14 days notice in writing to all directors
entitled to receive notice will be sufficient.
(2) Non-compliance with this will invalidates the
meeting.
(3) It shall not be necessary to give notice of a
meeting of director to any director who is
outside Nigeria during the period of the meeting.
APPOINTMENT OF COMPANY
SECRETARIES
Like Section 169 of the Companies Act,
1968, Section 293 of CAMA makes it
mandatory for companies, whether private
or public, to appoint Company Secretaries
but unlike the Companies Act of 1968, the
Companies and Allied Matters Act, 1990
appears to have raised the status of a
Companys Secretary to one which is
reserved for qualified professionals only.
See Section 295 of CAMA.
APPOINTMENT OF COMPANY
SECRETARIES
It is the duty of Company Directors to
ensure that a person that is appointed
Company Secretary possesses the relevant
experience and skill.
QUALIFICATION FOR APPOINTMENT AS
COMPANY SECRETARY (S.295 OF
CAMA)
Section 295 of the Companies and Allied
Matters Act, 1990 provides it shall be the
duty of a director of a company to take all
reasonable steps to ensure that the
Secretary of the company is a person who
appears to him to have the requisite
knowledge and experience to discharge
the functions of a Secretary of a company.
CAMA)
In the case of a public company, the
same Section provides that a Secretary
must have one of the specified
qualifications:
A member of the Institute of Chartered
Secretaries and Administrators; or
CAMA)
A Legal Practitioner within the meaning of
the Legal Practitioners Act, 1975; or
A Member of the Institute of Chartered
Accountants of Nigeria (ICAN); or
CAMA)
Any person who has held the office of a
Secretary of a public company for at least
3 years of the 5 years immediately
preceding his appointment; or
A body corporate or firm consisting of
qualified persons under paragraphs (a),
(b), (c) or (d).
DUTIES OF COMPANY SECRETARIES
The Companies and Allied Matters Act
makes provision for both general and
specific duties for Company Secretaries.
Section 298(1) of the Act provides that the
duties include the following:
Attending the meetings of the Board of
Directors of the company, its general
meeting, whether AGM, statutory general
meeting or extra-ordinary meeting. He is
also charged with rendering all the
necessary secretarial services in respect of
the meeting and advising on compliance
by the meeting with the applicable rules
and regulations.
The Board of Directors have Committees.
When they are meeting, the Company
Secretary is the one statutorily
empowered to service these meetings.
The Company Secretary is the compliance
officer, the liasing officer between the
company and the CAC.
It is the Company Secretarys duty to keep
all statutory books, registers of members,
register of debenture holders et cetera. It
is his duty to maintain the registers to
ensure that they are properly kept.
Carrying out such administrative and other
secretarial duties as directed by the
directors of the company. See Section
298(1) of the Act.
OMNIBUS DUTIES OF COMPANY
SECRETARIES
Company Secretaries are to carry out
duties as may be assigned to them by
Board of Directors from time to time.
In BARNETT HOARES AND COMPANY
V. SOUTH LONDON TRAMWAYS
COMPANY (1887) 18 QBD 818,
particularly at 817, the position of the
status of a Company Secretary was
described thus:
SECRETARIES
A Secretary is a mere servant. His
position is that he is to do what he is told
and no one can assumes that he has any
authority to represent anything at all.
Thus, his duties, since this decision,
were seen as clerical and ministerial only.
SECRETARIES
However, in PANORAMA DEVELOPMENT
(GUILDFORD) LTD. V. FIDELIS
FURNISHING FABRICS LTD (1971) 2 QB
711, Lord Denning stated:
Times have changed. A Company Secretary is
a much more important person nowadays than
he was in 1887. He is an officer of the company
with extensive duties and responsibilities. He
is no longer a mere clerk.
SECRETARIES
As shown above, the duties of Company
Secretary in Nigeria, as in many other
jurisdictions is now statutory defined. Although
appointed by the Board of Directors, a Company
Secretary is no longer their servant. In the
performance of his statutory duties, the
Company Secretary is entitled to resist any
interference from the shareholders, that is, the
members of the company, the Board of Directors
or even the Managing Director. See the
following cases:
OKEOWO V. MIGLIORE (1979)
SECRETARIES
WIMPEY NIGERIA LTD. V. BALOGUN
(1987) 2 NWLR (PT. 28) 322.
QUESTION
To what extent can a Company Secretary
bind his company by his acts?
Support your answer with statutory
provisions or otherwise
Note that although Section 298 spells out the
duties of a Company Secretary, he cannot suo
motu, that is, on his own volition, exercise any
power expressly vested by statute or the Articles
of Association in the directors. See Section
298(2) of the Act.
When it comes to providing the administrative
and secretarial services to accomplish those
management decisions, he is at liberty to take
appropriate decisions.
