FOR THE LOVE OF CHRIST JESUS; THE BEGINNING AND THE END.

TABLE OF CONTENTS COMPANY LAW AND PARTNERSHIPS I and II.

HISTORY OF COMPANY LAW
SOURCES OF COMPANY LAW
ADMINISTRATIVE AND REGULATORY BODIES (CAC, SEC, NSE)
THEORIES OF CORPORATE LAW
INCORPORATION OF COMPANIES
COMPANY PROMOTERS AND PRE-INCORPORATION CONTRACTS.
CONSEQUENCES OF INCORPORATION AND THE “CORPORATE
PERSONALITY”.
LIFTING THE VEIL OF INCORPORATION.
POWER, AUTHORITY, CAPACITY AND LIABILITIES OF A COMPANY
(LOOKING AT THE POWERS, ORGANS (BOARD OF DIRECTORS, MEMBERS
IN GENERAL MEETING, ETC) CRIMINAL LIABILITIES OF A COMPANY, ETC)
THIS TOPIC WAS TREATED IN THREE PARTS OF THE BOOK.
MEMORANDUM AND ARTICLES OF ASSOCIATION (LEGAL EFFECTS,
CERTAIN MINIMUM REQUIREMENTS AND CLAUSES EXPLAINED)
ALTERATION OF CONTENTS IN THE MEMORANDUM OR ARTICLES OF
ASSOCIATION.
CORPORATE SOCIAL RESPONSIBILITY. (HISTORY, THEORIES, LEGAL AND
STATUTORY PROVISIONS IN THIS REGARD EXPLAINED).
CORPORATE GIFTS AND POLITICAL DONATIONS.
COMPANY CAPITAL.

COMPANY LAW PART II/LAW OF PARTNERSHIPS.

MAJORITY RULE AND MINORITY PROTECTION.
CORPORATE ADMINISTRATION AND MANAGEMENT AND LIABILITY FOR
CORPORATE ACTS.
THE GENERAL MEETING OF A COMPANY: TYPES (AGM, EGM, STATUTORY
MEETING, COURT ORDERED MEETING), NOTICE, VOTING, PROXIES,
QUORUM IN MEETING, RESOLUTIONS, MINUTES OF MEETING, ETC.
THE BOARD OF DIRECTORS; NATURE, FUNCTIONS, SHARE
QUALIFICATION, APPOINTMENT, VACANCIES, ETC,
 DISQUALIFICATION/VACATION, REMOVAL, REMUNERATION, TYPES OF
DIRECTORS, NUMBER, ETC.
LIABILITY OF THE COMPANY FOR ACTS OF ITS OFFICERS.
SHAREHOLDING AND MEMBERSHIP (CLASSES OF SHARES, VARIATION OF
CLASS RIGHTS, ETC) ACQUIRING MEMBERSHIP
ISSUE SALE AND TRANSFER OF SHARES
GOING PUBLIC/OFFER OF SHARES TO THE PUBLIC: LEGAL FRAMEWORK
AND REQUIREMENTS (PROSPECTUS, DISCLOSURES, ETC)
CAPITAL MARKET MANIPULATION AND INSIDER DEALINGS
FINANCIAL STATEMENT, AUDIT, DIVIDENDS.
MERGERS AND ACQUISITIONS.
WINDING UP AND LIQUIDATION; TYPES, PROCEDURES, LEGAL
CONSEQUENCES, ETC
CASE REPORTS FOR WINDING UP AND LIQUIDATION
PARTNERSHIP
BUSINESS NAME
REGISTERED AND INCORPORATED TRUSTEES.

COMPANY LAW1

HISTORY OF COMPANY LAW.

:: History being a record of past events shapes the future-Prof Abugu.
:: When did the “company-like” form rear its head and how did it evolve over the years?
Some scholars say the history of Company Law is traceable to the practice of Italian
Merchants2 others say it is traceable to 13th Century England. Our discussion shall adopt
the latter position.
13th -17th Century.
The following endeavours were accorded “corporate” status during this period.

1
Please get the book by Professor Abugu. Titled: Corporate Law in Nigeria. (2012) Maxwell Publishers. This
book explains the concepts and principles. You can purchase other books to whet your appetite.
2
Writers Like Sir William Holdsworth.
 1 The Church of England, Monasteries and other Ecclesiastical Bodies: Procured
charters from the crown for the sole propagation of their objects. These were the earliest
forms.
2. The Borough System: A charter3 could be obtained from the crown to recognize a
particular community/municipality as a corporation. This practice was given legal backing
by the Municipal Corporation Act of 1835.
3. The Guilds: People involved in the same business would come under the
auspices/umbrella of the guild. Members contribute/pool money and make bulk purchases
and share according to contribution/interest. This united form protected their interests and
gave them better bargaining power. Charters were procured in this regard.
4. Partnerships: not exactly like the ones we have now. This type took two forms viz:
- The Commenda: a temporary association of two or more people where “A” (called the
Commendator) lends money to “B” (his partner called the Commendatarus) to employ in
trade and take a percentage of the profit (usually 25 percent) The commendator bears the
capital and risk while the commendetaurus deals with the running and administration.
- The Societas: Here, members conglomerate under the auspices of the societas but each
traded with his own stock and on his own account4. Charters were obtained to acquire
monopoly of trade for members and to give them (their members) power over the territory
in which they traded.
:: By this time, international trading began to gain prominence. However, due to the huge
risk and capital involved, a single individual found it herculean to undertake. Therefore,
“Joint Stock Companies” were formed (and obtained charter5) to pursue international and
social undertakings. The Muscovy Company was the first joint stock6, followed by the
East Indian Company.
A Joint Stock essentially involves a large number of people pooling money together in
common stock. The common stock is divided into units of (readily transferable) shares
based on the contribution/interest of each member. The profit is shared to each member
based on his interest.
17th - 18th Century:
The Bank of England was formed in 1694. This bank lent money to the State at an interest.
The South Sea Bubble

3
To secure the charter of the crown, the town’s men had to diligently perform their civic duties.
4
They just had to identify with and obey the rules of the societas.
5
In Edmund v Brown and Tillard, it was recognized that a JSC can own property, survive the lives of its
members, sue and be sued, and members may not be liable for debts of the corporation.
6
Chartered in 1555.
 A group of individuals were in the habit of lending money to the State at an interest. A
royal charter was granted to incorporate the group. The South Sea Company7 emerged on
this premise. The company was granted a monopoly to engage in trade with South America.
This Company bought over major national debts8 thereby unburdening the State and
acquiring the favour and loyalty of the government and the governed9. The South Sea Act
was enacted to recognise and legitimate them.
As time went on, the cost of trading skyrocketed. This led to a high demand for Royal
Charters to acquire a corporate personality to undertake sophisticated business in the harsh
economy. People utilised fraudulent devices to circumvent the difficulty of obtaining a
proper charter from the crown.
- Unscrupulous people enriched themselves by forming sham companies with gross
misrepresentation of object and financial projections. This led to the exploitation of the
gullible public.
- Charters of defunct companies were acquired and utilised.
- Companies undertook businesses outside that for which they were formed.
The parliament intervened with the Bubble Act 1720. This Act prohibited10 people from
saying that they are a corporate body except and until they have been granted a charter to
carry out the particular business or purpose they purport to carry. However, this Act did
not ameliorate the hardship/difficulty attendant in getting a charter.
Smart lawyers circumvented this inconvenience by executing a deed11 which established a
“corporate-like” relationship. The courts of equity permitted this practice and noted that
the Act was not contravened. This is equity’s contribution to the advancement of company
law
In 1825, the Bubble (Repeal) Act was enacted. It enabled the crown to grant charters of
incorporation to trading companies without giving them limited liability.
In 1834, the Trading Companies Act was enacted enabling the Crown to grant privileges
of incorporation without actually granting the Charter or conferring limited liability.
Next came Joint Stock Companies Act of 1844.

7
Company of Merchants of Great Britain Trading to the South Sea formed by James Blunt in 1711.
8
NB: the Co paid E7,500,000. The Company also bribed certain ministers which led to the enactment of the
South Sea Act to protect and legitimate them.
9
The People started investing in them with little or no knowledge of the enterprise or what they undertook
(speculative investment).
10
Specifically Section 18 which declared it illegal and prescribed penalties thereof.
11
In which the property of the company was vested in the trustees and the members were entitled to the beneficial
interest in the company from its shares and profits. This made them seem like companies even if they did not
have a separate legal entity. At least people could invest in the undertaking and have “trustees” do the work and
at the end of the day; get their profit. These deeds were as comprehensive as today’s memorandum and articles.
- Regulated Joint Stock Companies and provided for registration12 of all new companies
which must have not less than 25 members.
- The registration process was in two stages. You first file13 the name, address, object and
place of business… of the company. The second stage is to file the deed of settlement14
signed by the at least ¼ of the holders.
- This Act introduced the office of the registrar of companies.
- There was no limited liability under this Act but each member’s liability was to cease three
years after they had transferred their shares (i.e. left)
Next: The Companies Clauses Consolidation Act 1845 which sought to streamline the
incorporation process. Standard forms and provisions were set out for promoters to adopt.
Next: The Limited Liability Act of 185515.
- Enacted the Limited Liability Principle16. However directors could be liable if they declare
and pay any dividend when they know that the company is insolvent or if the dividend
(which they paid) causes the company to go insolvent.
- It prescribed a minimum capital requirement of E250.
- Provided that the Deed of Settlement had to be executed by at least 25 shareholders.
- Banking and insurance companies were excluded from the application of this Act17.
Next: The Joint Stock Companies Act 1856 which eased up the regulation of companies.
- No minimum amount of shares required, no need for government approved auditors.
- The Deed of Settlement was replaced with the Memorandum of Understanding and Articles
of Association.
- Reduced the minimum number of Subscribers to the memo from 25 to 718.
- The register of members (which was only open to shareholders) was made available to the
public under this Act.
- Provided for limited liability under Section 60 and Section 61.
In 1857, the Punishment of Fraud Act was enacted to make directors criminally liable
for false statements published with intent to deceive or make someone become a
shareholder.

12
This Act provided for incorporation by mere registration. Rather than hoping for a charter or Act of Parliament.
13
Something similar to today’s Memo.
14
Something similar to today’s Articles. This deed of settlement contained provisions on internal regulation.
15
It was enacted following the recommendations of Mr Bellendun in 1837, The Mercantile Law Commission
in 1852 and the Resolution of the House of Commons in 1854.
16
Which provides that the liability of members shall be limited to their interest/share in the company. Their
personal assets/properties cannot be touched/used to offset the company’s liability.
17
The Liability of Banking and Insurance Companies was unlimited until 1862 and 1858 respectively.
18
It however prohibited a co from carrying on business with less than 7 members for more than 6 months. Else,
each shareholder shall be liable for all the debts of the company contracted during that period.
 Next: Companies Act 1862 which:
- Consolidated the various extant laws.
- Recognized Limitation by Guarantee, Limitation by Share and Unlimited Liability.
- Banking was brought under the operation of this act. This meant that there could now be
Limited Liability in banking business.
- Alteration of object clause was absolutely prohibited.
- This Act introduced the ultra vires rule.
Then came the 1867 CA… no substantial or overwhelming improvement. Next, the
Director’s Liability Act 1890 dealt with Liability of Directors. Then came the 1877
Companies Act. This was followed by the Companies Act of 1890.
Then came Companies Act 190019, Companies Act 1907, Companies Consolidation Act
190820, Companies Act 1917, Companies Act 192921, then Companies Act 1948. With
similar provisions.
The Nigerian Perspective
The West discovered the Commercial potential in Nigeria. Charters were granted to certain
companies like the Royal Niger Company (RNC), East Indian Company (EIC), United
African Company(UAC) and South Sea Company.
From our colonial history, we would remember that Lagos was ceded to the West (British)
in 1861. English law was then introduced to govern the territory. In 1876, the Supreme
Court Ordnance was promulgated for Lagos. It provided that English Laws existing as at
1874 were applicable in the territory.
After the proclamation of Northern and Southern Nigeria in 1900, the limitation date was
made 1st Jan, 1900. The English Companies Act was received.
The Company Ordnance was promulgated in 1912 to provide for incorporation of
companies by registration. Then following the amalgamation of the Northern and Southern
Protectorates in 1914, The Companies Ordinance 1914 was enacted to regulate the new
territory. This Ordinance was followed by the 1917 Companies Ordnance, then the 1922
Companies Ordnance which repealed the former22.
Nigeria was a unitary State until the Lyttleton Constitution of 1954 introduced a Federal
System of Government.

19
No substantial difference… except that it mandated the Auditing of a company’s account.
20
This Act introduced the concept of Private Companies.
21
Was enacted to consolidate the existing laws. It introduced the concepts of redeemable preference shares and
minority protection.
22
Which later became the Companies Act
 On the 1st of October 1960, Nigeria gained her independence and the power of the British
parliament to legislate for Nigeria ceased. The 1960 Constitution was enacted. This
constitution divided Nigeria into regions (Northern, Western, Eastern and a Federal Capital
Territory). Company matters were contained in the Exclusive Legislative List.
On the 1st of October 1963, Nigeria became a republic and was severed from the British
Crown. The Queen’s functions were taken over by the President who became the
Constitutional Head of State. This led to the enactment of the Republican Constitution of
1963. Part 1 Item 19 of the 1963 put the regulation of companies within the jurisdiction
of the Central Government to the exclusion of the Regions.
After the Military took over power in January 15, 1966. Decree No.1 (Constitution
(Suspension and Modification) Decree of 1966 was promulgated. Decree No. 34 of 1966
made Nigeria a Unitary State. The 1968 Companies Act was promulgated by the Federal
Military Government.
The Civilian took over and the 1979 (Presidential) Constitution was promulgated. It still
retained incorporation and regulation of companies in within the exclusive (F.G) reserve.
A Law Reform Commission23 was set up in 1987 to reform the 1968 Act. This ushered in
the present Companies and Allied Matters Act 1990. Most notable for establishing the
CAC24, providing a regulatory regime for Unit Trust Schemes and recognising the role of
the Securities and Exchange Commission.
Then came the 1999 Constitution which enthroned a Federal25 Civilian Government26.
The incorporation, regulation and winding up of companies is still retained in the exclusive
legislative list27. Furthermore, Section 251(1E) of the 1999 Constitution vests jurisdiction
in matters arising out of the Companies and Allied Matters Act on the FHC to the exclusion
of the SHC except where a crime is in issue28. In Momodu V State, the court held that the
exclusiveness of the FHC is only in relation to civil matters.
There were other developments (especially in the banking sector) which indirectly had an
impact on the Company Regime29.

23
Headed by his Lordship Hon Justice Dr Olakunle Orojo (Rtd)
24
Which is the corporate law’s ombudsman.
25
Section 2(2) provides that Nigeria shall be a federation consisting of states and a Federal Capital Territory.
26
See Section 1, and 3 of the Constitution relating to its supremacy and prohibition of unlawful takeover.
27
For FG only. Therefore, no State has the power to make laws regulating companies even those within its
territory. This has led to agitations like those evident in the Niger-Delta.
28
A similar provision can be found in Section 235 of the Investment Securities Act 1999 (Now 2007).
29
In the Banking Sector: Enactment of CBN Ordinance in 1958, Enactment of the Banks and Other Financial
Institutions Decree in 1991, the Nigerian Deposit Insurance Corporation Act 1998… In the Taxation Sector;
Enactment of the Tax Ordinances and Acts, Petroleum Profit Tax Act 1959 (which affected companies engaged
in upstream petroleum operations), Enactment of the Companies Income Tax Act 1961 (which imposes a certain
percentage tax on the profits of companies). In short, Nigeria (just like Britain) is a country of enactments.
 The corporate regime in Nigeria appears to be in the hands of the Federal Government.
Professor Abugu recommends a division of power. He opines that where the activity is
Intra-State, the Host State can have jurisdiction… where it is Inter-State, then it would be
proper for the FG to handle. Certain advantages were listed in this regard:
- The States would generate their own revenue which would be applied to development and
provision of public facilities in the States.
- States would encourage businesses to incorporate. This would lead to industrialization.
- Employment for indigenes their indigenes.
- Decentralization of commerce and decongestion of commercial areas (like Lagos and
Abuja)
- Easier and effective monitoring.
- Development of local jurisprudence.
Although the arguments against this position include:
- The standards may be compromised and arbitrarily set and the regulatory provisions and
process for incorporation may vary greatly from State to State. As can be seen with the
USA (Blue Sky Laws).

SOURCES OF COMPANY LAW IN NIGERIA

- Legislations: Like CAMA, BOFIA, CBNAct, NICOMAct, and various Acts and Enabling
Statutes.
- Case Law: both foreign and municipal. Facilitated by staire decisis and judicial
precedence.
- Codes of governance and Listing Rules: Enacted by regulatory bodies like the Nigerian
Stock Exchange, Securities and Exchange Commission pursuant to powers derived from
their enabling statutes.
- Books and Academic Writings.

