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MATRIC NO: 133139











The purpose of this paper is to provide an insightful perspective on the development
of company law with respect to the various legal instruments that have influenced the
framework of the rules and practice of corporate law. A major part of this work
would be dedicated to comparing the historical development in these three
jurisdictions: England, the United States and Nigeria, showing the impact its history
has had on its current corporate framework.
One cannot deviate from the major constituents that have been provided by various scholars
that make up a company. One of such respected view is of Lord Lindley1. He defined it thus:
a company is an association of many persons who contribute money or moneys
worth to a common stock and employ it in some trade or business, and who share the profit
and loss as the case may be) arising there from. The common stock so contributed is denoted
in money and is the capital of the company and the persons who contribute it, or to whom it
belongs, are called as members. The proportion of capital to which each member is entitled
is his share which is always transferable although the right to transfer them is more or less
"Company law" or "corporate law"2 in all jurisdictions is generally understood as a body of
law enabling the creation of an entity with "five core structural characteristics": " (1)
personality, (2) limited liability,


(3) transferable shares,




3(1) of the Indian companies Act 1956 (

The terms "company" law and "corporate" law are used interchangeably. On the one hand, "corporate law" is a US term and
"company" law is the preferred term in the United Kingdom [compare only comparables: Approaching Comparative
Company Laws David C. Donald 2008 ILF Working Paper 77]

management under a board structure, and

(5) shared ownership by contributors of


Simply put, a company is an incorporated association which is an artificial person, having a

separate legal entity, with a perpetual succession, a common seal, a common capital
comprised oftransferable shares and carrying limited liability. It is called an artificial person
because of its very nature that law alone can give birth to a company and law alone can put it
to an end.

Now, we shall take a look at the history of company law in the following jurisdictions:


The termincorporationwas not at first associated with the commercial sphere as it was
mainly used in connection with ecclesiastical and public bodies, such as chapters,
monasteries, and boroughs. It was some form of endorsement or grant by the Crown
conferring corporate personality. For instance, the borough was not a corporation of traders
or merchants. It was a politicaland administrative organization formed principally for proper
administration of the towns.4

In the commercial sphere at the time, the principal medieval associations were the guilds of
merchants. They were roughly trade protection associations but had few resemblances to
modern companies today. It basically referred to members of a particular trade artisans or
merchants coming together for the purpose of monopolizing their trade in a particular town.
They were organized in a manner something between a professional association, trade union,

David C. Donald supra 27 at 3

KunleAina: History of Company law Company Law 1(NOUN) pg. 4:

a cartel and a secret society. They often depended on grants of letters patent by a monarch or
other authority to enforce the flow of trade to their self-employed members, and to retain
ownership of tools and the supply of materials5
The use of the term Incorporation as a convenient way of distinguishing the rights and
liabilities of the association from those of its members was hardly needed since each member
of the guilds traded on his own account subject only to obedience to the regulations of the
guild. The activities and trading carried out by individual members was not done on behalf of
the guild, thus making liability, a personal, individual issue. All they had in common was a
monopoly of trade and no further, protected by patent letters granted by the Crown. When
members trade on joint account, as opposed to individual trading subject to the rules of the
guild, it was carried on through partnerships. Two basic types of which were known to the
medieval law merchants:the commenda and the societas.

The first refers to sleeping

partnership where a partner finances the partnership but is less active in the business but
profits in the profits and is liable to the extent of his share while the latter refers to the current
view of partnership where both parties benefit equally in the profits and liabilities of the
partnership equally.

The name company was firstapplied to merchant adventures for trading overseas. They
existed as far back as the fourteenth century, but came into prominence during the expansion
of foreign trade and settlement in the sixteenth century. They were popularly referred to
asregulated companies because they were virtually extensions of the guild principles into the
foreign sphere both in structure and operations. Each member traded with his own stock and
on his own account, subject to obeying the rules of the company, and incorporation was not

essential since the trading liability of each member would be entirely separate from that of
the company and the other members.


By the mid-sixteenth century the concept of separate trading by each member with his own
stock later gave way to joint stock with members coming together to trade with joint
accounts. Now, Partnership form of business wherein members traded in foreign lands for
profits became popular. They contributed resources and shared profits and liabilities
according to the amount of stock contributed.At first, stocks were pooled together for a
particular trading expedition or voyage to a foreign land. The profits were thereafter shared.
Subsequently, joint-stocks were entered for a particular period of time, (sometimes short,
sometimes long) with profits shared by the members afterwards. Charters obtained initially
for the purpose of trade protection gave way to the obtaining of charters for the monopoly of
trade especially to a particular foreign land. When voyages to remoter lands were becoming
much risky to go by the joint-stock partnerships, charters were sought for in form of financial
and political assistance from the government. This actually marked the genesis of
government participation in the commercial sphere of England enabling the capitalist to
combine with the entrepreneur6.