POWER AND AUTHORITY OF
COMPANY SECRETARIES
Section 298(2) of CAMA provides that the
Secretary cannot, without the authority of the
Board exercise any powers vested in the
directors. It is submitted that since an
unauthorised act is expressly prohibited by
Section 298(2) of the Act, such act cannot be
later ratified by the Board since it is void ab
initio. That was the decision in ADEBESIN V.
MAY AND BAKER NIGERIA LTD decided
before the enactment of the Act.
REMOVAL OF COMPANY
SECRETARIES
It is the duty of the Board of Directors of a
company to appoint and remove Company
Secretaries. See Section 296(1) of CAMA
with respect to the removal of Company
Secretaries of public companies.
However, the Board of Directors can no
longer arbitrarily remove a Company
Secretary from office unless as provided
by CAMA in Section 296(2).
THE PROCEDURE FOR THE REMOVAL OF
COMPANY SECRETARIES
The procedure for the removal of a
Company Secretary is as follows:
The Board of Directors must serve a
Notice on the Secretary stating:
that it is intended to remove him from office;
the ground for the proposed removal;
that he may resign from office within 7 days;
that he may make a defence in writing which
must be submitted within 7 days;
COMPANY SECRETARIES
If after the notice, the Secretary neither
resigned from office nor made any
defence, the Board of Directors may
remove him from office and report to the
General Meeting at the next meeting.
Where the Company Secretary makes a
defence, written or oral, which in the
opinion of the Board of Directors is
unsatisfactory:
COMPANY SECRETARIES
If the ground on which the Secretary is to
be removed from office is fraud or serious
misconduct, the Board of Directors may
remove him from office and report the
same to the companys general meeting.
COMPANY SECRETARIES
If the ground on which the Company
Secretary is to be removed is other than
fraud or serious misconduct, the Board of
Directors shall not remove him but may
suspend him from office pending the next
General Meeting of the company when the
suspension will be reported and the
company will take a decision.
COMPANY SECRETARIES
If the next general meeting ratifies the
suspension of the Company Secretary
from office, he shall be removed from
office and the effective date of removal
shall be the date the Board of Directors
suspended him from office.
COMPANY SECRETARIES
Note that the procedure for the removal of
Company Secretaries must be strictly
complied with. See the case of ERONINI
V. HABO AND ORS. (1957) 1 NSCC
17.
QUESTION
Enumerate five ways you think CAMA has
enhanced the status of a Company
Secretary in Nigeria. See Sections 293 to
298 of CAMA.
ANSWER
HOW CAMA HAS ENHANCED THE
STATUS OF COMPANY SECRETARIES
ANSWER
Section 293(1) of CAMA has made it mandatory
for every company in Nigeria to appoint a
Company Secretary. So, the office is made
statutorily relevant by virtue of that Section.
Section 295 of CAMA has considerably enhanced
the status of Company Secretary by restricting
the eligibility for appointment as Company
Secretary of public companies to only
qualified professionals, viz, lawyers, chartered
accountants and ACIS members.
ANSWER
The duties of a Company Secretary are
now statutorily prescribed in Section 298
of the Act. Therefore, they are no longer
errand boys to the Board of Directors or
mere clerical officers of the company.
Job Security
ANSWER
Although Company Secretaries are
appointed by the Board of Directors and
are removed by them CAMA, under
Section 296(2), has prescribed the
procedure for the removal of Company
Secretaries.
ANSWER
Company Secretaries are now statutorily
acknowledged as officers of the company
who, within their administrative sphere or
responsibilities, may initiate acts which will
be binding on the company. To this
extent, one may say that CAMA has
enhanced the status of Company
Secretary but you have to be critical in
appraising this point.
CORPORATE LITIGATION OR
MAJORITY RULE

THE RULE IN FOSS V. HARBOTTLE
(1843) 2 HARE 461

It is a well established principle that a company
is a separate legal person from its members.
Once it is accepted that the company is a legal
person, it follows that if a wrong is done to the
company, the company is the proper person to
bring an action. Therefore, as a rule, when a
company is incorporated and is a going concern,
the wish of the majority must prevail for it is
important that the principle of democracy should
prevail. A company must, therefore, act in
accordance with the decisions taken by the
majority of its members willing and able to vote.
Also, it is part of the rule that once
powers have been delegated to directors,
the majority cannot derogate from the
powers of the directors for the day-to-day
management of the company.
However, powers of the majority rule
extends to every facet of the companys
affairs. The majority of members have
power to:
Alter the Memorandum and Articles of
They appoint and dismiss the directors.
If they so desire, they can put an end to
the business.
The rule is that in an action to remedy
any wrong done to the company or where
irregularity has been committed in the
course of a companys affairs, the proper
plaintiff is the company itself. It is the
majority who determines whether the
company should sue for redress or not.