ADMINISTRATIVE AND REGULATORY BODIES.

This topic briefly focuses on the CAC and SEC30
THE CORPORATE AFFAIRS COMMISSION (CAC)
Section 1 of the CAMA establishes it as a body corporate with perpetual succession and
common seal can sue and be sued, hold and dispose properties and perform its functions
independently. HQ at the FCT with branches in each State.

30
There are a host of others which regulate specific sectors.
 Composition/Membership of the CAC Section 2 CAMA. 10 members which comprise
of the :: Chairman31, :: Representative of32: -the Business community, -The Legal
Profession, -Accountancy Profession, -Ministry of Commerce, -Ministry of Justice, -
Ministry of Industry, -SEC33 and -Manufacturers’ Association of Nigeria, :: Then a
registrar general with not less than 10 years post call experience.
Their composition ensures competence and knowledge in handling the affairs of the
commission. The members are public servants and must act in the interest of the public.
The rules of equity may apply.
Tenure of Office: Section 3- serve for 3 years and can be reappointed for another three
and no more-Section 3(1).
Removal:
- By the minister subject to approval of the President. If the person’s membership is
detrimental to the CAC-Section 3(2).
- Where the member becomes insane, bankrupt, is convicted of a felony (or any offence
involving dishonesty), guilty of serious misconduct or personally disqualified from
practicing his profession by his professional body.
Remuneration: to be determined by the president-Section 4.
Quorum: 5 member. The chairman34 being part-Section 5:
Disclosure of interest: Provides that a person directly interested in a co which the CAC is
deliberating upon must disclose such interest and relevant facts within his knowledge. The
CAC then records such disclosure and the affected member should not participate in the
proceeding/deliberation- Section 6
Functions: Section 7.
1. Administer the Act: regulation, incorporation, supervision, management, winding up and
so on. They can institute proceedings where necessary-Section 303 CAMA.
2. Establish and maintain a Companies Registry and office in all states to be maintained
according to the Registrar General’s direction35.
3. Supervise and scrutinise the affairs of companies36.

31
Appointed by the president on recommendation of the Minister. Must be knowledgeable and specialized.
32
Each of the representatives are appointed by the minister on the recommendation of the respective bodies that
regulate the profession of the person representing.
33
Not below the grade of director or its equivalent.
34
Or any other member can be elected by the members to represent the chairman in his absence.
35
Assistant registrar generals run the affairs in other states.
36
In deserving circumstances (listed in the act like fraud, deceit, misconduct, etc.) in the interest of the
shareholders and public. Investigators can be appointed by the CAC to do this-Section 314 and 315 CAMA
4. Carry out other functions specified in the Act and those necessary to implement the
CAMA37.
THE SECURITIES AND EXCHANGE COMMISSION. SEC
The apex regulatory body for the Nigerian Capital Market to ensure a fair, efficient and
transparent capital market-See the Preamble to the ISA (Investment Securities Act 2007).
Established under Section 1 of the ISA. Just like the CAC, it is a body corporate… with a
Head Office in Abuja and Zonal Offices in various States-Section 2 ISA.
Composition-Section 3 ISA: 9-Member Board. Consisting of; -Chairman, -Director
General and Chief Executive (as accounting officer)38, -three full time Commissioners, -a
rep of the Fed Min of Finance, -A rep of CBN and two part-time Commissioners39.
Members should be fit and proper. They subscribe to (and are bound by) the codes of ethics.
Their function is summarised as “administering the SEC”, Regulating Capital Security
business in Nigeria and protecting investors-See Section 13. Other incidental to. E.g. In
Owena Bank V Nigerian Stock Exchange the court held that they can even suspend the
registration of any person’s security for up to 12 months (and no more).
Appointment and tenure: Section 5.
The DG40 and Full-time Commissioners41 are appointed by the president on the
recommendation of the minister and subject to confirmation by the senate. Chairman and
other ex-cofficial members go for 4 years and no more-Section 5(5).
Disqualification: Section 8. Same as that of the CAC highlighted earlier.
THE (NSE) NIGERIAN STOCK EXCHANGE.
A Self-regulatory corporate42 body initially established as the Lagos Stock Exchange under
the Lagos Stock Exchange Act 1961 which is now the Investment and Securities Act
2007.
Has its head office in Lagos.
Composition: -A President and -two VPs, -A CEO, -Chairman, -one ex-officio member, -
nine national members, -one institutional member and -eight dealing members.

37
In this light, the CAC makes rules and regulations to guide. Subject to the approval of the president.
38
This is one person.
39
One of whom must be a legal proactitioner with 10 years post call experience.
40
DG has 5 years and can be appointed for another one term (5 years) and no more. He is responsible for the
management of the SEC.
41
Serve for 4 years and can be reappointed only one more time.
42
Can sue and be sued, blabla…
 Functions: Summarised; to ensure discipline and justice in the administration of security
exchange. In doing this, it can call for information from, inspect and conduct inquires and
audit of its members-Section 32 ISA.

THEORIES OF CORPORATE LAW43.

The concession /Grant Theory: that the company derives its personality and power from
the concession granted to it by the State.
Fiction Theory: Adherents include; Pope Innocent IV, Von Savigny, Blackstone,
Edward Coke, Salmond amongst others. That the company is a fictional personality
distinct from its members-Salomon V Salomon. It is artificial, invisible and intangible…
devoid of mental element-Dartmouth College V Woodward. See also Lee V Lee’s Air
Farming Ltd.
Realist/Aggregagte Theory: That a co is not artificial but real and recognised by statute.
The Realist theory seems to have gained grounds in recent times-See the Suttons Hospital
Case.
Economic Theory: That the company is established as a vehicle to make profit.
Property Rights and Social Institutions Theory: Asks the question; whether the
company is to uphold the interest of the shareholders44 or stakeholders45. Professor Berle
advocated for shareholders while Professor Dodd advocates for the stakeholders (CSR).
Dodd’s Corporate Social Responsibility view seems to be gaining prominence.
The Contractual Theory: Originates from Ronal H. Coase through the “nexus-of-
contract” theory. Here the company is regarded as a less costly alternative to market
transactions. Assets are more productive where they are combined by individuals as a joint
team to increase profit.
Communitarianism Theory: That companies should seek to serve the community not just
the shareholders-Farrar.
Team Production Theory: Alchian and Demsetz view the corporation as a team effort.
Production is as a result of various input and team effort. Margaret Blair and Lynn Stout
introduced the concept of “mediating hierarchy” which is an independent unquestionable
board of directors who oversee the administrative affairs of the corporation to ensure
maximum output.

43
Not in the course outline for this semester… you can still read it to gain extra knowledge.
44
Those that invested in the business to make profit.
45
Employees, manufacturers, consumers, host communities and the world as a whole.
 INCORPORATION OF COMPANIES.
How can a company be formed?
1. By Grant of Royal Charter: This operated under the monarchical systems. Given to
ecclesiastical bodies and others. E.g. Bank of England and Whales.
2. By Registration: either as a private or public company. After dividing into Public or
Private Company, there is a further sub division of Private/Public companies Limited by
Shares46, those limited by guarantee47 and those with Unlimited Liability.
a. Private Companies: is a company declared to be private by its memorandum-Section 22(1)
CAMA. The total members must not exceed fifty (50 48)-Section 22(3). The Articles of a
private co should restrict49 transfer of its shares-Section 22(2). It cannot invite the public
to subscribe to/buy its shares nor can it ask the public to deposit money with it. Except
companies so authorised by law-Section 22(5). Its minimum Authorised Share Capital is
#10,000-Section 27(2) CAMA. If the co contravenes the provisions of Section 22, it shall
be treated as if it were not a private company-Section 23.
b. Public Companies: A co stated to be public under its memorandum. It must have a
Minimum Authorised Share Capital of #500,000-Section 27(2). Generally has no
restriction on number of shareholders or transferability of shares.
3. Statutory Company: formed under special legislations regarded as the enabling
law/statute. E.g. PHCN, NNPC, the University of Lagos, etc.
DISCUSSIONS:
On the Registration/Incorporation Process: Any association or group carrying on business
for the purpose of making profit with more than 20 members must be registered as a
company50-Section 19.
We look at members’ capacity51. Section 18 provides that they should be not less than 2
persons. These “two persons” may be humans or body corporates or a mix of both.

46
In the event of trouble, the liability of each member is limited to the share he has in the company. His
private/personal property cannot be used to settle debt.
47
For a co limited by guarantee, the liability of the member is limited to the amount which he had agreed to
contribute in the event of the company being wound up while he is a member or within one year from his
cessation of membership-Section 92(4). These companies usually enjoy certain benefits like tax exemptions.
However In Rev Shodipo v FBIR where the court held that although a co ltd by guarantee would be exempted
from tax, it would be liable to pay tax when it engages in business.
48
Excluding persons who are bona fide in employment of the company or retain their shares after termination
of their bona fide employment.
49
The Restriction may be absolute or pre-emptive (which gives preference to transfer to members before
outsiders)
50
Exceptions are made for Co-operative societies and partnerships for practicing law or accountancy.
51
The following have no capacity: :: Infants (Persons less than 18 years unless there are also two or more
other capacitated promoters). :: Persons of unsound mind. :: Undischarged bankrupt. :: A person with fraudulent
 Requisite documents52 are to be lodged with the Registrar-General of Companies, CAC.
After the Registrar scrutinises the documents53, requisite fees are paid and a Certificate of
Incorporation is issued or refused54 (with reasons).
An aggrieved applicant whose application has been refused may apply to the commission
(CAC). The commission would then apply to the court within 21 days of receipt of the
aggrieved’s application. Cases have shown that the court would compel the CAC to register
the company in deserving circumstances… especially where there is no illegality and the
provisions of the Act have been complied with-R V Registrar of Companies. In Lasisi V
Registrar of Companies an order of mandamus was issued to compel the registrar to
register British Leyland International (Nigeria) noting that the Act has been complied with
and the memorandum of the company is lawful. In King V Registrar of Companies, the
court noted that the registrar should properly exercise his discretion and not be influenced
by extraneous factors. See Also Kehinde V Registrar of Companies.
The certificate of incorporation is rebuttable proof that the company is duly registered. A
person who asserts that the company was not incorporated should prove his assertion-
Abakaliki LGC V Abakaliki Rice Mills Owners Enterprises. Section 634 EA.
Consequently, those who assert that a co has been incorporated should prove same by
producing the certificate of incorporation- Registered Trustees of Pentecostal Assemblies
of the World Inc V Registered Trustees of African Apostolic Christ Church.
Where a certificate was procured by duress, fraud, violation of an enactment or issued in
error, the court has the power to review and nullify the certificate-R V Registrar of
Companies.

On Conversion of a Company from one form to another.

Note that a company limited by guarantee cannot be converted.
A. By Default: Where a private co contravenes the provisions of Section 22, it would no
longer be regarded as a private co-Section 23.

disposition disqualified under Section 254 from being a director of a company-Section 36. :: A corporate body
in liquidation.
52
Documents of incorporation are provided for in Section 27, 35 and 36 of the CAMA they include; include
Memo, Article, notice of address, statement of authorized share capital etc.
53
The commission is to scrutinise the document and register within 30 days or give notice of its refusal with
grounds within 30 days.
54
Can be refused if it does not comply with the provisions of the Act or other laws. If the company seeks to
carry out illegal purpose. If the subscribers are incapacitated or incompetent. If the name the company proposes
to use would conflict with an existing trademark or registered business name-Section 36(1), Exxon Corporation
v Exxon Nominees Ind Ltd.
B. Private to Public or Limited to Unlimited Liability: First, the company must have a
share capital55. Then the members should pass a “special resolution” saying that they want
to convert from private to public or limited to unlimited (as the case may be). An
application is then made to the CAC in prescribed form.
- A co limited by shares can convert to an unlimited Liability Company and vice versa 56-
Section 51.
- A Private company may convert into a public co and vice versa-Section 53(1-8)
On Foreign Companies: A foreign company which wishes to transact business in Nigeria
must be incorporated as a separate entity in Nigeria-Procter and Gamble Co V Global
Soap and Detergent Industries Ltd. Section 54. WEMA Bank V NNSL. This does not
however rob it of the right to sue and be sued in Nigeria-Section 60(b) Watanmal PTE Ltd
V Liz Olofin and Co. in Kwame V Sucre Export (London) Ltd the appellant’s alleged that
the respondent was an unregistered foreign company and could not sue in Nigeria. This
contention was rejected.
On Service of Process on Companies: It can be done by delivering it to the company’s
registered office or head office or giving it to a principal officer57 of the company-Buhari
V Haddy Smart Nig Ltd. For foreign companies, Order 7 rule 10 HCLL adds that it can
be given to an agent of the foreign company who is within jurisdiction.

COMPANY PROMOTERS.
In Twycrose V Grant, defined as one who undertakes to form a company with reference to
a given project and to set it going. In Emma Silver Mining Co V Lewis, defined as one
who gets a company floating.
Section 61 CAMA defines a promoter as a person who takes part in forming a company…
who takes the necessary steps to set it going… except a person acting in professional
capacity e.g. lawyer, solicitor, secretary, etc.
It is a question of fact. Acts like; arranging for the preparation of the memorandum of the
company (Garba V Sheba), Negotiating agreement for the purchase of property by the
company, (Re Olympia) and so on made the actors to be regarded as promoters. He need
not be a subscriber to the memorandum.
At common law, a promoter is neither the agent nor trustee of the company-Laguna’s V
Laguna’s: Omnium Electric Palaces V Baines. This is because the company is not in
existence at the time of promoters acting- Kelner V Baxter. An Agent cannot act on behalf
55
A co limited by guarantee does not have a share capital therefore cannot be converted to a public company.
56
It however cannot subsequently reconvert to an unlimited LTD after converting to a Limited Liability Co-
Section 51(1 and 2).
57
Like Director, Secretary, and so on.
 of an inexistent principal. The current position under Section 62(1) is that promoters stand
in a fiduciary position.
DUTIES OF A PROMOTER.
We have established that Section 62(1) puts him in a fiduciary position. He therefore must
act with utmost good faith-Section 62 (2) and account to the company for profit made
while acting as a promoter. Note that the company (after incorporation) can ratify58 or
rescind59 a transaction which the promoter purported to carry out on its behalf-Section
62(3). Section 62(4) removes the time bar/limitation in relation to suing a promoter.
- A promoter should not allow his interest to conflict with that of the (proposed) company-
Erangler V New Sombero Phosphate.
- All secret profits must be disclosed to an independent board of the company. In Gluckstein
V Barnes, the court held that the promoter ought to have disclosed the E20,000 profit he
derived from the sale of a property to the co to be formed. In Re Leeds and Hanley Theatre
of Varsities, the promoters of a company bought property and resold to the company at an
increased price. They did not disclose that they were the vendors. The court held that they
were to account to the company for the profit realized60 and disclose that they were the real
vendors. Although in practice, the courts are usually reluctant to rescind contracts entered
into by the promoters where it would be inequitable or relatively impossible to restore the
parties to their previous positions. In Lagunas Nitrate Co V Lagnas Syndicate. Where the
property was sold at an overvalued rate by the promoter to the company, and the
shareholders alleged that the prospectus was misleading. The court held that rescinding the
contract and restoring the parties to their position was impossible as various people have
changed their position in relation to the contract with the company.
The shareholders may rescind the contract or sue the promoter for damages from breach of
fiduciary duties-Section 62(3) Re Cape Breton Co.
Remuneration of promoters.
In Garba V Sheba, the court held that since a co cannot contract before its formation, a
promise by the company (before its incorporation) to pay the promoter cannot be enforced.
Similar position was maintained in Re National Motor Mail Co, Clinton’s Co. In practice,
the promoters would usually be the directors and would find a way around. For example,
they usually buy the property and resell to the company at a reasonable profit (this was
okayed by the court in Re Ambrose Lake Tin and Copper Mining Co). Same done in Re

58
This ratification can be by the board of directors or all members or at a general meeting after the promoter has
fully disclosed the facts and nature of the transaction.
59
In such case the prompter bears the transaction personally. Enjoys the benefit, performs the duties and suffers
the liability (where any) arising from the transaction which the company refuses to ratify.
60
The promoter can be reimbursed for out-of-pocket expenses and other legitimate expenses like charges and
advertisement
 Cape Brenton where the purchase was E5,000 and the promoters sold it for E42,000 to the
company. They got away due to lapse of time. Also in Omnium Electric Palaces V Baines,
the court noted that since the promoter is neither a trustee nor agent of the company, he is
not bound to disclose profit. However, since Section 62 puts the promoters in a fiduciary
position, sales to the company at a profit should be disclosed… sub 4 removes the time
limitation for suing a promoter.