By the second half of the 16th century, the English, French, and Dutch governments assisted
trade and encouraged overseas exploration. A great increase in the number and activities of
the chartered companies took place. More lands were reached and conquered; slaves acquired
and traded with; with political influence established also. This led to the formation of
companies for both economic and political reasons. Two of the earliest and most important of

Rahul Kumar Singh National Law University, Jodhpur Origin and evolution of the modern company law

overseas trading companies were the Muscovy Company (1555) and the Turkey Company
(1583). They had important effects on international relations, for they maintained English
influence and paid the expenses of ambassadors sent to those countries.7Another prominent
example is The East India Company in 1600.According to a source describing the situation,
The much more famous, wealthy and powerful English (later British) East India Company
was granted an English Royal Charter by Elizabeth I on Decenber 31, 1600, with the
intention of favouring trade privileges in India. The Royal Charter effectively gave the newly
created Honourable East India Company a 15-year monopoly on all trade in the East
Indies. The company transformed from a commercial trading venture to one that ruled India
and exploited its resources as it acquired auxiliary governmental and military functions, until
its dissolution.8Additional capital was only raised by calls on the existing members rather
than by invitations to the public. But even after that until the second half of the seventeenth
century differentiation between the two types of company (unincorporated partnerships and
incorporated companies) was not firmly established.

Following the influence of the government into the business sector, the concept of corporate
form was brought in for the first time in United Kingdom wherein the body corporate could
be brought into existence either by a Royal Charter or by a special Act of Parliament. Both
these methods were very expensive and dilatory. Consequently, to meet the growing
commercial needs of the nation, large unincorporated partnerships came into existence,
trading, however, in corporate form. The partnership principle of trading on joint account was
maintained by the regulated companies which became joint commercial enterprises.The
memberships of each such concern being very large, the management of business was left to


Rahul Kumar Singh supra at 4


a few trustees resulting into separation of ownership from management. Rules of law were
not being developed by that time which gave a chance to fraudulent promoters to exploit the
public money. As a result, many spurious companies were created which were formed only to
disappear resulting in loss to the investing public. Aina in his publication9Company Law 1
revealed that More than two hundred companies formed around the year 1720, for example,
companies were formed for the prosecution of every kind of enterprise, including one for
insurance and improvement of childrens fortunes, and another for making salt water
fresh. One of such events was the formation of the South Sea Company. According to a
Wiki- source,9 it was hoped that it would lead to breaking into the traditionally closed
Spanish markets in America. Investors in the UK, enticed by extravagant promises of profit
from the company promoters, bought thousands of shares The share pricerose so rapidly
that people began buying shares merely in order to sell them at a higher price, which in turn
led to higher share prices. It was the first speculative bubble the country had seen, but by
the end of 1720, the bubble had burst, and the share price sank from 1000 to under 100.
As bankruptcies and recriminations ricocheted through government and high society, the
mood againstcorporations, and errant directors, was bitter Most company promoters were
not particularly fussy about whether they obtained charters (an expensive and dilatory
process). The English parliament, therefore, passed an act known as the Bubbles Act of 1720,
which, instead of prohibiting the formation of fraudulent companies, made the very business
of companies illegal. This Act made no attempt to put joint stock companies on a proper basis
so as to promote the interest of the industry and trade and also to protect the investors10. The
Bubble Act 1720s prohibition on establishing companies remained in force until 1824.


Supra at 8; *Anderson: History of Commerce vol. 1, 1 ed., 291]


Various motivations have been suggested for the Act. These include the desire to prevent
speculation such as that which produced the contemporary South Sea Bubble; an attempt to
prevent smaller non-charter from forming and so reduce the importance of Parliament in
regulating businesses; or that the South Sea Company itself wanted to prevent other bubbles
from forming that might have decreased the intensity of its own10. Many scholars agree that
the last of these reasons is the cause. It was passed to prevent other companies from
competing with the South Sea Company for investors capital. In fact, the Act was passed in
June 1720, a while before the peak of the bubble.11 Due to the promulgation of the Act and
the dilatory process of obtaining charters for unincorporated partnerships, many legal experts
deduced from the prohibition that it did not prohibit a group of people calling themselves
company so long as the company did not presume to be a corporate body dealing with shares,
it was not against the law; and because these associations were not corporations they could
not own their own property. The lawyers, therefore in order to circumvent that, vested the
property of the association in the Trustees appointed by the association by the use of Trust
Deed and the Trust Deed was known as Deed of Settlement. A deed of settlement refers to a
legal document created for the formation of joint stock companies. The deed constitutes
certain persons as trustees of the partnership property. It contains regulations relating to the
management of private affairs of the company.12