The facts of FOSS V. HARBOTTLE
(SUPRA) are as follows:
F. and T. were shareholders in a company
which was formed to buy land for use as a
pleasure park. The defendants were the other
directors and shareholders of the company. F.
and T. alleged that certain of the defendants
had sold land belonging to them to the company
at an exorbitant price. F. and T. now asked the
court to order that the defendants make good
the losses to the company.

The Court held that since the
companys Board of Directors was still in
existence, and since it was still possible to
call a general meeting of the company,
there was nothing stopping the company
from obtaining redress in its corporate
character and that the action of F. and T.
could not be sustained.
The rule has been held to apply not only to
incorporated bodies but also to unincorporated
associations. It was accordingly applied to trade
unions in COTTER V. NATIONAL UNION OF
SEAMEN (1929) 2 CH. 58 and MBENE V.
OFILI (1968) 1 ALR COMM. 235 and to
JAMAL-UL-MUSLIM OF LAGOS on the ground
that it was a body possessing a Constitution or a
set of rules and regulations entitling it to sue
and be sued as a legal entity.
See also the following cases:
YALAJU AMAYE V. AREC (SUPRA).
The majority rule
applied in this case.
2. EDOKPOLO V. SEM-EDO WIRE
INDUSTRIES LTD (1984) 7 SC. The
majority rule was relaxed in this case.
3. ABU BAKARE V. SMITH (1973) 6
SC 31. The majority rule also applied.

BASIS AND RATIONALE FOR THE
RULE IN FOSS AND HARBOTTLE
If every individual member of the
company were permitted to sue anyone
who had injured the company through a
breach of duty, there could be as many
actions as there are shareholders, that
is, it prevents multiplicity of suits.
Legal proceedings would never cease
and there would be enormous wastage
of time and money.
The rule prevents the company from
being torn into pieces by multiplicity of
action. In the case of LA
COMPAIGNIE DE MAYVILLE V.
WHITLEDY (1896) 1 CH. 788, Kay
L.J. stated that:
The proper course in the case of any matter
which relates to the internal management and
trade affair of the company is to call a meeting
and that is practically the only remedy which
this court allows a director or a shareholder of
a company to take; otherwise we should have
companies torn to pieces by litigation of this
kind. The court has always set itself resolutely
against such litigation.
If an individual member could sue a person who had
caused loss to the company and the company then
ratified that persons act at a general meeting, then a
legal proceedings would be quite useless, for a court
will naturally hold that the will of the majority prevails.
This is essentially based on Partnership doctrine that
the court will not interfere in matters of internal
management. Courts will generally not act in vain.
This is based on one of the maxims of Equity that
Equity will not act in vain. In MACDOUGALL V.
GARDINER (1875) 1 CH D. 13, the court held that
the plaintiff must fail as the action was asking for the
interference of the court in the internal affairs of the
company.
A defendant in a corporate litigation will
be better protected if the company is the
main plaintiff because the defendants
rights like counter-claim, set-off, et
cetera are preserved if the company is
sued.
EXCEPTIONS TO THE RULE IN
FOSS V. HARBOTTLE
At Common Law, various devices were
adopted to reduce the harsh effects of the
rule in FOSS V. HARBOTTLE through the
creation of various exceptions by the
courts in the interest of justice. These
exceptions have now been enacted under
Section 300 of CAMA.
PROTECTION OF INDIVIDUAL MEMBERS
RIGHT
Entering into any transaction which is
illegal or ultra vires, for example, where
the shareholders at a general meeting
resolved to spend part of the purchase
money after sale of the company in
compensating employees and part as
remuneration for past services of
directors, when a company being wound
up has no power to make such a
payment. See Section 300(a) of CAMA.
RIGHT
Purporting to do by ordinary resolution
an act which by its constitution or the
Act requires to be done by special
resolution. This is directed towards
preventing the majority from ratifying by
a wrong procedure an act which is itself
wrong. See Section 300(b) of the Act.
RIGHT
3. Where the individual rights of
members have been infringed by the
company or the directors by an act or
omission, of course, such a member(s)
can bring an action seeking for redress.
RIGHT
There are several individual membership rights. For example, if
you did not receive your notice of meeting and you heard that
your company is holding its Annual General Meeting in a
particular place, you can approach the court and seek to restrain
the company from holding that meeting because it is your
individual right. See Section 300(c) of the Act. Section 301 of
the Act provides that if the application is granted, such aggrieved
member shall not be entitled to damages but to declaration or
injunction restraining the company from doing a particular act. In
PENDER V. LUSHINGTON (1877) 6 CH. 70, an action was
brought by a shareholder whose vote was rejected on behalf of
himself and all others who had voted for him for an injunction to
restrain the directors from acting on the footing of the votes
being bad. The court held that the plaintiffs were entitled to an
injunction.