PRE-INCORPORATION CONTRACTS
Are contracts purported to be made on behalf of the company before its incorporation61.
Pre-incorporation contract is defined in Section 72 as “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”.
Incorporation contracts were not binding on the company at common law and they could
not be ratified by the company even after incorporation. This is because before
incorporation, the company is regarded as being inexistent, thereby lacked contractual
capacity. As in Howard V Patent Ivory Manufacturing Company, the court held that an
inexistent co (principal) cannot ratify. In Kelner V Baxter and Ors. A, B and C, signed a
contract (while the company was not yet in existence) for the supply of goods (wine) that
were to be used in the business of the company. The signatures were followed by the words
"on behalf of the Gravesend Royal Alexandra Hotel Co. Ltd.". The company was
subsequently registered but quickly became insolvent. The court held that the supplier
could sue the signatories personally because the contract was not binding on the
company62. In Caligara Dairo V GlovanniSatori and Co, a contract of loan entered into
on behalf of a co before its incorporation was held not to bind the company. At common
law, the company could circumvent this restriction by:
- Entering into a new contract (after its incorporation) with terms similar to the pre-
incorporation contract- Transbridge Co V Survey International.
- Provide (in the object clause) that the company would enter into a contract similar to the
pre-incorporation contract-Okafor V Ezenwa.
Although the courts usually disregarded the common law pre-incorporation technicalities
to prevent fraud. In Firgos Nig Ltd V Zetters (Nig) Pools Ltd, over $7000 was spent in
concluding a contract for the supply of goods to the company (yet to be incorporated). The

61
This should not be confused with provisional contracts which are merely made by the company before the
date at which it is entitled to commence business-Re Otto Electrical Manufacturing Co, Jenkins Claim.
62
This does not mean that the contract is invalid. It just means that the promoter would personally bear the
contract. This must be contrasted with a case where the promoter signed as the company rather than on
behalf of the company. In such a case, the contract would be invalid at common law. In Newborne v Sensolid
(Great Britain) ltd, the signature on the contract was purported to have been concluded by the company rather
than the promoter on behalf of the company. As he signed in the company’s name. This is distinguished from
Kelner’s case where he signed on behalf of a co.
 company held that it is not bound to pay. The court held that the company is estopped from
denying the transaction.
Notwithstanding the long yarns above, the current position is contained in Section 72 of
the CAMA:
(1) The company can ratify pre-incorporation contracts after it has been incorporated.
(2) Prior to ratification (and if the company eventually does not ratify), the promoter (who
purported to act on behalf of the company) would personally bear the responsibility and
benefits of the contract.
In Edokpolo V Sem-Edo Wire Industries Ltd, the court affirmed the common law position,
in Foss V Harbottle also followed common law position. In Edokpolo’s case, a
shareholder’s agreement entered into before the formation of the company was
distinguished from a pre-incorporation contract. Although this case has been criticised for
regarding a shareholder’s agreement as a pre-incorporation contract?
In SocieteGeneraleFavouriser Development Du Commerce Et De L’Industrie En France
V Societe Generale Bank (Nigeria), the court held that Article 11 of the pre-incorporation
agreement (which stipulated that disputes of the company should be submitted to
arbitration) should be obeyed by the company.

CONSEQUENCES OF INCORPORATION.
It confers corporate personality-Section 37 CAMA “shall be a body corporate… power to
hold land, having perpetual succession and common seal…” The company can sue and be
sued- Njoku V UAC Foods: Baroda V Iyalabani Ltd: Vulcan V Gessellschaft: Igwe V
Kalu and a host of other cases63
This “corporate personality” gives the company a legal personality which is separate and
different from that of its members-Salomon V Salomon and Co Ltd. In Salomon’s case,
Lord Macnaghten reasoned that the company is “different from the subscribers”. Same
stand was maintained in Lee V Lee’s Air Farming Ltd. In Dunlop Nigerian Industries
Ltd V Forward Nigeria Enterprises, the court upheld the corporate personality principle
notwithstanding that the second defendant and his wife held about 90 percent of the
company’s shares. Equally in Macura V Northern Assurance Company, notwithstanding
that the defendant was the majority shareholder. See also Marina Nominees Ltd V FBIR.
This principle has been expanded to holdings64. As in Adams V Cape Industries, the court
held that a holding company and its subsidiaries are distinct and separate legal

63
The company must however sue and be sued in its correct name-Agbonmagbe Bank Ltd v General Manager,
GB Olliavant Ltd
64
Where one company sets up subsidiaries. E.g. Union Enterprises sets up Union Bank, Union Homes, Union
Pension, Union Insure, Union Events and so on. These subsidiaries set up by Union Enterprises are different
from it.
 personalities. Same principle reiterated in Williams Cory and Sons Ltd V Dorman Long
and Co Ltd and the case of Kanu Sons and Co Ltd V FRN.
From this “corporate personality”, four principles have been established. They include:
a. The Extent of the Company’s Legal Capacity: The company can exercise its legal
capacity only “to the extent provided by the memorandum for the furtherance of the
company’s authorised business or objects”-Section 38(1). Therefore it can only do things
that are necessary to enable it carry out its objects. Where it goes outside its objects, the
ultra vires rule kicks in65 to invalidate such acts. The company is also limited by various
Statutory, common law and equitable stipulations.
b. Nature of the Company’s Legal Capacity: It is an association of persons but the company
is separate from these persons-Salomon V Salomon and Co Ltd, Pan Asian African Co
Ltd V Nicon66. Lee V Lee's Air Farming Ltd, Butt V Kelson. With separate personality at
law.67
c. The Procedural Capacity of the Company: Who institutes suits for the company? In
Foss V Harbottle the court held that it is the company and not the members that should
handle the company’s suits. Also, in Mozley V Alston the court held that the proper plaintiff
is the company itself. Section 299 CAMA. Though the company would have to engage a
legal practitioner-Mode Nig Ltd V UBA Plc. If the legal capacity of the company is
challenged, it would have to prove that it is incorporated-Governor of Mid West State V
Mid Motors ltd. Where it fails to prove that it is incorporated (maybe by showing
certificate), then it cannot sue or be sued as a separate personality-Nduka V Ezenwaku.
d. The Life of the Company: The Co generally has perpetual succession and lives beyond
the life of its members. The company comes to life on the date of incorporation and dies
when it has been finally wound up and dissolved in accordance with the law-Section 38(1).
Ahmadu Amwa and son V Anthony Ehidiamehen.

LIFTING THE VEIL OF INCORPORATION.

Lord Denning in Littlewoods Mail Order Stores Ltd V IRC noted that “the doctrine in
Salomon V Salomon has to be watched very carefully”… “courts can often draw aside the
veil… to see what really lies behind”.
Lifting the veil occurs where the courts or law disregard the corporate personality of the
company in deserving circumstances. In Adeyemi V Lan and Baker (Nig) Ltd, the court
held that there is nothing sacrosanct about the veil of incorporation. The veil shall be lifted
to prevent the avoidance of recognition by the eyes of equity.

65
This shall be discussed later in this work.
66
Where the court noted that the company can occupy residential premises in its own right.
67
In Fact, the court in Onyekwuluje v Benue State Givernment, held that Chapter IV of the 1999 Constitution
is exercisable by a company.
 In Lennards Carrying Co V Asiatic Petroleum, the court noted that a corporation is an
abstraction. In Trenco (Nigeria) Ltd V African Real Estate, the court noted that since the
company has no mind of its own, it acts through agents. Lord Denning noted in Bolton
Engineering Co V Graham and Sons ltd a co can be likened to a human body which has
a brain and nerve centre. The brain controls and the hands act. He then stated that; the
directors and managers represent the directing mind and their action can be treated as that
of the company. See also-Faith Entreprises Ltd V BASF Nigeria Ltd.
We shall discuss the judicial instances and of lifting the veil, then proceed to the Statutory
provisions on lifting the veil.
JUDICIAL LIFTING THE VEIL
Professor Abugu rightly notes; that “there is no consistent principle”. The veil would be
lifted where the justice of the case demands. Examples include.
:: To prevent fraud and improper conduct: Public Finance Securities Ltd V Jefia. In
Gilford Motor co Ltd V Horne, the defendant had promised not to solicit after the
company’s customers if his appointment (with the company) was terminated. He later
formed a company to do the soliciting/seeking. Held: the co was a mere device. In Jones
V Lipman, Lipman contracted to sell his land to Jones. He later sought to evade the contract
by incorporating a company and conveying the piece of land to the company and said he
did not own the land again. Held: company is a mere creature of Mr Lipman. In
Wallersteiner V Moir lord Denning frowned upon the use of companies as puppets by the
defendant Dr Wallersteiner. In Akinwunmi O. Alade V Alic (Nig) Ltd, court noted that veil
must be lifted where there is fraudulent and reckless conduct. In Adedipe V
Frameinendur68 the court held that where a company fails to apply money received for
purpose received, the directors would be personally liable in accordance with Section 290
CAMA.
:: To know the identity of those in control of the company: In Diamler Co Ltd V
Continental Tyre and Rubber Co (GB) Ltd69 in determining whether the respondent
company was an alien, the court had to look at the nationality of persons in control of the
company. In Re F.G Films Ltd, an English company claimed certain tax advantages by
virtue of being a British film company. The veil was lifted to discover that the company
(though registered in England) was controlled by an American Holding Company. Held
they are not essentially English and could not claim the tax advantages.
:: Revenue Purposes: “govament too like moni” therefore, they would do anything
necessary to enforce revenue collection and prevent tax evasion. Even if it means lifting
the veil of the company. In De Beers Consolidated Mines V Howe, a spotlight was shone

68
(2012) 24 WRN 120 CA.
69
[1916] 2 A.C 307.
 on those who have managerial control to decipher the residence of the company for tax
purposes. See Re FG Films discussed above. Firestone Tyre and Rubber Co V Llewellin,
an English subsidiary was treated as an agent of its American Parent company for the
purposes of tax. Also Pan Asian African Co Ltd V National Insurance Corp (Nig) Ltd.
Conversely, in Marina Nominees Ltd V Federal Board of Inland Revenue, it was noted
that if lifting the veil would result in loss of revenue to the government, then the veil would
not be lifted.
:: In cases of Agency: we know that an agent is a person who acts on behalf of another
person (his principal) and can bind his principal with third parties. Where a company is
acting on behalf of another person (a principal), the court can disregard the issue of separate
personality and decide to fish out the principal.
:: Where a company has various subsidiaries, the court may (in deserving circumstances)
regard all the subsidiaries and the company as a single economic unit-DHN Food
Distributors Ltd V Tower Hamlets LBC. In this case, a land was registered in the name of
a subsidiary but a parent company carried on business there. When the government
compulsorily acquired the land and sought to compensate only the subsidiary, the court
(Per) Lord Denning refused and noted that the group should be treated as one concern and
the parent should also be compensated. This single economic theory was affirmed in
Amalgamated Investment and Property Co Ltd V Texas Commercial International Bank
Ltd70 but was criticised in Woolfson V Strathclyde Regional Council. In a leading case of
Adams V Cape Industries Plc71 the courts refused to apply the single economic unit
principle and noted that subsidiaries are not facades. This shows that it all depends on the
facts of each case.
:: Other instances where it would be unjust and inequitable not to lift the veil. See
Intercontinental Offshore Construction Ltd and Ors V Shoreline Liftboats Nigeria Ltd:
Also; Gilford Motor Co V Horne.

70
[1982] Q.B 84.
71
[1990] Ch 433. Adams v Cape industries, Cape Industries plc was a UK company, head of a group. Its
subsidiaries mined asbestos in South Africa. They shipped it to Texas, where a marketing subsidiary, NAAC,
supplied the asbestos to another company in Texas. The employees of that Texas company, NAAC, became ill,
with asbestosis. They sued Cape and its subsidiaries in a Texas court. Cape was joined and argued there was no
jurisdiction to hear the case. Judgment was still entered against Cape for breach of a duty of care in negligence
to the employees. The tort victims tried to enforce the judgment in the UK courts. The requirement, under
conflict of laws rules, was either that Cape had consented to be subject to Texas jurisdiction (which was clearly
not the case) or that it was present in the US. The question was whether, through the Texas subsidiary, NAAC,
Cape Industries plc was ‘present’ in the us. For that purpose, the claimants had to show in the UK courts that
the veil of incorporation could be lifted and the two companies be treated as one. Held that the parent, Cape
Industries plc, could not be held to be present in the United States and the U.S judgment awarded against it
should not be recognised.
 STATUTORY LIFTING OF CORPORATION VEIL.
Various statutory provisions may direct the court to lift the veil of incorporation in certain
circumstances. They include:
- Section93_CAMA:If a company carries on business without having at least two member
s and does so for more than 6 months, every director or officer72 of the company during t
he time that it so carries on business with only one or no member shall be liable jointly a
nd severlly with the company for the debts of the company contracted during that period.
- Section_336(1)_CAMA If, at the end of a year a company has subsidiaries, the directors
shall, as well as preparing individual accounts for that year, also prepare group financi
al statements being accounts or statements which deal with the state of affairs and profit
or loss of the company and the subsidiaries. This provision sees the company as a single
economic unit for the purpose of preparing financial statements.
- Section_506(1)CAMA: If, in the course of the winding up of a company, it appears that
any business of the company has been carried on in a reckless manner or with intent to
defraud (creditors of the company or creditors of any other person for any fraudulent pu
rpose),
the court, on the application of the official receiver, or the liquidator or any creditor or c
ontributory of the company, may, if it thinks proper so to do, declare that any persons wh
o were knowingly parties to the carrying on of the business in manner aforesaid shall be
personally responsible, without any limitation of liability for all or any of the debts or ot
her liabilities of the company as the court may direct.
- Section 548(4)73. Requires an officer that stamps or signs on behalf of a company to clearly
write the company’s name in the (signed or stamped) document else he would be personally
liable. Unless the company decides to pay.

72
Section 31 of the repealed 1968 Act used “every person who is a member”.
73
If any officer of a company or any person on its behalf‐
(a) uses or authorises the use of any seal purporting to be a seal of the company whereon its name is not so en
graved as aforesaid; or
(b) issues or authorises the issue of any business letter of the company or any notice, or other official publicati
on of the company, or signs or authorises to be signed on behalf of the company any bill of exchange, promiss
ory note, endorsement, cheque or order for money or goods wherein its name is not mentioned in the manner
aforesaid; or
(c) issues or authorises to be issued any bill or parcel, invoice, receipt, or letter of credit of the company, wher
ein its name is not mentioned in manner aforesaid, he shall be guilty of an offence and on conviction liable to
a fine of N500 and shall further be personally liable to the holder of any such bill of exchange, promissory not
e, cheque, or order for money or goods, for the amount thereof, unless it is duly paid by the company
 CAPACITY AND POWERS OF A COMPANY.
On this, we shall be focusing on the Memorandum and Articles of Association. See Part
II CAMA.
The memorandum is superior to the Article and the provisions in the Article cannot
override the provisions of the memorandum-Guinness V Land Corporations of Ireland.
THE MEMORANDUM
This is the basic document of the company required (under Section 27) to be filed with
certain stipulated details74 and nothing more. Other matters would be regarded as matters
of administration to be dealt with in the Articles.
The “memorandum shall be signed by each subscriber in the presence of at least one
witness who shall attest the signature”-Section 27(5). It shall be stamped as a deed-Section
27(6).
The Memorandum and Articles (hereinafter referred to as “MEMART”) are public
documents-Section 109 EA, NIDB Ltd V Fembo Nig Ltd. Any person can inspect and
obtain copies of them after paying the prescribed fee-Section 551.
Schedule 1 of part II CAMA contains three specimen Forms labelled Table B, C and D
for companies Limited by shares, companies limited by guarantee and unlimited liability
company. These specimens can be adopted with necessary modifications to suit the
individual company’s preferences and requirements-Bucknor-Maclean V Inlaks Ltd.
Under Section 27(1), the Memo should contain the following.
1. A Name Clause. The name is the first indication of its personification-Prof Abugu. The
name shall end with75; Ltd (for Limited) Plc (Public Limited Company) Gte (Limited by
Guarante) or Ultd (Unlimited)- Section 29(1a). Actions by and against the company must
be instituted in the company’s full and correct name. By Section 30, the company would
not be allowed to register an offensive, deceitful or immoral name nor can it register a
name which is already being used by another company76-Niger Chemist V Nigeria