The trust deed could specify the purpose forwhich property was vested and the trade venture
to which the property was to be applied. The trust deed is what is now known as the
memorandum and articles of associations. The trusteescan be sued or sue on behalf of the

Ron Harris, The Bubble Act: Its passage and its effects on Business Organization The journal of Economic
History, Vol. 54 No. 3 (Sept. 1994), pp.610 627 []
Op. cit. see Cooke, Corporation Trust and Company at 82; Gower (1952) 68 LQR 214. See also J Carswell, The
South Sea Bubble (London, Cressett Press 1960)

company. There was therefore no difference between this company and the type prohibited
by the Bubble Act and indeed after the panic brought by the Bubble Act many companies
adopted the deed of settlement system.13 This led to a lot of criticism as the Act was basically
ineffective or regarded a dead law. These eventually led to its repeal in 1825.









The history of modern company law in England began in 1844 when the Joint Stock
Companies Act was passed. The Act provided for the first time that a company could be
incorporated by registration without obtaining a Royal Charter or sanction by a special Act of
Parliament. The office of the Registrar of Joint Stock Companies was also created. But the
Act denied to the members the facility of limited liability. The English Parliament in 1855
passed the Limited Liability Act providing for limited liability to the members of a
registered company. The act of 1844 was superseded by a comprehensive Act of 1856, which
marked the beginning of a new era in company law in England. This Act introduced the
modern mode of creating companies by means of memorandum and articles of associations.

The first enactment to bear the title of Companies Act was the Companies Act, 1862. By
these acts some of the modern provisions of the company were clearly laid down. First of all,
two documents, namely, (a) the memorandum of association, and (b) articles of association
formed the integral part for the formation of a limited liability company. Secondly, a
company could be formed with liability limited by guarantee. Thirdly, any alteration in the
object clause of the memorandum of association was prohibited. Provisions for winding up
was also introduced. Thus, the basic structure of the company as we know had taken shape.
But the companies (Memorandum of Association) Act, 1890 made relaxation with regard to
change in the object clause under the leave of the court obtained on the basis of special


Aina: op cit. 14


resolution passed by the members in general meeting. Then the liability of the directors of a
company was introduced by the Directors liability Act, 1890 and the compulsory audit of
the companys accounts was enforced under the Companies Act, 1900.14


The concept of private company was introduced for the first time in the Companies Act,
1908 (the earlier ones were called public companies). Two subsequent acts were passed in
1908 and 1929 to consolidate the earlier Acts. The Companies Act 1948, which was the
Principal Act in force in England was based on the report of a committee under Lord Cohen.
An outstanding feature of the 1948 Act was the emphasis on the public accountability of the
company. Generally recognized principles of accountancy were given statutory force and had
to be applied in the preparation of the balance sheet and profit and loss account. Further, the
1948 legislation extended the protection of the minority and the powers of the Board of Trade
to order an investigation of the companys affairs; and for the first time the shareholders in
general meeting were given power to remove a director before the expiration of his period of
office. The independence of auditors vis--vis the directors were strengthened.
In 1977, the governments Bullock Report proposed reform to allow employees to
participate in selecting the board of directors, as was happening in across Europe,
exemplified by the German Codetermination Act 1976. However, the UK never
implemented the reforms, and from 1979 the debate shifted. Through the 1990s the focus in
corporate governance turned toward internal control mechanisms, such as auditing, separation
of the chief executive position from the chair, and remuneration committees to place some
check on excessive executive pay. These rules applicable to listed companies, now found in
the UK Corporate Governance Code, have been complemented principles based regulation


of institutional investor activity in company affairs. The UKs integration in the European
Union meant a steadily growing body of EU Directives and case law to harmonise company
law within internal market.15

The history and growth of company law of England from the early 16th century with the
Merchant Guilds into the Merchant Adventurers who developed the Partnership principle
advanced into the Joint stock companies with the concept of incorporation. These
development alongside with the Bubbles Act and the Joint stock Act with the many other
enactments and amendments in the 18th, 19th and 20th century have brought the Company law
of UK into what it currently is. The current Companies Act of 2006 which is in operation was
birthed out of several reforms to the previous Act.