RIGHT
4. Where fraud is committed on the
company or on minority shareholders
and the directors fail to take appropriate
steps to redress the wrong done, a
member is entitled to bring members
personal or private action in Court; this
is relative. See Section 300(d) of the
Act.
RIGHT
5. Where a company meeting cannot
be called in time to be of practical use in
redressing a wrong done to the company
or to minority shareholders. This may
arise because the machinery for
convening the meeting is not readily in
place or where urgent action is needed
and it will be too late to wait for a formal
meeting requiring notice. See Section
300(e) of the Act.
RIGHT
6. Where the directors are likely to derive a
profit or benefit or have profited or benefited
from their negligence or from their breach of
duty, individual members can bring an action
seeking redress. In this case, it is either you
obtain an injunction or an order praying the
court that the directors are in breach of their
fiduciary duties. See Section 300(f) of the Act.

FORMS OF ACTION
An aggrieved shareholder can bring either:
a personal action;
a representative action or
a derivative action, depending on whose
right he is protecting. See Sections 301 to
303 of CAMA.
Section 301
FORMS OF ACTION
(1) Where a member institutes a personal
action to enforce a right due to him
personally, he shall not be entitled to any
damages but to declaration or injunction
to restrain the company and/or the
directors from doing a particular act.
FORMS OF ACTION
(2) Where a member institutes a
representative action on behalf of himself
and other affected members to enforce
any rights due to them, he shall not be
entitled to any damages but to a
declaration or injunction to restrain the
company and/or directors from doing a
particular act.
FORMS OF ACTION
(3) Where any member institutes an action
under this section, the court may award
costs to him personally whether or not his
action succeeds.
(4) In any proceedings by a member under
Section 300 of this Act, the court may, if it
thinks fit, order that the member shall
give security for costs.
Section 302:
FORMS OF ACTION
For the purpose of Section 300 and 301 of
this Act, member includes
the personal representative of a deceased
member; and
FORMS OF ACTION
any person to whom shares have been
transferred or transmitted by operation of law.
Section 303:
(1) Subject to the provisions of subsection (2) of
this section, an applicant may apply to the court
for leave to bring an action in the name or on
behalf of a company or to intervene in an action
to which the company is a party for the purpose
of prosecuting, defending or discontinuing the
action on behalf of the company.
FORMS OF ACTION
(2) No action may be brought and no
intervention may be made under
subsection (1) of this section, unless the
court is satisfied that -
the wrongdoers are the directors who are
in control and will not take necessary
action;
FORMS OF ACTION
the applicant has given reasonable notice
to the directors of the company of his
intention to apply to the court under
subsection (1) of this section if the
directors of the company do not bring,
diligently prosecute or defend or
discontinue the action;
FORMS OF ACTION
the applicant is acting in good faith; and
it appears to be in the interest of the
company that the action be brought,
prosecuted, defended or discontinued.
1. PERSONAL ACTION
A personal action is a situation where a
member sues for wrong done to him in his
capacity as a member. In other words,
the individual member is bringing his own
action. This can occur under Section
300(c) of the Act.
2. DERIVATIVE ACTION
Derivative action is in reality an action by the
company for the wrong done to it but since it
will not sue as plaintiff, provisions are made for
a minority to sue on its behalf and not on behalf
of the shareholders. Although the action is
framed as a representative one on behalf of the
aggrieved minority and other shareholders, it is,
in fact, an action which should be properly
brought by the company if it had not refused to
do so and the action is, therefore, derived from
the right of the company to sue, hence, it is
described as a derivative action.
CONDITIONS FOR THE APPLICATION OF
DERIVATIVE ACTION
Section 303(1) of CAMA, which is the
applicable law, provides that an applicant
may apply to the court for leave to bring
an action in the name or on behalf of a
company or to intervene in an action to
which the company is a party for the
purpose of prosecuting, defending or
discontinuing the action on behalf of the
company.
DERIVATIVE ACTION
no such action may be brought and no
such intervention may be made unless the
court is satisfied as to the following:
that the wrongdoers are the directors who
are in control and will not take necessary
action;
DERIVATIVE ACTION
that the applicant has given reasonable
notice to the directors of the company of
his intention to apply to the court if the
directors do not bring or diligently
prosecute or defend or discontinue the
action;
DERIVATIVE ACTION
that the applicant is acting in good faith;
and
that it appears to be in the best interest of
the company that the action be brought,
prosecuted, defended or discontinued.
WHO MAY APPLY?
The following may apply to court under a
derivative action as an applicant:
a registered holder or a beneficial owner
and a former registered holder or
beneficial owner of a security of a
company;
a director or an officer or a former director
or officer of a company;
the Corporate Affairs Commission; or
WHO MAY APPLY?
any other person who, in the discretion of
the court, is a proper person to make an
application for that purpose.
See Section 309 of the Act, the Definition
Section. See also the following cases:
TIKA-TORE PRESS V. ABINA (1973) 4
SC 63.