74
Name, address, object, restriction clause, status, liability and capital clauses
75
Although Adekeye JSC in Wahabi Adejobi and Anor v The State, held that failure to put Ltd at the end of
the name is not fatal to the status of a company.
76
In 7-Up v Bubble Up, the court held that the words 7up and Bubble up were similar. In IRC v Jena, the words
“Dossex Gossamer” were similar to the plaintiff’s “Durex Gossamer”. In Alban Pharmacy v Sterling Products
Casorina was held to be too similar to Castoria and was likely to deceive customers. Parker-knoll v Parker-
Knoll International Ltd, both companies were manufacturers of Furniture one based in UK and the other
America which just began trading in UK. An injunction was granted to stop further trading as the names were
too similar to deceive. In Tussaud v Tussaud, the defendant who had left the plaintiff’s employment still
retained the plaintiff’s name. An injunction was granted to prevent usage of the plaintiff’s name. Niger Chemist
v Nigerian Chemist; the court held that the defendants would greatly confuse the public if they continue to
 Chemist. Ewing V Buttercup Margarine Company Limited. Nor77 can it register with
names containing the words/phrases “chamber of commerce78”-(Chamber of Commerce
V Registrar of Companies79).
A contravener should change the infringing name within 6 weeks or face the penalty.
By Section 30(2), the Consent of the CAC should be obtained before names containing the
following words can be used; “Federal”, “National”, “Regional”, “State”, “Government”
“Municipal” “Chartered” and other names which suggests government/municipal
patronage or affiliation. Also names80 like “Co-operative” “Building Society” “Group”
“Holding”.
2. Address Clause: which should state that the registered office of the company shall be
situate in Nigeria. No particular address needed. Although after incorporation, the co is
meant to send a Notice of Address of Registered Office Clause: A registered office is
where certain documents81 of the company are kept. Section 84, 85, 275 and 297 have
some provisions in this regard. Under Section 407(1)CAMA, the Jurisdiction for winding
up a company is placed on the Federal High Court in the area where the registered office
is located. Where the registered office changes, a notice of such change should be given to
the CAC within 14 days-547(1)
3. Object Clause: Section 27(1c). This states the nature/type of business the company is
registered to carry on82. … This is necessary because Section 38(1) provides that the
powers of a company shall be used for the furtherance of its authorised business objects.
This means that although the company is a legal entity, it may be incapacitated where it
seeks to do acts outside its object. This incapacity is enforced by the Ultra vires rule.
The Statement of the Object informs investors and prospective contractual partners of what
they are about to invest in-Attorney Gen V Great Eastern Railway Co83. It also “protects
creditors by ensuring that the company’s fund is not dissipated in unauthorised activities”-
Ashbury Rly Carriage Co Ltd V Riche84. The object clause may be altered in accordance
with Section 46 or Part XVI CAMA. This shall be discussed later.

trade in a name (Nigerian Chemist) so similar to that of the plaintiff (Niger Chemists Ltd).Except the registered
company is about to be dissolved and it consents to the other company using its name/a name similar.
77
See Section 30 for more details.
78
Unless it is a co limited by guarantee
79
(1952-55) 14 W.A.C.A 197 where the court affirmed this position.
80
A name can be reserved (for a company about to be floated by the incorporators) for a duration of 60 days and
renewed for another 60 days and no more-Section 32. While the name is reserved, registration of a similar name
shall not be allowed.
81
Like the register of members, directors, secretaries, charges, account records and so on.
82
A company cannot be formed for illegal purposes-R v Registrar of Compnaies ex p H.M.S Attorney-General.
83
[1880] 5 A.C 473.
84
[1875] L.R 7 H.L 653.
 4. Restriction Clause: Section 27(1d). This clause is optional. If the company wishes to
limit its powers. E.g. “this company shall not have an affiliation with Tobacco production”,
“This memo cannot be altered” and so on.
5. Status Clause: Section 27(1e). This clause states whether the company is private or
public… whether it is limited by shares, guarantee or of unlimited liability. Technically, if
you want to determine whether a company is public or private, you check the status clause
in the memorandum.
6. Liability Clause: Section 27(1f) the memo should state that the liability of the members
is limited by shares, guarantee or unlimited. See Section 49. It stands to reason that this is
unnecessary since there is already a status clause.
7. Capital Clause: See Section 35(2(d)) mandates that a statement of the authorized capital
of the company be filed at incorporation. #10,000 for private companies, #500,000 for
public companies. Some specific institutions are required to have more under their various
regulatory legislations like BOFIA (25 billion), Insurance Act, CBN Act (#100 billion),
NDIC Act (#5 billion)… subsequent CAMA may require a higher amount.
8. Subscription Clause: Contains the bio-data (names, addresses, description) of
subscribers, identifies the number of shares taken by each, their signatures and signatures
of witnesses85. Subscription is not the same with allotment. Subscribers can be regarded as
the promoters who hold shares in the company. While shareholders are those that just hold
share(s) in the company.
Other matters: Initially, some unrequired matters were also included in the Memo to
ensure their superiority and permanence. Section 44 seeks to put an end to this. Therefore,
unrequired matters should NOT be included in the memo-Section 44.

ALTERATION OF THE MEMO.

See Section 44.
Initially, alteration was prohibited as the memo was seen as the constitutional and
fundamental document. Today, the memo can generally86 be altered except the company
provides a restriction clause in the memo that prohibits alteration of the Memo. We shall
focus on alteration of name and object clause which features most in practice.
Alteration of Name: the process (See Section 31) can be summarised thus:

85
Each subscriber must subscribe for a minimum of one share each provided that a quarter of the entire share
capital is subscribed.
86
The Registered Office Clause cannot be altered.
- The members would pass a special resolution to change the co’s name: A special resolution
requires at least ¾ majority-Section 233(2). This is unlike a simple resolution which
merely requires a simple majority-Section 233(1).
- The CAC (in writing) would have to approve/consent to the special resolution.
- The CAC shall enter the new name (in place of the former one) in the register-31(5)
- A certificate of incorporation (bearing the altered/new name) is issued by the CAC to the
Company87.
- The CAC then publishes the change of name in the official gazette.
:: The new certificate or notice in the official gazette would suffice as evidence of
alteration-Section 31(8).
:: The alteration/registration can be revoked where the CAC discovers that due procedure
was not followed. E.g. no special resolution was passed.
:: The change of name would not affect any right or obligation attaching or accruing to the
company-31(6)
:: The procedure above would not be necessary where the company seeks to substitute the
word “Limited” with “Public Limited Company” and vice versa-Section 31(3). This
provision has been criticised because such alteration is too fundamental to be ignored.
:: The CAC can ask a company to change its name where it conflicts with the name of a
registered company already in existence before the company
Alteration of Object Clause: This was initially discouraged however, since 1968, it
became relatively straightforward to amend the object clause. The companies no longer
need to draft verbose objects to cover every conceivable endeavours they might undertake
in the future. Just amend the object clause to suit the new cause you wish to undertake as
a company.
The procedure (see Section 46 CAMA) was stated in Orji V Dorji Textile Mills Nig Ltd88
- A written notice of intention to amend the object clause must be given to all the members-
Section 46(1). This would enable them to know whether they still want to support/be part
of the proposed new cause.
- A special resolution to alter the objects should be passed-Section 46(1).
- Notice of the special resolution (that was passed) should be given to the CAC within 43
days (i.e. 28 days for dissenting member to apply to the court… Plus 15 days grace added)-
Section 46(7).
- The amendment has occurred.

87
This procedure was reiterated in Shackleford Ford and Co v Dangerfield [1868] L.R C.P 407.
88
[2010] 5 WRN 32.
 In Yalaju Amaye V AREC it was noted that the court should not interfere where the legal
procedures above have been complied with.
In Step 3 above, the dissenting member(s)89 may apply to the court within 28 days (of
passing the resolution) to challenge the resolution90. When a dissenting party has applied
to the court, the resolution shall not have effect until it is confirmed by the court. Such
confirmation can be wholly or in part or with terms which the court deems appropriate…
furthermore, the court can adjourn the proceeding for the dissenting member(s) to be
convinced or their interest bought over-Section 46 (4).
See Section 100-111 for amendment of Capital Clause.

ARTICLES OF ASSOCIATION
Regulates the internal affairs of the company. Before the 1990 CAMA, it was optional for
a company limited by shares to register the articles. If it did not file its articles, it is deemed
to have adopted the model contained in Table A-Section 8 and 10 CAMA 1968. However,
Section 33 of CAMA 1990 now makes it mandatory to file the Articles of Association
together with the Memorandum.
The articles largely regulate the internal affairs of the company. The articles must be signed
by each subscriber91 in the presence of at least 1 witness who shall attest to the signature…
and shall bear a stamp as if contained in a deed-Section 34(4) CAMA 1990.
Table A in Schedule 1 has four parts which have specimen forms for
- Public company having share capital-Part 1.
- Private co having share capital-part 2.
- Company limited by guarantee-Part 3.
- Unlimited Company-Part 4.
These specimen forms are mere guides and Section 34 provides that they could be
used/adopted with such omissions or alterations as may be required in the circumstances
to suit the particular preference of the shareholders.

89
46 (2) An application under this Section may be made to the court‐
(a) by the holders of not less in the aggregate than 15 per cent in nominal value of the company's issued share
capital or any class thereof or, if the company is not limited by shares, not less than 15 per cent of the company's
members; or
(b) by the holders of not less than 15 per cent of the company's debentures entitling the holders to object to
alterations of its objects:
Provided that any such application shall not be made by any person who has consented to or voted in favour of
the alteration.
90
Section 46(2)(3) and (5) Companies and Allied Matters Act.
91
Same persons who signed the memorandum.
 ALTERATION OF THE ARTICLES.
:: Subject to the provisions of the CAMA and MEMART, it can be amended by a special
resolution-Section 48.
:: A co cannot be restrained from altering its articles but it may pay damages 92 to a third
party (it has contracted with) that is injured by the alteration-Punt V Symons Ltd93.
Southern Foundries Ltd V Shirlaw94..
:: The alteration must follow due process and must be exercised bona-fide and for the
benefit of the company. In Shuttleworth V Cox Brothers and Co (Maidenhead) Ltd, the
Articles provided that the plaintiff and 4 others should be the company’s directors for life
unless disqualified on one of the specified 6 grounds. The article was altered to include a
7th ground (which provided that all the co-directors can request that one director should
resign. All the co-directors then requested for the plaintiff to resign. The plaintiff sued for
breach of contract. The court Per Scrutton LJ held that since there was no evidence of
bad faith and the alteration was for the company’s benefit, they were allowed.

LEGAL EFFECTS AND NATURE OF THE MEMART95.

1. Articles are subordinate to the Memo and cannot modify it-Guinness V Land
Corporation of Ireland. In Ashbury V Watson96 the court held that the rights of preference
shareholders set out in the article which conflicted with the memorandum were void to the
extent of its inconsistency with the memorandum97.
2. The MEMART have the effect of a contract under seal-Section 41. Terms cannot be
implied into the contractual relations nor is there need to furnish consideration on the
contract. E.g. even if a member has not paid for his shares, he can still sue and be sued on
the provisions of the MEMART.
3. The Provisions are binding as between company and its members- Rayfield V
Hands: In Wood V Odessa Waterworks Co. The articles provided for payment in cash but
the company passed a resolution to pay its shareholders by debenture. Held: No. In
Obikoya V Ezenwa, the articles provided that a permanent director shall not vote for the
removal of another permanent director. This was done. Held that the purported removal
was invalid. In Quinn and Axtens Ltd V Salmon98, the articles provided that the consent

92
Allen v Gold Rees of West Africa, Brown v British Abrasive Wheel Co Ltd. Sidebttom v Kershaw, Leese and
Co Ltd.
93
1903 2 Ch 506.
94
1940 2 All er 445.
95
Memorandum and Article of Association.
96
(1885) 30 Ch.D 376.
97
Although, now that Section 44 provides that only matters required by Section 27 and the Act should be
contained in the Memorandum. Therefore, it is safe to conclude that once the matter in issue is NOT required to
be in the memorandum, it may not override the provisions of the Article.
98
[1909] 1 CH 311, CA.
 of the two managing directors was required in relation a particular transaction. Consent not
obtained. Court held that they must observe the provisions. In Hickman V Kent or Romney
Marshes Sheepbreeders’ Association, the articles provided that disputes between the
company and its members must first be referred to arbitration. Held, they must refer their
dispute to arbitration99. In Exparte Beckwith, the articles required the directors to be paid
E1,000 per year. Before they could be paid, the company went into liquidation. Court held
that they could request for their salary by virtue of the provisions of the Articles which
bound the company. In Pender V Lushingtonj100, a shareholder was allowed to enforce his
right to vote under the article.
4. The Provisions are Binding as between the company and its officers: (Outsiders
Rights): Initially (at common law), “officers” was regarded as “members” and no others.
Therefore, articles could only bind members rather than directors, solicitors, accountants,
etc. As was noted by Ashbury J in Hickman V Kent or Romney Marshes Sheepbreeders
Association, an outsider cannot sue on the articles to enforce rights nor can the articles
constitute a contract between the company and a third person. Only members of the
company could sue on it. In Re English and Colonial Produce Company, a promoter
sought to enforce a provision in the articles that the company shall reimburse him for the
expenses incurred. Disallowed on the ground that at the time the contract was made, he
was not a member of the company. In Eley V Positive Life Association101, the articles
provided that Eley should be a solicitor of the Company for life and can only be removed
for misconduct. The company later dispensed with his services. Held that he could not
enforce because he was not a member of the company. To evade this limitation, the plaintiff
had to enter a separate contract with the company-Shinnder V NortherReincoat
Company102.
The position has changed. Section 41 (1) CAMA 1968 which provides that the MEMAT
shall have contractual effect between the company and its officers.
Distinguish the cases of Hickman, Ex parte Beckwith with Foss V Harbottle. In relation
to a member suing for wrong done to the company. Under the rule in Foss V Harbottle, a
member/individual shareholder cannot initiate proceedings with respect to a wrong done
to the company… only the company through its board of directors-Section 299 provides
same.
In addition, Section 41(3 and 4) entitles any outsider that is affected by a breach of
obligation together with the company to sue on behalf of himself and other affected
members. Also, an outsider authorised by the memat can appoint/remove director from

99
See however Beattie v Beattie where on similar facts a different conclusion was reached.
100
[1877] 6 Ch. D. 70
101
[1876] 1 Ex d 88.
102
1906 2 All ER 239.
 office. These provisions (Part X CAMA) constitute an exception to the rule in Foss V
Harbottle.
5. The Provisions are binding on the members inter se: Rayfield V Hands, the articles
required that a member that wishes to transfer his right must give notice to the directors
“who shall take the said shares equally between them at a fair value”. A member gave
notice but the directors refused to buy. The court ordered them to buy.
6. The MEMART guides future relationships.
7. The companies must be managed in accordance with the provisions of the
MEMAT-AVOP Plc V AG Ebugu State103, Okomu Oil Palm Ltd V Iserhienrhien104.
Same as the discussions above.
8. Being Commercial documents, they must be interpreted to validate if possible. In
Holmes V Keyes, Jenkins L.J noted that the provisions of the articles should be interpreted
in such a way as to give them business efficacy and workability.

CAPACITY OF COMPANIES.
Under this, we shall be discussing the following:
1. Constructive Notice Rule: Section 35 (1a) CAMA requires memat to be registered with
the CAC. Such registration makes the MEMAT public documents. The old rule states that
any person dealing with the company is deemed to have constructive notice of the
company’s public documents. Lord Wensleydale noted in Ernst V Nicholls that members
of the public should acquaint themselves with the nature of the co from its public
documents before dealing with it. Persons dealing with the co are expected to inspect their
public documents to ascertain that the transaction falls within the competence or object
clause of the company else, he would have himself to blame. In Re John Beauforth
(London) Ltd, a company whose object was to manufacture dresses went into a contract
involving the manufacturing of veneered panels. Dealers sought to enforce the contract.
Court held: They can’t, they ought to have known that the company was set up to make
dresses and not veneered panels. This doctrine has been criticised by Pennington as being
fanciful. The Nigerian Law reform considered the doctrine as inconvenient and
impracticable. Therefore, Section 68 CAMA105 has negated this rule. Section 68 provides
that this constructive rule shall apply only to charges and mortgages.