Nigeria, like many other commonwealth nations, has peculiar characteristics colonial
parentage. Our company laws, as expected, are offspring of English statutes. In this part, an
overview of the gradual growth of Nigerias company law: Pre-1912 and Post-1912 till date
shall be outlined.
Pre-1912 Ordinances: Early Business Activities
Before the advent of the Europeans, the indigenous occupation carried out were agriculture,
cattle rearing, hunting, smelting of ore, gold and bronze etc; trading by barter in a rural,
peasant economy. Although, some trans-Saharan trade contracts between North Africa and
the northern parts of Nigeria were already in existence. Upon the discovery of Nigeria and the
abolition of the slave trade and the establishment of British authority over Nigeria in the late
19th century, internal and external, business grew very rapidly. This trade growth continued in
the early 20th century and it was at this time that the first companies statute, that is, the
Companies Ordinance, 1912 was promulgated
There were no local laws, prior to 1876, catering for the operations of companies in
Nigeria, as the companies operating in Nigeria, at that time were all foreign and carried
foreign status with them.

They were corporations established in England and they

enjoyed those rights and privileges of their status as were available here.16
In 1876, the Supreme Court Ordinance for the establishment of a legal system was
promulgated for the Colony of Lagos which was ceded to the British Crown in 1861. The



Hon. Dr. J OlakunleOrojo: Company Law and Practice in Nigeria, 2008, 5 ed. Pg. 15


Ordinance provided for the application of common law, the doctrines of equity, and the
statues of general application within the jurisdiction of the Court.
After the proclamation of the Protectorate of Northern Nigeria and the Protectorate of
Southern Nigeria in 1900, the Supreme Court Proclamation, 1902 of Northern Nigeria were
introduced to create a Supreme Court for each of the Protectorates. Each of the Proclamation
contained a provision, making applicable, in the Protectorate, the common law, the doctrines
of equity and the statutes of general application which were in force in England on the 1st of
January, 1900
With the amalgamation of the Southern and Northern Protectorates in 1914 with the
Colony of Lagos becoming the Colony and Protectorate of Nigeria, the Supreme Court
Ordinance, 1914 was then promulgated to cover the whole country and a Supreme Court was
established for the whole country. Section 14 of the Ordinance provided that:
Subject to the term of this or any other Ordinance, the common law, the doctrines of
equity, and the statutes of general application in England on the 1st day of January,
1900 shall be in force within the jurisdiction of the Court.
The implication of this was that the English common law and the doctrines of equity insofar
as they applied to companies were made applicable in Nigeria; they have since formed part of
Nigerian company law subject to any later relevant local statutes. For example, the concept
of the separate and independent legal personality of the registered company17was so received
and has since become part of our law as with the doctrine of ultra vires.18
The relevant statutes under the statutes of general application were the English
Companies Act, 1862, provided for achieving limited liability by registration. It


Salomon v. Salomon (1897) AC 22

Ashbury Railway Carriage and Iron Co. v Roche (1875) LR 7 HL 653



alsointroduced the modern form of the memorandum and articles of association in place of
the deeds of settlement and contained provisions for winding-up.
Although the Act was applicable as a pre-1900 English statute of general application,
it could not be administered under local circumstances as there were no administrative
facilities for such administration available locally. The result was that the foreign companies
brought their status of incorporation with them and this was duly recognised by the Nigerian
law as part of the generally received law. They were, of course, subject to the relevant
common law and doctrines of equity.
Post 1912 Ordinances
A highlight of the principal company statutes were brought into force were the Companies
Ordinance, 1912, the Companies Ordinance, 1922, the Company Act, 1968 and the
Companies and Allied Matters Act, 1990.
(1) The Companies Ordinance, 1912
This was the first companies statute in Nigeria. It was enacted to provide a corporate
framework of some sort to the emerging economic trend in Nigeria. It provided for
the first time, a procedure for incorporating a company by registration.This was
supposed to provide a check for foreign companies trading in Nigeria and a guideline
for the creation of indigenous companies. It was first applied to the Colony of Lagos
and, later, 1917, to the rest of the country. The Ordinance was a consolidation of
1908 Companies Act and the 1862 act and the subsequent amendments.