LADEJOBI V. ODUTOLA HOLDINGS
LTD (2002) 3 NWLR (PT. 753).
WHO MAY APPLY?
UNIPETROL NIGERIA PLC V. AGIP
NIGERIA PLC (2002) 14 NWLR (PT. )
312.
WILLIAMS V. EDU (2002) 3 NWLR
(PT. 754) 400.
WHO MAY APPLY?
With respect to the commencement of the
derivative action as provided in Section 303 of
the Act, the court may, at any time, make any
such order as it thinks fit. See Section 304(1) of
the Act. The court may also make one or more
of the following orders:
an order authorising the applicant or any other
person to control the conduct of the action;
WHO MAY APPLY?
an order giving direction for the conduct
of the action;
an order directing that any amount
adjudged payable by a defendant in the
action be paid in whole or in part, directly
to former and present security holders of
the company instead of to the company;
WHO MAY APPLY?
an order requiring the company to pay
reasonable legal fees incurred by the
applicant in connection with the
proceedings.
These orders are provided in Section
304(2) of the Act.
EVIDENCE OF SHAREHOLDERS
APPROVAL NOT DECISIVE
Section 305 of CAMA states that an action
brought under Section 303 of this Act shall not
be stayed or dismissed by reason only that it is
shown that an alleged breach of a right or a
duty owed to the company has been or may be
approved by the shareholders of such company
but evidence of approval by the shareholders
may be taken into account by the court in
making an order under Section 304 of this Act.
Under Section 306, the courts approval is
required before a derivative action is continued.
COSTS OF THE ACTION
Under Section 304(2)(d) of CAMA, the
court is empowered to order the payment
of reasonable legal fees incurred by the
applicant in connection with the
proceedings.
COSTS OF THE ACTION
An applicant is not required to give
security for costs in any action brought in
respect of a derivative action. See Section
307 of the Act. But the court may at any
time order the company to pay to the
applicant interim costs before the final
disposition of action. See Section 308 of
the Act.

3. RELIEF OR REMEDY ON GROUND
OF OPPRESIVE OR UNFAIRLY
PREJUDICIAL CONDUCT
(SECTIONS 310 - 311 OF CAMA)
Where a member of a company alleges
that the affairs of the company are being
conducted in an unfairly prejudicial or
oppressive manner, such a member may
apply to the court for relief by petition.
This is provided in Section 311 of the Act.
WHO MAY APPLY FOR RELIEF?
Under Section 310 of CAMA, an
application to the court by petition for an
order pursuant to Section 311 of this Act
dealing with relief on ground of oppressive
conduct may be made by any of the
following persons:
a member of the company;
a director or officer or a former director or
officer of the company;
a creditor;
the Corporate Affairs Commission;
any other person who, in the discretion of
the court, is the proper person to make
the application.
See IJALE PROPERTIES LTD. V.
OMOLOLU-MUILELE (2000) FWLR
(PT. 5) 709.
Note that the personal representatives
of a deceased shareholder and any person
to whom shares have been transferred or
transmitted by operation of law may also
apply for this relief.
OGUNADE V. MOBILE FILM (WEST
AFRICA) LTD (1976) 2 FRCR for the
definition of oppressive conduct. In this
case, Karibi-Whyte, J. (as he then was)
adopted the dictionary meaning of the word
oppressive to mean an act which is
burdensome, harsh and wrongful.
WILLIAMS V. WILLIAMS (1995) SCNJ
26.
Where the court is satisfied that there is
need to intervene, the court may make
any of the following orders as the court
thinks fit for giving relief in respect of the
matter complained of:
an order that the company be wound up;
an order for regulating the conduct of the
affairs of the company in future;
an order for the purchase of the shares of
any member by other members of the
company;
an order for the purchase of the shares of any
member of the company and for the reduction
accordingly of the companys capital;
an order directing the company to institute,
prosecute, defend or discontinue specific
proceedings so authorising a member or
members or the company to institute, prosecute,
defend or discontinue specific proceedings in the
name or on behalf of the company;
an order varying or setting aside a transaction or
contract to which the company is a party and
compensating the company or any party to the
transaction or contract;
an order directing an investigation to be made
by the Corporate Affairs Commission;
an order appointing a receiver or a receiver and
manager of property of the company;
an order restraining a person from
engaging in specific conduct or from doing
a specific act or thing;
an order requiring a person to do a
specific act or thing.
where an order that a company be wound
up is made under this Section, the
provisions of this Act relating to winding
up of companies shall apply, with such
adaptations as are necessary, as if the
order had been made upon an application
duly filed in court by the company.
INVESTIGATION OF COMPANYS AFFAIRS BY
THE CORPORATE AFFAIRS COMMISSION
As part of the scheme to ensure proper
administration and management of the
company, provisions are made for the CAC
to appoint inspectors for the purpose of
investigating the affairs of a company.