103
(2000) 7 NWLR 9pt. 669 260.
104
(2001) 6 NWLR pt, 710 666
105
The Section provides: “a person shall not be deemed to have knowledge of the contents of the memorandum
and articles of a company or of any other particulars, documents, or the contents of documents merely because
such particulars or documents are registered by the Commission or referred to in any particulars or documents
so registered, or are available for inspection at an office of the company”.
 2. The Rule in Royal British Bank V Turquand106: The principle formulated in this case
is that a third party who deals with a company in reliance with its public documents is
entitled to assume that all matters of internal management had been complied with. This
rule has been enacted in Section 69107 CAMA 1990 which enshrines the presumption of
regularity for the purpose of protecting third parties dealing with the company108. This rule
has been applied in Metalimpex V A.G Leventis and Co Nig Ltd109, Trenco (Nig) Ltd V
African Real Estate Ltd110. Obaseki V African Continental Bank Ltd111. Exceptions:
- Where there are suspicious circumstances which ought to put the third party on enquiry-
Underwood Ltd V Bank of Liverpool and Martins.
- Where the third party knows of the internal irregularity- Howard V Patent Ivory
Manufacturing Co112. Morris V Kansen
- Where the documents relied on by the third party is a forgery-Reuben V Great Fingall
Consolidated Company.
3. The Ultra-vires rule: Look at the discussion on Object Clause above. When a company
does acts outside the objects for which it was established, the court may declare that it acted
ultra-vires. E.g. Shell Petroleum starts dealing in Foreign exchange or EcoBank starts
selling petroleum or INEC starts selling cars.
Strictly speaking, anything done outside the Objects stated in the memorandum is void113
notwithstanding ratification by the shareholders. Lord Cairns in the Ashbury case noted

106
1856, 6E and B 327, 25 Law Journal QB 317. In this case, the directors of the company borrowed money
from a bank. It was held that the bank need not prove that there had been a resolution authorising the directors
to borrow.
107
Presumption that company’s memorandum and articles have been duly complied with, officers duly
appointed to exercise the power it is carrying out and so on.
108
Any person having dealings with a company or with someone deriving title under the company, shall be
entitled to make the following assumptions and the company and those deriving title under it shall be estopped
from denying their truth that‐
(a) the company's memorandum and articles have been duly complied with;
(b) every person described in the particulars filed with the Commission pursuant to sections 35 and 292 of this
Act as a director, managing director or secretary of the company, or represented by the company, acting through
its members in general meeting, board of directors, or managing director, as an officer or agent of the company,
has been duly appointed and has authority to exercise the powers and perform the duties customarily exercised
or performed by a director, managing director, or secretary of a company carrying on business of the type carried
on by the company or customarily exercised or performed by an officer or agent of the type concerned;
(c) the secretary of the company, and every officer or agent of the company having authority to issue documents
or certified copies of documents on behalf of the company, has authority to warrant the genuineness of the
documents or the accuracy of the copies so issued;
(d) a document has been duly sealed by the company if it bears what purports to be the seal of the company
attested by what purports to be the signatures of two persons who, in accordance with paragraph (b) of this
section, can be assumed to be a director and the secretary of the company.
109
(1976) 2 Section 91 (1976) UILR.
110
(1978) 1 LRN 146.
111
1966 NMLR 35.
112
(1888) 38 Ch. D 156.
113
Ashbury Railway Carriage and Iron Company v Richie
 that the rule “serves the dual purpose of protecting both investors and creditors”. In
Ashbury Railway Carriage and Iron Company V Richie the company was established to
manufacture and sell railway equipment, buy and sell timber, coal metal and other like
materials. The co bought a concession for construction of a railway to Belgium and later
repudiated the contract. Held that the company was not liable as the contract was ultra
vires. The court noted that the company could use its money to make railway things but
not to make railways themselves. This rule was applied in Continental Chemist V
Ifeakandu. The co can circumvent this liability by altering their object. At common law,
the ultra vires rule was used as a shield and a sword to vitiate contract and avoid
performance. This worked hardship especially where there had been part performance by
the other party. E.g. INEC may receive delivery of 200Jeeps from XYZ and co. When XYZ
and co asks INEC to pay, it would then say that since it was established to conduct elections
and not to sell cars, it was not liable to pay under the “ultra vires contract”. So the court
began to liberalise by allowing transactions that are “reasonably” incidental to the objects
of the company… as was seen in A.G V Great Eastern Railway Co114.
Smart practitioners sought to evade the ultra-vires rule by:
- Drafting the object clause extensively to include every conceivable objects which the
company may want to pursue in future. They list a thousand and one objects in their
memorandum. See Anglo Overseas Agencies Ltd V Green. In Cotman V Brougham115,
Lord Wrenbury advocated for a plain and unambiguous specification of objects. He
indicated his unhappiness regarding the practice of drafting the object clause in very wide
terms noting that it only shows that the drafters are confused and mixing the term “power”
with “object”. The courts responded by utilising the “main objects” rule of construction
(just like the ejusdem generis rule). With this, they regarded the first few paragraphs (1-3)
as the main object and other numerous paragraphs as merely ancillary.
- In response to the Court’s response, the draftsmen started using “Independent Object
Clauses”. They would insert (at the end) that each object is to be interpreted independently
and not restricted by another object. This was upheld in Cotman V Brougham to hold the
company liable.
- Another devise used by the practitioners involved drafting the object clause in subjectively
worded terms. This is popularly known as “Bellhouse clause”. In Bellhouse Ltd V City
Walls Properties, the co’s object was to develop properties. They had a clause which gave
them power to “do all such other things incidental or conducive to the above objects or
any of them”. The case of Re Introductions Ltd responded to this. In this case, the co was
founded to provide services to tourists. It had a Bellhouse clause allowing it to do any other
acts necessary. In 1960, the co began pig breeding as its only business. The court held
moving from tourism to exclusively pig-breeding was ultra-vires and the loan procured for

114
[1880] 5 A.C 473.
115
[1918] A.C 514.
 that purpose was void. In Re German Date Coffee Company116 the court held that once
the substratum of a company has failed, the co should be wound up. As in this case the co
was established to work a Swedish patent but it did not get the patent. The court held that
it should be wound up. Same position was upheld in Re Amalgamated Syndicate117 This
is to prevent it from doing something else.
Assignment in the Handout: Check the Reform of the Ultra-Vires Rule.
The English Cohen Committee on the Reform of Company Law in 1945 recommended
the amendment of the rule. Again, in 1962, the Jenkins Committee on Company Law
Reform recommended the abolition of the rule. In 1972, the UK joined the European
Community and had to reform the Ultra Vires rule in conformity with European standards.
Section 9(1) of the European Communities Act 1972 removed the doctrine of
constructive notice and stated that ultravires transactions would not be void if the third
party acted in good faith and without notice. The English Companies Act 1985 further
provided that the memorandum can be altered so as to enable companies to amend their
objects to suit their new purpose or business instead of breaching the ultra vires rule.
Section 39(1) of our CAMA preserved the ultra-vires doctrine by providing that that a
company cannot carry out business not authorised by its memo and should not exceed the
powers by its memo118. Similarly, Section 40 provides that non-compliance with the
Ultravires rule may be relied upon when suing the company or its members and directors.
It may also be a ground for asserting that the company’s business is being carried on in an
unfair, prejudicial or reckless manner-Section 39 (2). Section 65 CAMA. Section 39(3)
however provides that the mere fact that the company performed an act that is not in
furtherance of its business does not make it invalid. Section 39(5) provides that
compensation is payable as damages to the innocent third party that has already started
performing the contract. Moreover, the object clause can be amended.
Note however that the reform of the Ultra Vires rule has not affected the stand with regards
to political donations. A company is prohibited from donating to political parties and the
like.

AUTHORITY, POWER AND LIABILITIES OF A COMPANY.

AUTHORITY: Under this, our concern shall be: when can decisions of a human agent of
the company be attributable to the company? When can a person be regarded as acting on

116
(1881-82) L.R 20 Ch D 169 (Court of Appeal).
117
[1897] 2 Ch. D. 600. Contrast Re Kitson and Co Ltd.
118
In Fact, Section 39(4) provides that any member or holder of any debenture by a floating charge may apply
to the court for an injunction to prohibit the doing of an act contrary to Section 39(1) (i.e. outside the company’s
authorised business)
behalf/authority of the company? Who acts on behalf of the company? Whose actions can
be attributable to that of the company?
Initially, authentication by company’s seal amounted to authority. Later decisions of
majority of the members in general meetings were regarded as acts of the company… later,
board of directors were appointed for the day to day management of the business. Due to
business expediency, certain powers of the board are delegated to individual managing
directors and later, to officers and agents.
1. Organic Theory/Doctrine of Alter Ego: Seeks to identify the human controllers of the
company. Viscount Heldane LC in Lennard’s Carrying Co. V Asiatic Petroleum Co Ltd
explained the doctrine of alter ego thus: “a company is an abstraction. It has no mind of
its own... it needs a person… called an agent who is really the directing mind and will of
the corporation. The very alter ego and centre of personality of the corporation”.
This theory regards the board of directors and the members in general meeting as the
“organs” of the company. It goes to reason that third parties can treat their acts (acts of the
BOD and GM) as those of the company and the company would be bound. See Section 65
CAMA.
Criticism of the Organic Theory: A company may escape liability for the acts of its other
agents and officers who are not its organs. Lord Hoffmann in the Meridian Global Funds
Management Asia Limited V Security Commission said that the organic theory is
“misleading”. He noted that the true question to ask was who was in control of the alleged
dealing/transaction? Rather than focusing on the BOD and GM. Based on the facts of the
who has authority to act? As in reality, the P.A/Secretary of the Chairman may wield more
powers than a managing director, In this case, two senior investment managers who were
not even members of the company’s board were held to be controllers. Lord Hoffman’s
theory has been criticised on the ground that it is very uncertain and the person to be blamed
would not be known until the issue/facts occur.
2. Agency: generally, an agent binds his principal (the company) with third parties
provided he acted within the scope of his authority. There could be ratification where he
acted outside authority. Note that a partner is regarded as the agent of the firm.
3. Vicarious Liability: Section 66(3) CAMA ensures vicarious liability of the company
for acts of its servants acting within the scope of their employment. In tort, a principal is
vicariously liable for actions of his employees within the scope of their employment.
The General principle in criminal law is that there is no vicarious liability.
POWERS: DIVISION OF CORPORATE POWERS.
 The primary organs are the members in general meeting and the board of directors- See
Section 63 and 65 CAMA. At common law, the distribution of powers was determined by
memat.
Section 65 provides that acts of the members in general meeting, the board of directors or
of managing directors while carrying on the usual business of the company shall be treated
as the acts of the company. This supports the Organic theory. Third parties can rely on acts
of the GM and BOD except; the third party knows that the GM or BOD has not power to
do conclude the transaction or act or the third party knows that the BOD, MD 119 or GM
had acted in an irregular manner.
The question now is; between the members in General Meeting120 and the BODirectors121,
who controls?122
Initially, the general meeting was seen as the controlling organ of the co and more superior
to the BOD see Wight Company V Tahourdin. There was a shift in position in Automatic
Self Cleansing Filter Syndicate V Cuminghame, where it was held that the GM cannot
dictate to the board in the exercise of its management powers. Same point noted in Ladejobi
V Odutola Holdings ltd, Emesim V Nwachukwu.
Section 63(3) clearly demarcates the functions of both organs except the articles provide
otherwise. Furthermore, Section 63(4) provides that the board are not bound to obey/take
orders from the GM when they are acting within their authority and in good faith and due
diligence. Section 63(5) however provides for instances where the GM may interfere in/
perform the functions of the board:
- When the board are disqualified or unable to act because of deadlock123.
- When it relates to instituting legal proceedings in the name and on behalf of the company.
- The GM can make recommendations to (and advise) the board regarding action to be taken
by the board.
- Where it relates to ratifying or confirming actions taken by the board of directors
What about other officers and agent of the company?
Agents acts are generally not deemed to be the acts of the company except it has been
authorised by the company (whether expressly, impliedly or ostensibly124)

119
The BOD may delegate one or more of their powers to a committee or appoint one or more of themselves as
managing director(s). The person appointed is the Managing Director (MD)
120
For provisions on the Members in General Meeting see Section 213 and 214 CAMA.
121
Section 246 CAMA requires a minimum of 2 directors.
122
In layman terms; “Who has more mouth/rep”
123
Where one or more of the directors cannot meet.
124
The company had represented the agent or officer as having its authority to act in that manners.
 Prior representation or authorisation and subsequent ratification after full knowledge of the
facts-Section 66(2) CAMA.
CRIMINAL LIABILITY OF COMPANIES.
Can a company be convicted for a crime? Initially, a company could not be held liable for
a criminal offence since it cannot be put behind bars and it has no mind of its own to
commit a fault-based offence.
Presently, it appears a co can be convicted for a crime. See Section 65, DPP V Kent and
Sussex Contractors Ltd.
There are various doctrines that have been utilized to hold a company liable.
- Lifting the veil.
- Agency.
- Vicarious liability.
Viscount Heldane LC in Lennard’s Carrying Co. V Asiatic Petroleum Co Ltd explained
the doctrine of alter ego thus: “a company is an abstraction. It has no mind of its own... it
needs a person… called an agent who is really the directing mind and will of the
corporation. The very alter ego and centre of personality of the corporation”. Also, in In
HL Bolton Engineering Co. Ltd V. T.J Graham and Sons ltd: Lord Denning personified
a company to the human body having brains and hands. The hands being the ones that take
direction from the brains. The brains of the company being the managers and the hands
being the servants. The ones that control are the brains of the company and their state of
mind can be attributed to the state of the company’s mind. (This entails vicarious liability).
In DPP V Kent Sussex Contractors Ltd125a company was held criminally responsible
under the Defence Regulation of Iran for the offence of producing false document with
intent to deceive. The officers of the company that signed the document were related to the
transaction.
In R V ICR Haulage Ltd, the court held that a company can be indicted for a criminal
offence with the exception of offences like bigamy, perjury and murder.
Moore V I. Bresler Ltd126, The court convicted the company, manager and sales secretary.
for declaring certain false tax returns. Notwithstanding that it was done by the company’s
worker with the intention to defraud the company. R.S. Welsh Criticised this case. So did
Glanville Willams noting that there is no justification for the courts to extend the doctrine
of vicarious liability to the area of crime noting that VL is a creation of Tort.
THE POSITION IN NIGERIA.

125
1944 1 kb.
126
1944 2 KBD 515.
 In Ogbuagu V The Police127. The appellant was the proprietor of a newspaper publishing
house. When leaving Jos, he instructed the employee not to publish the paper while he was
away. The servant nevertheless published the paper which contained a seditious article.
The court held that the proprietor was not liable. However in R V African Press128, a case
with similar facts… the court held that both the defendant and editor were jointly liable.
In Police V Adamu129 The court held that once a vehicle is being used to carry smuggled
goods, the mens rea of the owner is immaterial because the statute regulating customs and
excise is a strict liability one.
The truth is that most of these cases relate to vicarious liability. The reason being that there
is lack of legislation in this area in the Nigerian courts. There appears to be no consistency
between Nigerian Decisions.
There are some contemporary statutes that impose liability on companies. E.g. under the
CITA, a company can be convicted for acts of tax evasion.
It appears that the company may not be convicted where it is the company that is being
defrauded. In FRN V Dr, Nwoche Ojogwu and the Capital Merchant Bank130, the MD
(also promoter) floated other fraud companies which he diverted into his personal purse.
The MD was sentenced to 18years and the bank was discharged and acquitted.
Note that conviction does not amount to liquidation or physically sealing the company. The
company is convicted “symbolically”. In essence, it is regarded as an ex-convict and denied
certain rights and privileges.

CSR, CORPORATE GIFTS POLITICAL DONATIONS

CORPORATE SOCIAL RESPONSIBILITY.
Defined by the European Union as “a concept whereby companies integrate social and
environmental concerns in their business operations and in their interaction with
stakeholders on a voluntary basis”.
With modernisation and advancement, people began to feel that (beyond complying with
statutory obligations) companies should behave responsibly and empathetically to the
stakeholders131, environment and immediate community. In addition to furthering the
interest of members and investors (to make profit), the CSR believes that the company
should include the interest of the public… that companies should have some responsibility
to the society beyond making profits.