Ordinance states as follows:

To provide forthe formation of limited companies within the Colony and
Protectorate, It is hoped thereby to foster the principles of co-operative trading
and effort in the country.4

In 1917, the Ordinance was amended by the Companies (Amendment and Extension)
Ordinance, 1917 which came into effect on January 1, 1918 and extended to the whole
The Companies Ordinance, 1922
With the end of World War I in 1918 and the prospects of rapid economic
development, the Companies Ordinance of 1912 and the Companies (Amendment and
Extension) Ordinance, 1917 were consolidated and re-enacted with slight amendments as the
Companies Ordinance, 1922.
The Ordinance which came into force on December 7, 1922 was first applied to the
Colony of Lagos, 1948 Edition and Chapter 37 of the Laws of Nigeria, 1958 edition. It was
subsequently amended by the Companies (Amendment) Ordinance, 1941 and the Companies
(Amendment) Ordinance, 1954. In 1963, the Ordinance was designated Companies Act5and
it continued to regulate companies until its repeal in 1968 by the Companies Act, 1968.
The Companies Act, 1968
After the attainment of independence and with the rise of economic activities in the
country, there was the urgent need for modern company legislation. The Companies Act,
1922 had become inadequate to cope with the rate of economic development in a developing
country like Nigeria especially considering the need for indigenization of our laws in catering
for our peculiar needs. The Companies Decree No. 51 of 1968 was promulgated during the
military regime. It was re-designated in 1980 as the Companies Act, 196819. Before the
promulgation of the Act, a number of innovations and improvements were introduced by the


SI 1980 No. 13


1968 Act, for example, compulsory local incorporation of foreign companies, and
comprehensive provisions for publishing the affairs of the company in the interest of the
shareholders and the general public such as in respect of accounts, auditing, meetings, annual
returns and directors.
The major criticism of the Act was that it was only a little more than the putting
together of some of the sections of the replaced Companies Act 20, and some sections of the
English Companies Act, 1948 instead of taking the bold step of enacting both statute and case
law on companies. The preparation of such statue, it was contended, would have provided an
opportunity for full consultation for the review and reform of the law. That opportunity was
later provided in the Reform of Nigerian Company Law undertaken by the Nigerian Law
Reform Commission in 1987 followed by a consideration of its report by the Consultative
Assembly on Company Law in 1988. In the process, the Companies Act, 1968 was carefully
reviewed and is now repealed and replaced by the Companies and Allied Matters Act which
was Cap.59, of the Revised Edition of the Laws of the Federation of Nigeria, 1990. The Act
was amended by the Companies and Allied Matters (Amendment) Decree, 1990 and the
Companies and Allied Matters (Amendment) Decree, 1991.21
The Companies and Allied Matters Act, 1990
This Act makes provisions not only for companies, but also for the registration of
business names and for the incorporation of trustees. It is divided into three parts, namely
Part A: Sections 1 to 568 Companies;
Part B: Sections 569 589 Business Names; and
Part C: Sections 590 to 612 Incorporated Trustees.

Cap. 37, LFN, 1958

O. Orojosupra at 17



With reference to companies, the declared objective of the Nigerian Law Reform
Commission was to evolve a comprehensive body of legal principles and rules governing
companies and suitable for the circumstances of the country. In pursuance of this objective, a
broad approach was adopted. Not only the statutory provisions but also the common law
principles and the doctrines of equity applicable to company law in Nigeria were examined
and, wherever desirable, enacted, often, with necessary amendments. As indicated above, the
Act is a product of careful consideration and extensive consultations. It represents the
general views and consensus of users of company law in Nigeria. The following major
innovations of the Act may be noted22
(a) Comprehensiveness of the Act: first, by the enactment of some relevant principles of
common law and doctrines of equity; and secondly, by incorporation in the
substantive enactment, many of the common and general provisions of the articles in
Table A of the Companies Act, 1968.
(b) More logical arrangement of the subject matter of the Act.
(c) Establishment of a Corporate Affairs Commission to administer the Companies and
Allied Matters Act.
(d) Encouraging greater seriousness and commitment in the formation and registration of
companies by requiring a minimum authorized share capital and minimum
(e) Prohibition of non-voting shares and of weighted votes.
(f) Reform and enactment of the common law rule in Royal British Bank v.
Turquand23and the abolition of the common law rule of constructive notice of filed


See Report of the Nig. Law Reform Commission of Company Law, 1988, Vol. 1, pg. 10-11.[O. Orojosupra at
(1856) 6 E and B 327