APPOINTMENT OF INSPECTORS
Sections 314 to 320 of CAMA provide for
the circumstances under which inspectors
may be appointed, their powers, the
procedure for such appointment and
report. The investigation also includes the
membership of companies.
There are three situations where inspectors
can be appointed to investigate the affairs of a
company. Section 314(1) of the Act provides
that the CAC may appoint one or more
competent inspectors to investigate the affairs
of a company and to report on them in such
manner as it may direct.
on the application of the company or its
members;
on the declaration of the court that a
company be investigated; and
on CACs own motion.
No specific qualification is required for
appointment provided the appointee is
generally competent
1. ON APPLICATION OF THE
COMPANY OR ITS MEMBERS
In the case of a company having a share
capital, Section 314(2)(a) of the Act
provides that the application may be made
by members holding not less than of
the class of shares issued.
With respect to a company not having a
share capital, Section 314(2)(b) of the Act
provides that the application may be made
by not less than in number of the
persons on the companys Register of
Members.
Section 314(2)(c) of the Act provides that
in any other case, the application may be
made by the company where, for
example, there has been a lot of
concealment, under-declaration of profit
and other illegality. See SPECTRA
NIGERIA LIMITED V. STABILINI
VISIONINI NIGERIA LTD (1996) 6
NWLR (PT. 44) 239.
2. DECLARATION OF THE COURT THAT
A COMPANY BE INVESTIGATED
The Commission must appoint an inspector to
investigate the affairs of the company if the
court order declares that its affairs ought to be
investigated. The order for investigation is one
of those for which the court may make if it is
satisfied that an application for relief on the
ground that the affairs of the company are being
conducted in an illegal or oppressive manner is
well founded. See Section 312(2)(g) of the Act.
2. DECLARATION OF THE COURT THAT
A COMPANY BE INVESTIGATED
In OTONG V. MOGAL NIGERIA LTD
(1978) FRCR 80, where it was alleged
that the company had not filed any annual
returns, had not had annual general
meetings and kept no minutes of any
meetings and no books of account, the
court had no hesitation in directing the
Registrar to appoint inspectors for a
thorough investigation of the affairs of the
company.
3. ON THE COMMISSIONS
OWN MOTION
Section 315(2) of CAMA provides that the
CAC may appoint an inspector to
investigate the affairs of a company if it
appears to it that there are circumstances
suggesting any of the following:
OWN MOTION
that the companys affairs are being or
have been conducted with intent to
defraud its creditors in such a manner
which is unfairly prejudicial to some of its
members; or
that the company was formed for any
fraudulent or unlawful purpose; or
OWN MOTION
that persons concerned with the
companys formation or management of
its affairs have been guilty of fraud,
misfeasance or other misconduct towards
the company or its members; or
that the companys members have not
been given all the information with respect
to its affairs which they might reasonably
expect.
OWN MOTION
Note that members include the personal
representative of a deceased member and
any person to whom shares have been
transferred or transmitted by operation of
law. See Section 315(4) of the Act.
OWN MOTION
An inspector may be appointed to
investigate the affairs of a company
notwithstanding that the company is in
the course of being voluntarily wound up.

WINDING UP OF THE COMPANY ON
JUST AND EQUITABLE GROUND
(SECTION 408(E) OF CAMA)
Section 408(e) of CAMA, which is the same as
the former Section 209(f) of the repealed 1968
Companies Act, provides that the court may
wind up a company if the court is of the opinion
that it is just and equitable that the company
should be wound up. This provision is to protect
the minority further in cases of oppression by
the majority. It should be noted that the courts
power under this paragraph is discretionary.
The application may be brought by
members of the company, the creditors of
the company and the CAC. See the
following cases:
IDUGBOE V. OIL FIELD SUPPLY LTD
(1979) ALR COMM. 1
RE: GERMAN DATE COFFEE COMPANY
(1882) 20 CH. D. 169. In this case, the
court held that the substratum of the
company had failed and it was impossible
to carry out the objects for which it was
formed.
MEMBERSHIP OF A COMPANY
WHO IS A MEMBER OF A COMPANY?
A member of a company is a person having
constituent proprietary interest in the company
and whose name has been entered in the
Register of Members. A person who undertakes
to make a contribution, in the event of the
winding up of a company limited by guarantee,
becomes a member of the company when his
name is entered in the Register of Members.
every other person who agrees in writing
to become a member of a company and
whose name is entered in its Register of
Members shall be a member of the
company.
With respect to a company having a
share capital, each member shall be a
shareholder of the company and shall hold
at least one share. In such a company,
the term members and shareholders
may be synonymous but it is not
necessarily so.