127
1953 30 NLR 139.
128
1957 WRNLR Page 1.
129
1944-57 15 NLR 98
130
number 1 1997 FBTLR 179.
131
Members, shareholders, customers, employees, and so on
 In theory, we have the antagonists and protagonists/proponents.
The Protagonists argue that CSR would eventually be in the interest of the company in the
long term. That businesses are inextricably linked to the society which determines their
very survival in the long term.
The Antagonists argue that CSR distracts the company from its fundamental economic and
business role. That CSR seeks to give the companies functions which the government ought
to perform. The Laissez-faire proponents note that the main aim of the company is to make
profit. Milton Friedman also posits that the social responsibility of business is to increase
its profit.
Historical Evolution of CSR.
Began in 1930 and expanded over the ages. Worthy of note is the Adolf A. Berle and E.
Merrick Dodd debate over whom the directors should serve. Prof Berle posited that they
should serve the shareholders while professor Dodd argued that the corporate powers were
held in trust for the entire community. The argument was settled in favour of Professor
Dodd.
Vance Packard in The Hidden Persuaders132, William H. Whyte in the Organization
Man133. Theodore Levitt, in The Dangers of Social Responsibility134 David Millon In
Communitarians, Contractarians and the Crisis in Corporate Law 135… and a host of
other writers have advocated for social responsibility and the public role of a company136.
CSR IN NIGERIA.
In Nigeria, it is arguable that the primacy of shareholder’s interest still holds sway. In fact
some go as far as establishing and registering shareholders association’s to further ensure
their primacy. The CAC and SEC seldom utilise their power to inspect the companies for
recklessness or non-conforming practices.
A worldwide research carried out by Market Trends Nigeria Ltd in collaboration with
Environics International Limited Toronto, Canada reveals that in the near future, the goals
of corporate establishments would be social in nature bordering on improving access to
healthcare, fighting diseases, reducing crime and violence. The research admonished
companies to make a difference in the society. THE CSR BILL was introduced to the
National Assembly by Senator Uche Chukwumereije. The Bill seeks to establish an Act

132
Penguin Books, 1981.
133
University of Pennsylvania Press, 2002
134
36 Harv. Bus Rev. Sept Oct, 1958, at 42.
135
(1993) 50 Wash. and Lee L. Rev 1373.
136
Although R.H. Coase in The Nature of the Firm advocated the contractarian theory of the firm. This sees
the firm as a “nexus of contracts” between the employees, shareholders, creditors, managers. It threatened to
eliminate the underpinings of CSR movement. This nexus of contracts approach regards the company as a mere
legal fiction with no fiat or disciplinary action.
 which mandates companies to (set out 3.5 percent of their profit before tax to) contribute
to sustainable development of host communities137. The end is to achieve confidence and
mutual trust between the enterprises and societies in which they operate. Not yet law.
The CSR practice in Nigeria usually focuses on philanthropy, charity, donations,
sponsorship of events and so on. This is only one aspect of CSR in the real sense. This CSR
practice in Nigeria may be linked to our agrarian mode of livelihood and family/kinship
pattern of production. Less focus is placed on employee relations, improvement of product
and processes, environmental improvement and so on.
THEORIES OF CSR.
Classical Theory: Milton Freidman proposed that the main aim of business is to make
profit… profit maximisation. This classical theory notes that since the shareholders
invested money, they should get the profit. Provided there is no illegal, fraudulent or
unhealthy practice. Applying the money to social and other charitable endeavours would
amount to taxing the shareholders again. It can be justified on the basis that the taxes
collected from the companies by the government should be used to provide public and
other social services. Marianne Jennings and Jon Entine138 added that companies should
just make profit without going the extra mile to care for the communities… but they should
not harm the customers, employees and communities.
Stakeholders Theory: emerged as an improvement to the classical theory due to the
variety of interests associated with businesses today. It posits that the company should cater
for the interest of those who have a stake in the enterprise. They include, shareholders,
employees, customers, suppliers, the local community, and so on. Proponents of this view
include, MacLeod. If one of the stakeholders are ignored, the business may fail and be
wound up. E.g. if the company decides to ignore its supplier, it would not be able to meet
demand. If it ignores customers, there would be no one to purchase its products or employ
its services, and so on.
Social Contract Theory: That a company has certain features accorded to it by the State
like perpetual succession, separate legal personality, Limited Liability, and so on. This
requires the company to have a moral obligation to the State and society. It should work
for the betterment of the, Society, State, regions and indeed the world in which they
conduct business. Environmental Rights Activists support this view and advocate that
companies should not pollute the environment and should help in funding research into
alternative means of eradicating pollution.
CRITIQUE OF CSR THEORIES.

Communities where they are located or which are affected by the company’s activities.
137
138
Business with a Soul: Reexamination of what Counts in Business Ethics. [1998] 20 Hamline Journal of Public
Law and Policy.
 No company is ethically perfect: therefore, expecting them to be CSR motivated may be
erroneous-Marianne Jennings and John Entine both note that we should ask the
following 8 questions:
- First of all: Does the company comply with the law of the land?
- Does the company have a sense of propriety? After complying with the law, the funds of
the company should be ethically applied to their objects or intended purpose. E.g. some
companies are producing genetically modified foods, media companies beginning to air
sex scenes and so on are considerations under ethics.
- How honestly do product claims match with reality? And where they do not match, are
customers’ complaint treated appropriately?
- How forthcoming is the company with information? Does it disclose to the stakeholders?
Most failed banks did not disclose that they were failing when customers were investing.
Such banks should be regarded as socially irresponsible.
- How does the company treat employees? Some Chinese factories in Lagos despise their
workers’ safety and welfare. Some new generational banks give their employees certain
herculean “targets” to meet or face dismissal.
- How does the company handle third-party ethical issues? E.g. is the company committed
to human rights, labour relations, etc?
- How charitable is the company? Although sometimes eye-service may predominate.
- How does the company react when faced with negative disclosures? Do they say nothing
or respond immediately or do they attempt to cover up the problem or charges. How well
does it respond to stakeholder’s fears and anxieties?
Prospects for CSR.
In 2005, the UK government laid down a framework of CSR that all its companies should
adopt. This seeks to ensure responsible business practice and sustainable development. It
proposes that companies should:
- Be aware of the impact of their activities and operations around the world.
- Adopt best practices and improve existing processes.
- Be in active partnership and engagement with all stakeholders.
- Support CSR activities of international organisations.
- Promote CSR principles to governments.
The United Nations came up with the “UN Draft Norms on the Responsibilities of
Transnational Companies and other Business Enterprises with regard to Human Rights”
which is to establish an international framework for mandatory standards of CSR. It
provides that no business shall benefit from international crime and must guard against
bribery and corruption. Environmental protection, consumer protection, international
business standards and the likes are also advocated.
 In July 2001, The European Commission published a Green Paper to open the debate
on promoting a European framework for CSR. This was followed by a Stakeholder
Forum on CSR which brought together various businesses and NGO’s for deliberation on
ways to forge ahead.
In 2006, the European Commission issued a Communication on CSR which announced
a new European Alliance for CSR. In 2009, the EU reiterated their commitment to CSR
and a world in which companies’ drive for profit is balanced by the interest of the society
at large and respects, social, human and environmental rights.
In The United States of America, the fight for CSR has been relatively successful when
compared to other countries. Following the industrial revolution and industrial boom in the
mid 20th century. The US government established the “big four” regulatory agencies viz:
- Occupational Safety and Health Administration.
- Equal Employment Opportunity Commission.
- Consumer Production Safety Commission.
- Environmental Protection Agency.
Various Acts139 were also enacted. These and many others ensured a socially responsible
corporate regime and business practice. “Constituency Statutes” allow the BOD to take
into account the interests of non-shareholders.
Ironically, in Dodge V Ford Motor Co140, Henry Ford used the excess profit of the
company to lower sales price of vehicles and hire new workers rather than share the profit
among the shareholders. The court held in favour of the shareholders noting that the
foremost aim of the company is to make profit and distribute same to shareholders.
However, in Smith Manufacturing Co V Barlow, the directors of the co decided to donate
$1,500 to Princeton University. The Supreme Court upheld the decision of the co and noted
that it conforms with present day realities. In Unocal Corp V Mesa Petroleum Co, the
court held that the BOD141 must protect the public interest. Same position was taken in
Kats V Oak142. Professor Stout has noted that placing the interest of shareholders as
paramount is an error. Also Professor Greenfield opines that firms should service the
interest of the society as a whole. Professor Mitchell143 notes that it is for their own good.
Professor Clark takes a middle-ground. Mr Sundaram and Inkpen defend the
shareholders approach. It however appears that the Legal Regime in America is in favour
of stakeholders rather than shareholders.

139
Like Community Reinvestment Act, Clean Air Act, Foreign Corrupt Practices Act, Investor protection Act,
and so on.
140
170 N.W., 668, 684 (Mich, 1919)
141
Board of Directors.
142
508 A.2d 873 (Del. Ch. 1986).
143
Mitchell, L.E., La FirmeIrresponsable, Paris, France, Economica (2003).
 CORPORATE GIFTS
The issue here is whether a company can make gratuitous payments from its assets.
A lot of people see it as mandatory for a company to support events, promotions,
programmes, and so on… in essence, companies must “drop money”.
Perhaps the first case is Hutton V West Cork Railway Company144 a general meeting
passed a resolution to pay E1500 out of the company’s asset to the directors for their past
services. It was held to be invalid. As Bowen LJ noted in the case: “The law does not say
there should be charity… unless it is for the benefit of the co. It is not charity sitting at the
board of directors because as it seems to me, charity has no business to sit at the board of
director qua charity…” A similar position was maintained in Re Lee Behrens145 where
(three years before it was wound up), the company approved payment of pension to the
widow of a former MD. It was held that such payment was not allowed by the articles and
was not for the benefit of the company. The court noted that we must ask the following:
- Is it reasonably incidental to the object of the co?
- Is it bona fide?
- Is it done for the benefit and to promote the prosperity of the co?
Where the answer is no, then the gift is invalid.
In essence, you must show how that the charity is in the interest of the company.
In Park V Daily News Ltd, payment to employees who had become redundant was held to
be ultra vires not being within the object of the company nor in the interest of the co.
In Re W and M Roith146 pension for life for the widow of majority shareholder was held
to be unlawful.
However, if such charity is authorised by the memorandum, then it may not be invalid. The
way out is thus for a company to include a clause in the memo allowing charitable
donations147. If there is nothing in the memorandum, the common law position (discussed
above) would govern-Rolled Steel Products Holding Company V British Steel Corp148.
THE DOCTRINE OF STATE CAPTURE (POLITICAL DONATIONS)
Big corporations try to donate (in fact political parties approach them to donate) to the State
and other political endeavours. This may endear them to the political party and may even
translate to them dictating to the government of the State. Dr Sanni notes that if someone

144
[1883] 23 Ch. D, 654.
145
[1932] 2 Ch 46. Also Parke v Daily News [1962] Ch. 927.
146
1967 1 WLR 432
147
Although this is quite precarious as there is a tendency that the directors or other members of the company
may be extravagant.
148
1986 CH 246.
 contributes immensely to your success and you collect it, you would owe some obligation.
So also, if a corporation/person contributes immensely to the campaign funds of a governor
or the accounts of a State, it follows that the State should owe it/him some reciprocal
obligation.
Should political donations be allowed or prohibited or at least controlled? Dr Sanni
remarked that Nigeria is playing the ostrich in this regard.
In Simons V Heffer149???? Two donations to the labour party to prevent cruelty to animals.
The first donation was to advance freedom of animals and the other was for them to do
anything with the money. The second donation was invalidated. Thus, this is not an
absolute bar.
In Nigeria, the law is clear: Section 221 of the 1999 Constitution No association, other
than a political party, shall canvass for votes for any candidate at any election or
contribute to the funds of any political party or to the election expenses of any candidate
at an election. Section 229 defines the word “association” to include unincorporated
entities. A similar provision can be found in Section 38(2) 150 of CAMA.
Also, Section 93(3) Electoral Act (now Section 91(9) of the 2010 Electoral Act) forbids
individuals and other entities from donating more than 1 million Naira to a political
candidate. It seems like the Electoral Act contradicts the Constitution. The constitution
fully prohibits while the electoral act is saying a limit of 1 million. You know what should
happen.
In Nigeria, there is lack of enforcement. E.g. in Obasanjo V Yusuf, it was alleged that 2bn
naira was raised at a dinner at the instance of the Nigerian Stock Exchange (it is an NGO).
Yusuf and his political party told the court that they are fully prepared to prove this. Both
Obasanjo and INEC denied the issue. Although it is arguable that in the Present condition
of Nigeria, even a hundred million naira is not enough to run a campaign governorship
campaign talk less of a Presidential campaign.
Although Prof Bolodekun in Corporate Speech in a Democracy; What Can Nigeria
Learn from Abroad?151 Notes that we should try to balance the need for companies to do

149
1983 DCL C 298.
150
(2) A company shall not have or exercise power either directly or indirectly to make a donation or gift of any
of its property or funds to a political party or political association, or for any political purpose; and if any
company, in breach of this subsection makes any donation or gift of its property to a political party or political
association, or for any political purpose, the officers in default and any member who voted for the breach shall
be jointly and severally liable to refund to the company the sum or value of the donation or gift and in addition,
the company and every such officer or member shall be guilty of an offence and liable to a fine equal to the
amount or value of the donation or gift.
151
13 Cardozo J8 International and Comparative Law, 61, 2005 Journal.
 whatever it considers can be done in the interest of the company. This is equated to freedom
of expression of a company being a natural person.

COMPANY CAPITAL.
Capital has been defined as money that can be used to produce further wealth152 Capital is
the net-worth of a business153. The company needs funds to further the purpose for which
it was incorporated. Capital/property may be tangible154, intangible155, fixed156 or
circulating157 or moveable. These demarcations are not water-tight.
For this topic, our main aim is to “put a monetary value” on all such properties. This
monetary value represents the “company capital”.
Capital can be viewed from 2 perspectives.
- The General Perspective: That capital is the net-worth of the business-Prof Abugu.
Under the general perspective, capital could either be fixed or floating. See Section 567
CAMA.
- The Restricted/Narrow Perspective: Look at capital as the value of assets contributed by
the shareholders and subscribers of the company. Prof Gower holds this view.
Advantages/Importance of Capital to a Company.
1. It determines the safety and soundness of a company.
2. Serves as an assurance to the shareholders and the general public that the vehicle
(company) is worthy and can be trusted for investment. E.g. If you hear that UBA is going
bankrupt, you would most likely go and withdraw all your money before it becomes too
late.
3. Protection of Creditors: If the co runs out of capital, it may be liquidated. This has a
devastating effect on the creditors.
4. Capital protects from financial distress: financial distress occurs where a co is unable to
honour its obligations. When a co is in distress, the value of its assets starts dropping,
employees start leaving… it is just important for a company to have capital.

152
Microsoft Encarta Dictionaries 2009. 1993-2008 Microsoft Corporation.
153
That is the assets minus liabilities. If XYZ and Co has a total asset of #2 billion and it owes BIT Ltd #1
Billion, the net worth of XYZ is 1billion. i.e. 2 billion – 1 billion.
154
Tangible meaning we can feel and touch.
155
Like Copyrights, Patents, Shares, and other choses in action.
156
Real property like Land, Houses, Huge Stationary machinery or plant used to produce income or profit.
Section 650 provides a similar definition of fixed capital.
157
Changes from time to time in the course of business. E.g. Raw Materials.
 5. Market efficiency: In a market, we have the buyers and sellers. The market is influenced
by the forces of demand and supply. Efficiency on the other hand is receiving the most
satisfaction from the available resources. When the company does not have enough
resources to carry out its endeavours or to purchase from the market, this is a great issue.
In the corporate legal world, the following are the types of capital: (there are other types of
capital)
Nominal/Authorized Share Capital: The company registers with this capital. Section
27(2) CAMA158 requires a minimum of 10,000 and 500,000 for private and public
companies respectively. Various other acts specify various other minimum capital
requirements like the CBN Act (100billion), Banking (25Billion), SECAct NICOMAct,
Insurance Act (5 Billion) and so on.
Issued Capital: The part of the Authorised Capital that has been offered to
shareholders/the public. CAMA requires at least 25 percent to be taken up-Section
27(2)(b). The rest (the ones not taken) is referred to as unissued159. Section 117 authorizes
the company to issue shares. Capital can be issued at par 160, issued at a premium161 or at a
discount.162 The part of the issued capital that has been taken by public/shareholders who
have (at least) agreed to pay is called Subscribed Capital. When the Company asks them
to pay, it is Called-up Capital.
Paid-Up Capital: the part of the issued capital that has actually been paid for by the people
that subscribed to it. The part that has not been paid for referred to as uncalled capital.
Reserve Capital: This is the part of the capital reserved for the purpose of meeting
creditor’s claims or for other exceptional circumstances- Re May Fair Property Co Ltd163.
See Section 134164, also.

158
Sections 50, 52 and 99 CAMA.
159
Authorised minus issued capital.
160
capital issued at the face value 1 Naira.
161
A company that is doing well may decide to issue capital at an increased face value. E.g. 3 Naira. It is
authorised under Section 120 of CAMA to do this. Provided, the Co has the authorisatio to do so. The amount
from the share premium should be created and the money derived from the issue at a premium should be kept
there and not be tampered with.
162
Section 121 when the company is not doing so well they can issue their capital at a value lower than the face
value. From the Section, the co must at a meeting pass a resolution as to the rate of the value… the resolution
passed at the general meeting is then sanctioned by the court.
163
[1898] 2 Ch. 28.
164
A company limited by shares may by special resolution determine that any portion of its share capital which
has not been already called up shall not be capable of being called up except in the event and for the purposes
of the company being wound up; and thereupon that portion of its share capital shall not be capable of being
called up, except in the event and for the purposes specified in this section
 Reserve Fund: The fund containing the money set aside (before distributing dividends)
from the profits of any year to cater for emergencies or to plough back into the business.
See Section 383(1) CAMA.