(g) Abolition of the common law rules on pre-incorporation contracts and the provision
for ratification and adoption of such contracts.
(h) Provision for greater and more effective participation in, and control of, the affairs of
the company through improved provision in respect of meetings.
(i) Expanded provisions for relief against illegal and oppressive acts including provisions
for derivative action and relief against unfairly prejudicial conduct.
(j) Provisions for greater accountability by directors.
(k) Provisions for the appointment, qualification, duties and tenure of office of secretaries
of public companies.
(l) Improvement in the forms and contents of financial statements, classification of
companies into small companies and others for the purpose of greater financial
disclosure, incorporation of Accounting Standards and provision for greater and more
relevant disclose in the directors report.
(m) More comprehensive provisions in respect of receivership.
The provisions of the original Act which dealt with unit trusts, insider trading, mergers and
take-overs and the public offer and sale of securities have been omitted from the Act and are
now contained in the Investment and Securities Act24
The administration of the Act is vested in the Corporate Affairs Commission.
Application of the Act
The Act applies throughout the Federation. Part A of the Act applies to the following

All companies formed and registered under it;


All existing companies;


Cap 124, LFN 2004



All companies incorporated, formed or registered under other enactment;


Unregistered companies, subject to the restrictions imposed under section 629 and
the Twenty-sixth Schedule.

Section 542 provides that except as otherwise expressly provided in the Act, any
provision contained in the memorandum or articles of the company or in any agreement
executed by it or in any resolution passed by its general meeting or board meeting, shall,
to the extent to which it is repugnant to the provisions of this Act, become or be void as
the case may be.
In construing companies statutes, as any other statutes, Nigerian courts have
repeatedly acknowledged and applied English legal principles13.
The court that has jurisdiction in matters arising from the operation of the Act is the
Federal High Court25.
Amendment of the Act
Section 2(e), 26 and 358 of the Act were amended by the Companies and Allied
Matters (Amendment) Decree, 199026which also made the Act effective from 31st December,
1990 instead of 2nd January, 1990 as earlier provided. It accordingly validated all acts done
or purported to be done under the principal Act since 2nd January, 1990.

The Act was

further amended in 1991 by the Companies and Allied Matters (Amendment) Decree, 199125
in respect of sections 2, 137 and 359(2). The Act was amended in 1999 by the Investment
and Securities Act, 1999 which repealed Part XVII (sections 541 to 623 of the Act) and reenacted the sections as sections 1 to 148 of the Investment and Securities Act, 1999. The
1999 Act has also been repealed and replaced by the Investment and Securities Act, 2007.

See Sect. 7(1) Federal High Court Act, 1973

No. 32 of 1999



The historical antecedents leading up to the current legislation of Company law in Nigeria
have greatly influenced the framework operational today. The Received English laws and
Statutes of general application make up most of the principles of Nigerias company law.
With amendments from previous enactments till the Companies and Allied Matters Act,
2004, the major highlights of our corporate framework, for the most part, is foreign with a
mild shade of the Nigerian post independent complexion in it.


The Forces of Regulatory Competition


At the close of the colonial period, the corporate law of the United States essentially
in a British society. One of the major characteristic of this development is the fact that
they did not have the effect of British transplanted laws in its legal system, like
Nigeria and other commonwealth nations. Also, it was free from the destruction of
property through warfare and foreign invasion because of its distance from Europe.27
Its corporate laws developed unhindered alongside the economy. In view of this
relative peaceful existence, early corporations were specially chartered by state
governments and often provided services on a monopoly basis that a government
itself might have traditionally provided.28The first enabling statute for business
corporations, entitled a law "relative to incorporations for Manufacturing purposes,"
was enacted by the State of New York in 1811and similar enabling statutes gradually
replaced special chartering as a basis for incorporation.
It is particularly helpful to state that corporate charters portrayed a different context
than the usual meaning incorporation carries in the British context. The Supreme
Court held that corporate charters are constitutionally protected contracts vested
withprotection from arbitrary state interference29, thus ensuring private corporations
a strong position under the the very outset of corporate activity. Private and
public corporations were protected through corporate charters from state interference,
granting a great measure of liberty and flexibility to them. Protection from the state
was the main shield the charters provided corporations.