In PONMILE V. SPARKS ELECTRICS
(NIG.) LTD. (1986) 2 NWLR 519, the
court distinguished between a shareholder
and a member of a company limited by
shares and observed that entry in the
Register of the company is another
method of proof of being a shareholder
but it is not the only method, nor can the
absence of that method of proof invalidate
other methods.
In OILFIELDS SUPPLY CENTRE
LTD. V. JOHNSON (1987) 2 NWLR
625, it was held that the share certificate
is not the only means of establishing
shareholding and that even oral evidence,
if cogent, may suffice.
This is not so in the case of membership
as entry in the register is an indispensable
condition. While a member of a company
registered with shares must be a
shareholder of the company, the converse
is not necessarily true for a shareholder
will not become a member until his name
is entered in the Register of members.
Section 83 of the Act provides that a
shareholder must be registered within 28
days of the conclusion of the agreement
to become a member. In the case of a
subscriber to the memorandum, at the
registration of the company, and if default
is made in entering the name, the court
may compel the company to do so. See
Sections 83 and 90 of the Act.
CAPACITY TO BE A MEMBER
As a general rule, any legal person may
become a member of a company but
infants, personal representatives of
deceased persons, companies and aliens
are subject to special rules.
1. INFANTS
Section 20(1)(a) of the Act provides that a
person under the age of 18 years of age
shall not join in the formation of a
company or be a subscriber to the
Memorandum of Association unless there
are two other subscribers of full age and
capacity, that is, persons not disqualified
under Section 20(1) of the Act.
where an infant becomes a member of a
company, he will not be counted in
determining the legal minimum number of
members.
Note, however, that any person under the age
of 18 years may still subscribe to the
memorandum or otherwise become a member,
subject to the general disability of an infant to
contract under the general law. Thus, his
contract to take shares in a company is voidable
at his instance any time before he attains the
age of 18 or within a reasonable time
thereafter. Unless he repudiates his liability
within this period, an infant will be liable to pay
any calls made on his shares and if he decides
to repudiate, his liability on future calls will
cease.
In general, he will be unable to recover
money paid in respect of his shares unless
there has been a total failure of
consideration for which the money was
paid. See STEINBERG V. SCALA
(LEEDS) LTD. (1973) 2 CH. 452.
2. MARRIED WOMEN
Under the Married Womens Property Laws
of the States, a woman has the same
contractual rights and is liable to the same
obligations as any one else as regards the
holding of shares.
3. PERSONAL REPRESENTATIVES
On the death of a shareholder, the shares
are transmitted to his personal
representatives, that is, his executors or
administrators and the production of the
probate of the Will or Letters of
Administration of the estate of the
deceased person is sufficient evidence of
the grant. This is provided in Section 148
of the Act.
The personal representatives of deceased
persons are the only persons recognised
as having any title to the deceased
interest in the shares. They can sell and
transfer the shares without being first
registered as members. See Section
155(4) of the Act.
However, until the personal representative
of a deceased shareholder complies with
the provision of Section 155(3) of the Act,
he cannot, unless otherwise provided in
the Articles, be entitled to exercise any
right conferred by membership in relation
to meetings of the company. Section
155(3) of the Act provides that:
If the person so becoming entitled elects
to be registered himself, he shall deliver or
send to the company a notice in writing
signed by him stating that he so elects
and if he elects to have another person
registered, he shall testify his election by
executing to that person a transfer of the
shares.
4. COMPANIES
A company is regarded in law as a person and,
therefore, by virtue of Section 18 of the Act
which requires two or more persons to form and
incorporate a company, it may be one of the
subscribers of the memorandum of another
company. Just as an individual that subscribes
the memorandum is to sign it, a company that
subscribes the memorandum is to sign by the
Secretary or Director of the company. See
Section 71(1)(b) of the Act.
However, Section 20(3) of the Act
provides that a company in liquidation
shall not be capable of becoming a
member of a company.
5. ALIENS
An alien may acquire shares in a company
and become a member by complying with
the various requirements of the law
regulating the rights and capacity of aliens
to engage in trade or business in Nigeria.
This is provided in Section 20(4) of CAMA.
Some of the other laws, which have to be
complied with, are:
Section 17 of the Nigerian Investment
Promotion Commission Act which requires
alien to register with the Commission
before commencing business in Nigeria;
Obtaining business permit under Section 8
of the Immigration Act, 1963;
Section 7 of the Securities and Exchange
Commission Act, 1988;
Section 8 of the Investments and
Securities Act (ISA), 1999 which
empowers the Securities and Exchange
Commission (SEC) to keep and maintain
Foreign Direct Investments (FDI) and
Foreign Portfolio Investments (FPI) in
Nigeria;
Sections 148 and 155 of CAMA. Section
148 of the Act requires the production of a
document which is by law sufficient
evidence of probate of a Will or letters of
administration of an estate. Section 155,
on the other hand, deals with transmission
of shares.