Share Premium Account: is the amount received by a company over and above the face
value of its shares. The share premium account balances the difference between the par
value of a company's shares and the amount that the company actually received for newly
issued shares. Suppose a company issues a 100 shares of #1 each, but the shares are bought
for #3 per share. It then has #200 premium share capital165.

165
100 multiplied by 1 (each share is #1) = 100. But if it is paid #3, then it is 100 Multiplied by 3 which is 300.
To get the share premium you subtract 100 from 300= 200.
 COMPANY LAW II/LAW OF PARTNERSHIP.
MAJORITY RULE AND MINORITY PROTECTION.
Section 299 CAMA provides that only the company can sue to remedy a wrong
done to it166 and only the company can ratify an irregular conduct167. This
provision is a codification of the rule in Foss V Harbottle. Meaning that the proper
claimant/plaintiff is the company168.
We know that the company being a legal personality acts through organs (i.e. the
members in general meeting and the board of directors). Therefore, the power to
initiate legal proceedings on behalf of the company is vested in the board of
Directors169-Section 63 CAMA, Carlen V Drury.
The issue of minority protection would come up in a situation explained by Bello
C.J.N in Omisade V Akande (observing Lord Denning MR in Wallersteiner V
Moir) thus: “suppose the company is defrauded by insiders/ by directors who
control/hold a majority of the shares-who can sue...? those directors are
themselves the wrongdoers170… they will not authorize the proceedings to be taken
against themselves if a general meeting is called, they will vote down any
suggestion that the company should sue”. Minority protection is where the law
allows the minority holders to enforce certain rights in certain instances which can
be termed “exceptions to the rule in Foss V Harbottle”171. This is because “the
majority in control may constitute an unruly horse if not checked172” These
instances have been codified in Section 300 CAMA.
When can the “minority” be entitled to sue?
Section 300: Provides that the court on the application of any member, may by
injunction or declaration restrain the company FROM:

166
See also Lord Jenkins in Edwards V Halliwell, B.P.R. Ltd V Awayewaserere, noted same.
167
As in MacDougall V Gardiner, the court held that if the thing (irregular act) complained of can be ratified by the
company, there is no use litigating about it. In this case, the chairman adjourned a meeting of the company without
allowing a vote to be taken on the issue of adjournment. Two shareholders sued. The court held that ultimately a
meeting would still have to be called wherein the majority would still have its way and ratify the irregular adjournment.
Furthermore, in Burland V Earl, the court expressed its unwillingness to “interfere with internal management of
companies acting within their powers…”
168 On this, see also Mozley V Alston. Professor Abugu has noted that this rule prevents multiplicity of Legal

Proceedings.
169 However, the members in general meeting can alter the article to make them the proper representatives. They can

also refuse to re-elect a director that habitually refuses to initiate proceedings for and on behalf of the company-John
Shaw and Sons (Salford) Ltd V Shaw.
170 See Smith V Croft (No.2) where the same situation was explained.
171 Although Professor Abugu and Professor Olawoyin prefer to call the exceptions “instances where the rule in Foss

V Harbottle would not apply” rather than calling them exceptions.

172 Professor Abugu, Principles of Corporate Law in Nigeria.
 (a) “Entering into any transaction which is illegal or ultra vires”173: In Yalaju-
Amaye V A.R.E.C, the court allowed a minority shareholder to sue on breach of
articles of association.
(b) “Purporting to do by ordinary resolution any act which by its constitution or
the Act requires to be done by special resolution”: the shareholder would be
allowed to sue where the majority does not adopt the proper course-Cotter V
National Union of Seamen.
(c) Doing “any act or omission affecting the applicant's individual rights as a
member”: Since the Memo and Article are binding contracts between the members
and co and members inter-se. Therefore a breach of these contracts which affects
the member personally is actionable. See Edokpolo and Co Ltd V Sem-Edo Wire
Industries Ltd.
(d) “Committing fraud on either the company or the minority shareholders
where the directors fail to take appropriate action to redress the wrong done”174:
In Burland V Earle, fraud was defined as when the minority appropriate to
themselves assets of the company175. In Estmanco (Kilner House) Ltd V Greater
London Council, fraud was deemed to encompass both common law and equitable
considerations. In Associated Registered Engineering Co Ltd V Yalaju-Amaye,
the court held that any act which would amount to an infraction on fair dealing or
abuse of confidence can entitle the minority to sue. In Cooks V Deeks, the directors
of a company obtained a contract of the company in their own names. The court
held that the benefit of the contract belonged to the company in equity.
(e) “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”176; and
(f) “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”177.
In the above listed instances, the law allows the minority to apply for a
“declaration” or “injunction” only. No damages.
The Minority may sue by the following actions.
1. Personal Action (Section 301(1) CAMA): where the right infringed is personal
to the plaintiff shareholder. E.g. breach of the shareholder’s personal right or a
contract between him and the company/wrongdoers-Omololu-Mulele V Ijale
Properties Ltd and Others, Johnson V Grove Wood and Co.

173
Same point was noted by Jenkins LJ in Edwards V Halliwell. Simpsons V Westminster Palace Hotel Co Ltd too.
174
See Daniels V Daniels: Frank and Ors V Abdu: Prudential Assurance Co Ltd V Newman Industries (No.2).
175 See also Menier V Hooper’s Telegraph Works.
176 Hodgson V National and Local Government Officials Association.
177 Daniels V Daniels, Alexander V Automatic Telephone Co,
 2. Representative Action (Section 301(2)): by a shareholder on behalf of (and
with the consent of178) other aggrieved shareholders who also have an interest in
the litigation. This prevents multiplicity of actions179.
3. Derivative Action (Section 303): This is brought by an applicant180 on behalf
of the company. I.e. to defend/enforce the company’s right-Omisade V Akande.
The company should be joined as a party to the suit181 so that it can be privy to the
judgment resulting thereon182. 1. The plaintiff must show that the majority
directors are the wrongdoers and if he (the plaintiff) does not sue, nobody else
would sue. 2. The plaintiff must apply for the leave of the court (by originating
summons183) which is at the court’s discretion to grant if it is satisfied 184. 3. The
plaintiff must be acting in good faith and for the benefit of the company. 4. He
should come to equity with clean hands (meaning that he should not have
participated in or benefited from the wrong complained of. Furthermore, that his
claim should not be vitiated by his inequitable conduct). 5. He may be required to
undertake to pay the cost of action if the suit turns out to be frivolous/unwarranted.
6. The case of AGIP Nigeria V AGIP Petroli International BV mandates that the
applicant serves the wrongdoers with notice. Section 304 empowers the court to
make deserving orders. It may authorize the applicant to control the conduct of the
action in question, give directions.
4. Winding up on Just and equitable Grounds (Section 408 CAMA): Section
408(e) CAMA provides that a company may be wound up by the court if it is of
the opinion that it is just and equitable to do so. In certain instances, a shareholder
may find it more appealing to have the court wound up the company. This has
been done where the whole substratum/object185 of the company failed186, where
the company became incapable of fulfilling its objects or its objects became
impossible or illegal187 or where it is formed for illegal purposes188, where it is a
sham, where the minority are unduly oppressed such that there is no confidence in

178
Melifonwu V Egbuj.
179
Otuguor Ogamioba and Ors V Oghene and Ors. Professor Gower noted same.
180 Section 309 defines the “applicant” used in Section 303 includes a current/former registered holder or beneficial

owner, director/officer of the co, the CAC or any other person who in the discretion of the court is a proper person to
make an application under Section 303.
181 The company or its directors must be served notice to this effect so as to prepare and appear to defend the case.
182 Third parties from whom the money of the company is to be recovered can also be joined
183 AGIP V Petroli International BV and Ors, Rule 2 of the Companies Proceedings Rules 1992.
184 Hodgson V N.A.L.G.O.
185 Re International Securities Corp
186 Re German Dates Coffee Co. in this case the company was incorporated to exploit a patent process. It could not

obtain the patent for which it was formed to exploit. It was held that the substratum of the co has failed so it should be
wound up.
187 Re Suburban Hotel Co.
188 Re Thomas Edward Brucemead and Sons.
 the management189, where there is a complete deadlock190, where the co is small
and (based on the facts and events) it would have been wound up if it was a
partnership191. In Ebrahimi V Westbourne Galleries Ltd, a three-man private
company was formed. Two out of the three removed one in accordance with the
articles. It was held that it is just and equitable that the company be wound up
because the mutual confidence has been breached as the third person reasonably
expected to participate in the management of the company’s affairs. In Loch V
John Blackwood Ltd, it was alleged that the statutory conditions as to general
meetings were not observed, the balance sheet and account report had not been
submitted, the wrongdoers were in the majority, and that without winding up it
would be impossible to realize the true value of the shares. Winding up was
decreed.
5. The “Unfairly Prejudicial” Remedy (Section 310, 311 CAMA): this is a
laudable remedy introduced by the Section 75 of the English Companies Act
1980 now re-enacted in Sections 310 and 311 of our CAMA. In Rigntower
Holdings Plc, Gibson J noted that the test here is “unfair prejudice” not
necessarily unlawfulness or illegality. The Jenkins Committee noted that “unfair
prejudice” means the violation of fair play. In Williams V Williams, the court held
that the oppressive conduct should be shown to be continuous. Under this remedy,
the applicant is saying that the affairs of the company are being conducted in a
manner that is unfairly oppressive and prejudicial to the interest of member(s) and
also affecting him in his capacity as a shareholder of the company192. Upon
receiving this complaint, the court may grant any of the remedies stated in Section
312(2)193 In Re Saul D, Harrison and Sons Plc, the court noted that we should
examine the conduct vis a vis the provisions of the articles. While in O’Neil V
Phillips, the court held that fairness was to be determined by reference to general
equitable principles. In this case, O’Neil (a manual worker) was promoted by Mr

189
Loch V John Blackwood Ltd, Re Davies and Collect Ltd, Re Lundie Brother Ltd.
190
Re Farmat Produce and Shipping Line Ltd, Idugboe V Oil Field Supply Ltd.
191 For example, in a partnership, each partner owe one another a duty of utmost good faith. Therefore if one of the

partners is unjustly excluded from the participation in the business it would amount to a breach of partnership
obligations. Re Yenide Tobacco Co Ltd (approved in Lock V John Blackwood). Farmart Produce and Shipping Line
Ltd V Establishment De Commerce General. Fasakin V Fasakin, UBN Ltd V Tropic Foods Ltd.
192 Williams and Another V Williams.
193 Section 312(2) "Without prejudice to the generality of subsection (1) of this section, the court may make one or

more of the following orders that is, an order—

(a) that the company be wound up; (b) for regulating the conduct of the affairs of the company in future; (c) for the
purchase of the shares of any member by other members of the company; (d) for the purchase of the shares of any
member by the company and for the reduction accordingly of the company’s capital; (e ) directing the company to
institute, prosecute, defend or discontinue specific proceedings, or authorising a member or the company to institute,
prosecute, defend or discontinue specific proceedings in the name or on behalf of the company; (f ) varying or setting
aside a transaction or contract to which the company is a party and compensating the company or any other party to
the transaction or contract; (g) directing an investigation to be made by the Commission; (h) appointing a receiver or
a receiver and manager of property of the company; (i) restraining a person from engaging in specific conduct or from
doing a specific act or thing;(j) requiring a person to do a specific act or thing
 Philips rapidly to site supervisor and director then managing director and later he
started receiving 50 percent of the profit. However when the company began to
run down, Mr Philips did not gbadun/like O’Neil again and declared that he is no
longer director and no longer received 50 percent profit. Mr O’Neil petitioned for
winding up. Held that simple breakdown of trust between members should not
suffice to wind up the company. In Re Ghyll Beck Driving Range Ltd, a father
and son with 2 others incorporated a company with equal shares. The father fought
with the petitioner and the relationship between the parties was strained. The
affairs of the business was managed without consulting the petitioner. It was held
that the petitioner was unfairly excluded but that did not suffice for a winding up.
The court ordered the majority pay the petitioner off by purchasing his shares. In
essence, this remedy is important where winding up would be extreme… the court
can then use its discretion to award alternate remedies. This remedy is pretty
simple as the claimants task is to prove unfairness. Furthermore, the application
may be brought by persons other than members194 as it can include -personal
representatives or those vested with interest of the member, -present and former
officers/members, -creditors of the company, the CAC, and any other person
whom the court deems proper. Professor Abugu believes that by this provision, a
floodgate has been opened195.
Note however Section 408(E) CAMA allows for a company to be wound up on
just and equitable grounds. This means that a stubborn client may insist onteh
Ebrahimi situation. It is suggested that the Section be repealed.
In conclusion, Professor Abugu is of the opinion that the majority rule has now
been abdicated for rule of law and justice and the rules on locus standi have been
liberalized. Therefore, a minority shareholder is not totally voiceless in the face of
injustice.

CORPORATE ADMINISTRATION AND MANAGEMENT AND LIABILITY

FOR CORPORATE ACTS.
ORGANS OF CORPORATE ADMINISTRATION.
A company being an artificial person acts through natural persons whose mind and
acts are attributable to the company. See Lord Denning’s dictum in Bolton
(Engineering) Co Ltd V Graham and Sons Ltd. Also Lord Viscount Heldane
L.C’s Dictum in St. Lennards Carrying Co V Asiatic Petroleum Ltd, where Mr
Lennard was held to be the alter ego of the company and directing mind.
From Section 63196 and 64 CAMA, we can note that the organs of the company
are:
194
Scottish Co-operative Wholesale Society Ltd V Meyer.
195 See however Re Legal Costs Negotiators Ltd, the court rejected the petition on the basis that since the applicants
were majority shareholders they could prevent the minority from being unfair to them.
196 Which provides that the co may act through its members in general meeting or its board of directors.
1. The Members in General Meeting:
2. The Board of Directors.
Note Section 37 CAMA, 65, Salomon V Salomon.
THE MEMBERS IN GENERAL MEETING: Comprises the shareholders. They
are entitled to attend the meeting and vote thereat. The MGM exercises the
residuary powers of the company.
Section 63(1). Section 211-Section 237. They pass resolutions. Kinds of
Meetings:
1. Statutory
2. Annual general meeting
3. Extraordinary General meeting
The Statutory Meeting: Section 211. Prescribed for public companies. It is the
first meeting of the company to be held within the first 6 months of its
incorporation after which a Statutory Report of the meeting is forwarded to
shareholders not less than 21 days and also to CAC. Section 212 contains penalties
for non-compliance. There should be independent valuation.
Annual General Meeting: Section 213. The Yearly meeting of the co. Not more
than 15 months should elapse between one and the other. Look at sub 1(a).
Although the CAC may extend the time. Both ordinary and special business are
transacted in the AGM-Section 214 ordinary business may include; declaring
dividends, presenting financial statement, appoint and fix auditors, etc.
Extraordinary General Meeting: To take care of things which cannot wait till
the next Annual GM comes. The BOD may decide to convene an EGM. See
Section 215. Section 216 provides that all SGM and AGM shall be held in Nigeria.
Notice of meetings in Section 217-221. 21 days notice must be given. This notice
should clearly intimate them of the venue, time, items to be discussed, etc.
A creditor can insist on having a notice of meeting by having a stipulation to this
effect in the debt contract.

Notice of Meeting: Section 221 deals with failure to serve notice. Those that are
entitled to receive notice should be served notice. Non-compliance can invalidate
the meeting. Longe V FBN.
Voting: in the Meeting. Decisions may be either by a show of hand (based on
number that indicate that they are in support/against) or by poll (vote based on
shares) see S 224..
Before the chairman of the meeting declares result of voting from show of hand, a
member can request for a poll (vote based on shares).
Proxies: Section 230. A proxy is a person appointed by a shareholder to represent
him at meetings. Steps into his shoes. Where it is a corporation/company that
appoints, he is called a representative-Section 231
 Quorum: The meeting is to reach a quorum (1/3 of total members) before they can
start-Section 232.
Resolutions: The resolution may be special or ordinary-Section 233-238. Ordinary
resolution requires just simple majority. Special requires ¾ i.e. 75 percent.
Resolutions are passed at the general meeting-Section 234 and filed with the CAC
where required-Section 233. Section 235. E.g. Resolutions are required for
increase and reduction of capital197, appointment of Directors, alteration of articles
and so on.
Special Notice: Section 236 mandates that where special notice is required by the
Act, it must be served. Special notice would be required for appointment of
directors above 70 years198, removing a director or to appoint some other person
in his stead199, for appointment, filling casual vacancy, reappointing and retiring
auditors before the expiration of his term200. For special notice, a minimum of 21
days (to members then 28 to the company) is required. See Longe V FBN.
Minutes of Meeting: For every meeting there should be minutes of meeting which
should subsequently be kept in company’s registered office.. The minutes
constitute a record of what happens during the meeting. International
Agricultural Industries (Nig) Ltd V Chika Brothers Ltd.