The major exception to this peaceful growth was the US Civil War between 1861 and 1865, which left the US
South largely destroyed and under the administration of an occupation army. See Donald (2008) Approaching
Comparative Company law supra at 59
See Dartmouth College v. Woodward, 4 Wheat. 518 (1819)


By the mid-nineteenth century and towards the latter end, corporation law or
company law30 had developed markedly in flexibility and a growinglatitude for
management decisions.31as the attitude towards corporations and business gradually
shifted towards securities dealings.32 It is noteworthy that a US corporation's "internal
affairs" are governed by the laws of the state of its incorporation regardless of where
it bases its center of administration. State incorporation laws influenced the affairs of
the corporation internally, while Federal laws barely had much influence except for
rare cases, generally.33In the late 1890's a number of states began to compete for tax
revenue by fashioning their corporate laws to attract promoters planning to
incorporate new companies and managers who might decide to reincorporate an
existing company in a different state.34The State of Delaware became a prominent
charter state after Woodrow Wilson, who was then governor of the leading corporate
charter state, New Jersey, amended the New Jersey corporate statute to make it less
business friendly,35which resulted in many New Jersey corporations reincorporating
in Delaware, and began Delaware's climb towards the top of the corporate law market.
This "regulatory competition" for corporate charters has been a primary engine of
development for corporate law until today.


The terms "company" law and "corporate" law are used interchangeably. On the one hand, "corporate law" is a US term
and "company" law is the preferred term in the United Kingdom [compare only comparables: Approaching Comparative
Company Laws David C. Donald 2008 ILF Working Paper 77]

See See LAWRENCE M. FRIEDMAN, A HISTORY OF AMERICAN LAW 130 (3rd ed. 2005) note 326, at 395 et
seq. and Bratton &McCahery, supra note 292, at 627 et seq.
See BANNER, supra note 203, at 198 et seq
Donald (2008) Approaching Comparative Company law supra at 60
See FRIEDMAN, supra note 326, at 399.
See William W. Bratton and Joseph A. McCahery, The Equilibrium Content of Corporate Federalism, 41 Wake
Forest L. Rev. 619, 653 (2006) note 292, at 629 as cited in the 2008 ILF Working Paper 77 by David C. Donald


State v. Federal Law

The federal government has largely avoided regulating corporate "internal affairs".
Historically, Congress has only entered the field of company law only after economic and
political discoveries of the state laws failure to prevent insiders from deceiving outside
investors, thus breaching the trust ofa significant portion of the national population. Another
instance of the federal governments intervention was during the period of the great "trusts",
such as Standard Oil, and their abuses that marked the end of the 19th century, the federal
government seriously considered replacing the state corporate statutes with federal law, but
the project eventually lost momentum in light of more active antitrust prosecution. Also, after
the stock market crash of 1929 and the severe economic depression that followed, the
federal government entered the securities field in force with the Securities Act, the
Exchange Act (which created the SEC), the Public Utility Holding Company Act of
193536, the Trust Indenture Actof 1939, the Investment Company Act and the Investment
Advisers Act of 1940.37
In 2002, following the revelation of serious accounting misrepresentations by major
corporations such as Enron and WorldCom, and the collapse of the stock markets, the
federal government enacted the Sarbanes-Oxley Act. This Act sought to reinforce the
existing system of disclosure by decreasing conflicts of interest, increasing accountability,
and adding new types of disclosures.

Conflicts of interest were reduced by strictly

controlling the services that auditors could provide to the companies they audit38by inserting
an audit committee composed of independent directors into the boards of listed companies14
thereby flatly outlawing company loans to directors.39These were clear incursions into the


The Public Utility Holding Company Act of 1935, 15 U.S.C.A. sections 79-79z-6 (2000)
The Investment Advisers Act of 1940, 15 U.S.C.A sections 80b-1-80b-21 (2000).
Section 201-202 SOA
Section 402 SOA


internal affairs of the regulated companies, but were incursions related to the overall
disclosure system. Disclosures were improved by imposing internal checks on the creation of
disclosure documents (i.e., accounts) and the persons who were responsible for their
preparation. Accountability was increased by requiring chief operating officers and chief
financial officers to personally sign required disclosures and attest to the accuracy and
completeness of their contents subject to civil and criminal liability.40



Section 302, 904 SOA.


In the United States, comparativelyone can look back on a 200 year history of company law
that has not been significantly interrupted by war or tumultuous ideological turnarounds. The
long-term trend has been for authority to gradually pass from the states to the federal
government. States, originally held back by various cultural, economic and political forces,
entered the fray to compete for franchise revenues by loosening their grip on companies until
abuses and market breakdowns provoked federal action, such as the "trust busting"41 at the
turn of the 20th Century, the enactment of the securities laws in the 1930's, the various
amendments and rules added to the latter over the decades, and most recently the SarbanesOxley Act of 2002.