HOW TO BECOME A MEMBER
In a company having a share capital,
whether limited or unlimited, membership
can be acquired:
by subscribing the memorandum as
provided in Section 79 of CAMA.
By Allotment and Registration (Section
125); and
by transfer (Section 151) or
by transmission (Section 155); followed by
registration of the transferee in the
Register of Members.
Where a company is limited by guarantee,
membership may be acquired by
subscription and by an undertaking as in
Section 27(4)(b) of the Act followed by
registration by the company.
BY SUBSCRIPTION (SECTION 79(1) OF
CAMA)
The subscribers are persons who sign the
Memorandum of Association and Articles of
Association of a company. The first members
acquire their membership by subscription. They
must together subscribe to shares amounting in
value to at least 25 per cent of the authorised
share capital. See Sections 79(1) and 27(2)(b)
of the Act.
On the registration of the company, the
subscribers are deemed to have agreed to
become members and their names must be
entered in the Register of Members.
Section 27(3) of the Act now enables a
subscriber of the memorandum to hold
shares as a trustee for another person but
he shall disclose in the memorandum that
fact and the name of the beneficiary.
2) BY ALLOTMENT AND REGISTRATION
One of the ways a person can subsequently
become a member of a company is by applying
for allotment of shares. On an application for
shares by an individual, the company may allot
shares to him by notifying him of the acceptance
of the offer made in his application. He then
becomes a member and is entitled to have his
name entered in the Register of Members.
3) BY TRANSFER (SECTION 115 OF CAMA)
The shares or other interest of a member in a
company are properly transferable in the
manner provided in the Articles of the company.
See Section 115 of the Act. A person may
become a member of a company by having the
shares of that company transferred to him by
the holder of those shares. The transfer from
an existing member to another may be by sale,
gift or some other transaction which to all
intents and purposes, must be lawful.
4) BY TRANSMISSION (SECTION 155(1)
OF CAMA)
The vesting of shares in the personal
representatives on the death of a shareholder is
known as transmission of shares rather than
transfer. On the death of a member, the
survivor(s), where the deceased was a joint
holder or the personal representative of the
deceased, where he was the sole holder, shall
be the only persons recognised by the company
as having any title to his interest in the shares.
5) BY ESTOPPEL
Where a persons name is inadvertently
placed on the Register of Members, and
he knows and assent to it, he will then be
estopped from denying that he is a
member.
CONDITIONS FOR MEMBERSHIP
There are two conditions a person has to
comply with before becoming a member
of a company as indicated above:
The agreement to become a member
either by subscribing the memorandum or
allotment, transfer, transmission or by
estoppel.
By the entry on the Register of Members
of the shareholders name.
An exception to this general rule is in the case of
death or bankruptcy, that is, by operation of law
where the shares are vested in the personal
representatives of the deceased or in trustee in
bankruptcy, in the case of a bankrupt member.
Note that although the personal representative
or trustee has the right to transfer the shares
and collect dividends, they cannot exercise the
rights of membership until registration takes
place.
TERMINATION OF MEMBERSHIP
A person ceases to be a member when his
name is removed from the Register of
Members. This may occur in the following
ways:
1. TRANSFER OF THE SHARES
The transfer, which is a voluntary process
on the part of the shareholder, shall be by
instrument of transfer and shall be without
restrictions. The transferor ceases to be a
member when the transferees name is
entered in the Register of Members.
2. FORFEITURE OF THE SHARES
This occurs where a member fails to pay
on calls of shares by the company (non-
payment of calls). See Section 140 of the
Act.
3. SURRENDER OF THE SHARES
This is a short cut to forfeiture in order to
avoid the formalities required in a
situation where shares are to be forfeited.
4. TRANSMISSION TO PERSONAL
REPRESENTATIVES ON DEATH OF MEMBER
This occurs by operation of law. In essence,
it is an involuntary transfer since death can be
regarded as the end of all. Transmission
requires no instrument of transfer. The dead
person only ceases to be a member of the
company when some other person is registered
in his place.
5. Transmission to trustee in bankruptcy.
6. Disclaimer by trustee in bankruptcy of
members.
7. Redemption of redeemable preference
shares.
8. Purchase by the company of its own
shares. This may be under a court order
or satisfying the claim of a dissenting
shareholder.
9. Rescission of the contract to take the
shares arising out of fraud or
misrepresentation in the prospectus or
reason of irregular allotment. This is
provided in Section 571 of the Act.
10. Repudiation by infant. See the case of
STEINBERG V. SCALA LEEDS LTD.
(Supra)
REGISTER OF MEMBERS
Every company must keep a Register of
Members in which are entered their
names, addresses and descriptions. See
Sections 83, 84 to 90 of the Act.
Register of Members is one of the
statutory books that must be kept by a
company.
_____________________
END OF FIRST SEMESTER

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