According to Professors William W. Bratton and Joseph A.










micromanagement of the charter market." They observe: "Failing that, corporate federalism
remains robust, so long as the federal government and stock exchanges continue to refrain
from allocating to themselves so much subject matter as to cause Delaware's customers to
question the efficacy of their rent payments."42
Along these lines, the future shape of US company law will likely be decided by a
combination of the stability of the securities markets and the popular weight of the respective
arguments for and against state chartering.


Donald (2008) Approaching Comparative Company law supra at 65

Bratton &McCahery, supra note 292, at 696 [cit. David C. Donald, 2008 ILF Working Paper 77




Viewing the Patterns based on History
The medieval 16th century marks the beginning of company law in England with
merchant adventurers trading in foreign lands for profit. These merchants developed
the concept of Partnership commenda and societas, probably as a result of Roman
influence. This birthed the current position of Partnership in Company law today.
Also, the concept of companies originated with merchants who came together to
pool resources for the sole purpose of exploring foreign lands for profit. It started in
the form of joint-stocks until recognition was given it by the grants of charters a
form of endorsement, giving it a monopoly of trade to a particular foreign land. This
concept fleshed out the principle of Incorporation distinguishing charter companies
from unincorporated joint-stock companies. This ushered in the concept of separate
legal personality obtainable in Company law today of the UK.
Finally, the concept of limited liability and memorandum and article of association
came as a result of the lapses in check mating the economic boom generated by
chartered companies in the 17th century. The Joint-Stock Act of 1844 and the
subsequent amendments that followed provided for these.
Nigeria, on the other hand has its laws in the commercial front transplanted from the
common law of England. It received its company laws in the same vein thus making
our corporate framework, a direct replica of the UK company law. Many of the
doctrines of equity and Statutes governing our laws are foreign. The current
legislation in force is the Companies and Allied Matters Act 2004 and the Investment
and Securities Act 2007. They are the first few enactments in the area of our company
laws governing the affairs of companies in Nigeria. They cater for some of the

domestic challenges in our corporate field. For example: it provides for the
registration of business names and Incorporated trustees, which prior to now, was not
adequately provided for. The effectiveness of our laws as to its fitness in our current
socio-economic and political problems is yet to be ascertained.
The United States have had a relative peaceful progress in its corporate arena. Notably
among these is its system of incorporation. The laws governing incorporation and
corporate governance lie with the State laws of individual states. Private and Public
companies alike, enjoy the veil of incorporation to shield them from government
interference as against the idea of incorporation in Nigeria and UK inclusive, that
gives it an identity or personality, recognized by law accorded with rights separate
from those behind the veil. U.S sees it from the perspective of freedom from the
excessive supervisory powers of the state in controlling its internal affairs. Its idea of
incorporation does not strictly emphasize the rights of company but mainly its
freedom of business.
Although, this does not mean the federal government has no powers over company
incorporated under different state laws. It has refused to interfere so that it does not
affect the equilibrium of competition amongst states in the corporate arena but serves
to protect the interest of the shareholders and the securities market from dubious
activities like insider trading by putting adequate measures like the Oxley-Sabarnes
Act and other monitoring schemes.
Based on all these attributes as generated from the different historical events that have
led to the uniqueness of the system of company laws in these jurisdictions, one can
only appreciate these systems in their different ways as no system should be given
some level of credence over the other. The state of development of company laws in


these different jurisdictions is as a result of the different interactions and functions

involved in each legal system


This paper has attempted to provide some chronological account of the different historical
backgroundof company law in the three jurisdictions: UK, Nigeria and the United States.It
identifies some common ground that all the jurisdictions share especially with the early
stages of forming companies, Partnership, Public and Private corporations, Incorporation,
Corporate Governance and others, showing the various stages that necessitated their creation
with the different instruments of law that have so far today, given Company law its current
form, framework and principles.It does this by presenting the relevant company law statutes
and related topical laws of these jurisdictions and its contributions. An understanding of the
type of historical development a particular jurisdiction has experienced and is currently living
clarifies not only possible causal connections between legislative changes and changes in
legal systems, but gives a better insight into how the respective countries and jurisdictions
can be usefully appraised in the other aspects of its corporate development. This Paper can
also serve as an "introduction" to comparing the company laws of the United Kingdom, the
United and Nigeria.