THE BOARD OF DIRECTORS: “directors” are defined in Section 650 to include

person occupying the position of director by whatever name called and includes
any person in accordance with whose directions or instructions the directors are
accustomed to act”. Section 244 defines directors as persons duly appointed by
the company to direct and administer the business of the company. Professor
Gower sees them as “an expert body of directors who manage other people’s
property for them”. The controller of the company’s affairs-Per Mccardis J.N,
Morality V Regent’s Garage and Engineering Co Ltd. Directors are appointed by
the Members in General Meeting201 to oversee the day-to-day business of the
company. Their powers shall be determined by the company’s articles202. The
board must have a membership of at least two directors203. The BOD could
delegate their functions/powers to the Managing Director(s) whom they
appoint204. His powers shall be determined based on the terms of his appointment-
Harold Holdsworth and Co (Wakefield) Ltd V Caddies: Read V Astoria Garage
(Streatham) Ltd. Such MDs must be duly appointed and the termination of their

197
Section 100.
198
Section 256.
199 Section 262.
200 Section 364.
201 Pursuant to Section 246-248.
202 They cannot however do what the company itself could not do.
203
Section 246.
204
See Section 64 CAMA.
 appointment must follow due process and be in accordance with terms of
appointment-Nelson V James Nelson and Sons Ltd. Section 262 empowers the
company to remove a director even before the expiration of his tenure
notwithstanding anything in the article or agreement to the contrary. But he can
sue for damages for wrongful dismissal.
It is necessary to determine the definition of a director and ascertain their exact
legal status or position. Professor Olawoyin205 noted that directors have been
variously described as agents, trustees, quasi trustees, employees, servants, paid
servants, paid managers, managing agents, managing partners, organs and
controllers of their companies… the relationship of the director, though akin to
all these in some respects is not on is sui generis…”. He posits that the office is of
a multifarious character and he concluded that “the director neither fits in
completely with any of the positions”. Meaning that it is not on all fours stricto
sensu with either of the categorization or terminology. Jessel M.R in Re Forest of
Dean Coal Mining Co Ltd, noted that “it does not matter what you call them
(company officers) so long as you understand what their true position is”. What
matters is that they stand in a fiduciary relationship 206 Regal Hasting Ltd V
Gulliver 1946 1 Al ER 378. Industrial Development Consultants Ltd V Cooley
1972 1 WLR 443. Canadian Aero Services V Omalley 1973 40 DLR 3D 371. BCE
V 1976 Debenture Holders 2008 3 SCR 560. Boardman V Phibbs 1967 AC 46.
Official Secrets should not be used by Director-Section 280 British Industrial
Plastics V Ferguson 282(duty of care) 284. 287(on secret profit) 288, 290, 289.
Also Section 283 which entitles the co to recover company’s money which the
director took. Standard Chartered Bank V Pakistan National Shipping Corp No.2.
note Section 93.
Is the Officer a Trustee? Although the director (just like a trustee) is in a fiduciary
relationship with the company and is always expected to act in good faith and for
the benefit of the company. Unlike the trustee who has legal estate in trust
property, the legal estate in the company is not vested on the director.
Agent?: although the usual powers and duties appertaining to an agent may also
be applied to the director, he is not strictly an agent. A mis-description of a
company’s name may translate in the agreement not binding on the company in
the case of a director. This may not be so for an agent207.
Lord Russell in Regal (Hastings) Ltd V Gulliver noted that the directors occupy
a position peculiar to themselves. *See the discussion above on types of directors.
Every company must keep at its registered office, a register of its directors and
secretaries (containing names, address, occupation, etc.). Section 292, 275.

205 Olawoyin, G.A, Status and Duties of Compnay Directors (University of Ile Ife Press, Ile-Ife, 1981) P.28.
206
Re City Equitable Fire Insurance Co.
207 Western Nigeria Finance Corporation V West Coast Builders Ltd.
 Share Qualification: there may208 be a stipulation that a person must hold a
minimum number of shares in the company to qualify as director. This is to ensure
that the director has a material interest in the success of the company. Section
251(2) CAMA stipulates a maximum period of 2 months within which the director
must purchase shares209 to qualify as director else vacate his office. In Craven-
Ellis V Canons Limited, failure to purchase meant that the appointment had
lapsed. Although the court held that he was entitled to remuneration in quantum
meruit based on what he had done so far.
Disqualification/Vacation: Section 257 and 258 draws a distinction between
disqualification and vacation. The former renders a person ineligible to join the
board while the latter erodes the right of one who is already on the board from
continuing to remain therein. The following persons are disqualified: -minors
(below 18), -Lunatics, -convict for fraud/breach of duty (except leave of the court
is gotten), -a corporation (other than its representative appointed to the board for
a given term), -a person who has attained the age of 70 (unless appointment is
approved in a general meeting by a resolution of which notice specifying age is
given-Section 256). The articles may impose further disqualifications.
The office of Director may be “vacated” (Section 258) if he ceased to be a director
having not obtained the prescribed share qualification, becomes bankrupt,
unsound in mind, becomes prohibited pursuant to Section 254, resigns, retires by
rotation, removal under Section 262.
Removal: Section 262 applies to director appointed for a specific or fixed period
other than for life-Iwuchukwu V Nwizu. Here a company is empowered to
remove a director (by ordinary resolution of general meeting) before the expiration
of his period of office notwithstanding anything in the articles or agreement
prohibiting same. The procedure is that:
- Due notice must be served to the director to be removed.
- Special notice (i.e. 28 days) shall be given to the company and the company shall
give the members 21 days notice of such proposal to remove the named director.
- The director is entitled to give his defence (maybe sent to members 210 or read at
the meeting). The director can then be removed by ordinary resolution and such is
intimated to CAC through filling and filing Form CO.7 within 14 days of removal.
- The director is entitled to compensation or damages.
- Another director may be appointed to replace the vacancy created by the removal
of a director in the same meeting.
In Bernard Longe V First Bank of Nigeria, the termination and removal of Longe
as managing director was held to be unlawful and void for not following the due

208 This may be provided in the Articles.

209
Either in his name or as a trustee.
210 Court may prevent sending to members if satisfied that defamatory statements may be circulated.
 procedure. He was not duly notified of the meeting where was to be removed. The
High Court and Court of Appeal rejected his claim but the Supreme Court accepted
his appeal vitiating removal on ground of improper service. Noting that the
possible defences available under Section 266 include that the director was given
the notice of the meeting, the person involved ceased to be a director and that the
person involved is disqualified under Section 257 from getting the notice. Where
the power to remove a director is specifically conferred by the articles on an
individual, it appears that the provisions and procedure of removal in Section 262
may not apply. Note also Odusola Holdings Ltd V Ladejobi 2006 12 NWLR 321
Remuneration: remuneration of directors may be determined from time to time by
the GM OR may be fixed by the Articles. Note however that the company is not
bound to pay remuneration but must reimburse directors for expenses they
incurred in the course of furthering the business of the company. Where
remuneration is provided for, unpaid remuneration can be regarded as debt payable
out of the asset of the company. Remuneration fixed by the article shall be alterable
only by special resolution-Section 256(3). Section 267 provides that (1)
See Section 279, Section 284, Section 263 n 266 stipulate certain managerial
duties for the Directors.
Types of directors: a director may be executive or non-executive. The non-
executive does little or nothing just merely attends a reasonable number of board
meetings-Section 245 246 and 247. Executive directors are those who in addition
to their roles as directors hold executive or managerial position to which they are
appointed by the board-Longe V First Bank Nigeria Ltd. The top of the executive
director is the MD. We also have “shadow directors” (on whose instructions the
directors are accustomed to act-Section 245). There are also “alternate directors”
who can be appointed by a director to seat in his stead (subject to the articles of
association). Generally, a person above 70211, an insolvent212 should not act as
director.
Number of Directors: at least 2 directors-Section 246 CAMA. The Articles should
provide the min and max-Re Alma Skimming Co (1889). Section 93. They are to
comply with statutory requirements or face sanctions-Section 386 (for directors
who knowingly pay out dividend out of capital). Section 506 penalises fraudulent
trading
Appointment: exercisable in the manner provided in the Articles. They are
generally appointed by the members in the general meeting213. Note however that
a company cannot be a director-Section 257(d) but can have its representative
appointed as director. Directors are removable at any time in manner prescribed

211 Section 251.

212
Section 253.
213 Though the article can provide that the directors (or even an outsider) can appoint.
 by Section 262 CAMA.“First Directors” these are those appointed in writing by
the subscribers of the memorandum-Section 247. In Onwuka V Tymani, oral
appointment was invalidated.
Casual Vacancies: where the seat of a director becomes vacant otherwise than by
the expiration of the term of office (e.g. death, resignation, removal or
disqualification). The BOD or MGM can appoint a person to fill the causal
vacancy until the next general meeting-Barron V Potter.
Loan to Directors: Section 270 makes it unlawful for a company to grant its
directors loan. As loans to directors have the potential of undermining capital and
resulting in a conflict of interest. There are however exceptions contained in the
Section.
Loans may be granted to provide funds to enable the director meet expenditures
incurred for the purposes of the company or enable him to perform his duties
properly.
BOD V MGM… WHO LEADS?
The Directors at common law were originally conceived to be mere agents of the
company214. Odusola Holdings Ltd V Ladejobi 2006 12 NWLR 321.In
Automatic Self-cleansing Filter Syndicate Co Ltd V Cumminghame215, the court
maintained a neutral position by holding that Shareholders (i.e. MGM) should not
intrude in the director’s exercise of powers. In Marshals Valve Gear Co Ltd V
Manning Wardle and Co Ltd, the court was in favour of the shareholders.
:: The CAMA now makes the answer to this question dependent on what the
Article says.
In John Show and Sons Salphored Ltd V Peter Slaw and John Shaw, the court
also maintained that the directors were not bound to receive instructions from the
MGM where they are exercising the powers vested in them by the Articles.
However, the MGM can alter the articles to promote them above the directors216
or refuse to re-elect the director(s). Furthermore Section 262 empowers the MGM
to remove a director at any time by special resolution. They may also invoke
Section 311. It thus seems that the MGM wields more powers. But still, the answer
depends on what the articles say.
:: Article 80 of Table A provides that the Directors shall manage the business of
the co. Scott V Scott interference with director’s duties was frowned upon. In Quin
and Astens V Salmon, the articles required the consent of two managing Directors
for the sale of a premises. One manager dissented. The MGM by a simple

214
Isle of Wright Railways V Tahourdin.
215
In this case, the Articles vested the general management on the BOD. The MGM passed a simple resolution to sell
the company’s assets. The court held that the BOD are entitled to refuse to comply with this decision. Also
Gramophone Typewriters Ltd V Stanley.
216 Section 48 CAMA. Provided that no alteration would invalidate any prior act of the BOD which would have been

valid if that alteration had not been made

 resolution purported to ratify the board resolution. The court granted an injunction
to restrain such as the consent of the director was necessary.
:: (Subject to restrictions in the Act and Articles)The BOD shall not be bound to
follow the directions/instructions of the members in general meeting provided they
are performing their duty in good faith and due diligence. In essence, directors
must be given a free hand in the execution of their functions.
Note however that (by the combined provisions of the CAMA and various
cases217) the MGM have residuary powers and may act in the following instances:
- Where the Board of Directors are disqualified or unable to act due to deadlock.
- The MGM can institute legal proceedings in the name, for and on behalf of the
company if the board neglects to do so.
- The MGM can ratify or confirm actions taken by the BOD-Bamford V Bamford.
Section 66 Kelner V Baxter. Section 197 and 69
- The MGM can make recommendations to the board regarding action to be taken
by the board.
- The MGM can act where there is no functioning board218 or board cannot make a
quorum219.

LIABILITY OF THE COMPANY FOR ACTS OF ITS OFFICERS.

The organic theory developed by Lord Heldane in St Lennard Carrying Co v.
Asiatic Petroleum Co Ltd (supra) and Bolton Engineering Co Ltd V Graham
and Sons Ltd. Furthermore, RBB V Turquhand and Spasco Vehicle and Plant
Hire Co V Airlane Nigeria Ltd, transactors need not inquire as to regularity of
internal proceeding or indoor management. The authority of the Director (just like
an agent) can be express, implied, apparent or ostensible depending on the facts
and circumstances of the case. E.g. in Hely-Hutchinson V Brayhead Ltd the
acting managing director usually did not seek prior authorization while making
large transactions on behalf of the company. Held that in this instant transaction,
the company was bound since they had acquiesced. In Freemen and Ylockyer V
Buckhurst Park Properties (Mangal) Ltd, K who though was not appointed was
(to the knowledge of the board) acting as managing director. Held that in the
instant transaction, the company was bound for acquiescing. Outsiders can
presume that the director was duly appointed. (except there was no appointment
in the first place-Norris V Kanssen). In essence, the Rule in Royal British Bank
V Turquand220: is to the effect that a third party who deals with a company in
reliance with its public documents is entitled to assume that all matters of internal

217
The ones listed above, Alexander Ward Co Ltd V Samyang Navigation Ltd, Re Argentum
218
Okeowo V Milgore.
219 Poster V Poster,
220 1856, 6E and B 327, 25 Law Journal QB 317. In this case, the directors of the company borrowed money from a

bank. It was held that the bank need not prove that there had been a resolution authorising the directors to borrow.
 management had been complied with. This rule has been enacted in Section 69221
CAMA 1990 which enshrines the presumption of regularity for the purpose of
protecting third parties dealing with the company. This rule has been applied in
Metalimpex V A.G Leventis and Co Nig Ltd222, Trenco (Nig) Ltd V African Real
Estate Ltd223.
Exceptions to the Rule in RBB V Turquand:
- Where there are suspicious circumstances which ought to put the third party on
enquiry- Underwood Ltd V Bank of Liverpool and Martins (in this case, the sole
director and principal shareholder paid into his own account, cheques drawn in
favour of the company. held that the unusual nature of the transaction ought to
have put the third party on notice). On this, see also Craven-Ellis V Canons
Limited: Obaseki V African Continental Bank Ltd224.
- Where the third party knows of the internal irregularity-Howard V Patent Ivory
Manufacturing Co225. Also Morris V Kansen
- Where the documents relied on by the third party is a forgery-Reuben V Great
Fingall Consolidated Company.
- Where it is a transaction between the company and one of its directors.

FINANCIAL STATEMENT, AUDIT, DIVIDENDS.

FINANCIAL STATEMENTS
Indicate the way a company is being run. It is advantageous as it enables directors,
shareholders, and other concerned parties to take decisions and plan based on
information contained therein. To assess the performance and viability of a
company. The CAMA, ISA, Financial Reports Council Act 2011 provide certain
regulations in this regard.
Financial Reporting Council (set up by the Financial Reporting Council Act
2011) is empowered under Section 11 and Section 8(1K) FRCA2011 to review
the financial statements and reports of public interest entities which include (From
the interpretation of Section 77 FRCA) any government entity e.g. NPA,
NIMASA, etc. Section 59 mandates reports and financial statements to conform
with the standard set in the Act.
Just note the following:

221
Presumption that company’s memorandum and articles have been duly complied with, officers duly appointed to
exercise the power it is carrying out and so on.
222 (1976) 2 Section 91 (1976) UILR.
223 (1978) 1 LRN 146.
224 1966 NMLR 35.
225 (1888) 38 Ch. D 156.
 Section 331(1) mandates every company to keep financial records which should
sufficiently and honestly show the financial position of the company-Section
331(2)
Furthermore, Section 334 provides; (1) In the case of every company, the
directors shall226 in respect of each year of the company, prepare financial
statements for the year.(2) Subject to subsection (3) of this section, the financial
statements required under subsection (1) of this Section shall include‐ (a)
statement of the accounting policies; (b) the balance sheet227 as at the last day
of the year; (c) a profit and loss account or, in the case of a company not trading
for profit, an income and expenditure account for the year;…(d) notes on the
accounts; (e) the auditors' reports; (f) the directors' report; (g) a statement of
the source and application of fund; (h) a value‐added statement for the year; (i)
a five‐year financial summary; and (j) in the case of a holding company, the
group financial statements
Section 335 mandates such statements to comply with the provisions of the Act
and those of the Accounting Standards. Section 335(2) mandates that the balance
sheet shall give a true and fair view of the state of affairs of the company as at the
end of the year;
Section 336 mandates that a holding company which has subsidiaries should
prepare a group financial statement which discloses the financial position of both
the holding and group company-This was also considered in Union Foods Case.
Also Adams V Cape Industries Ltd.
The combined interpretation of Section 343 and 345 is that the balance sheet and
related documents should be signed by the BOD228, laid before the company in
general meeting and delivered to the Commission.
Section 344 provides that a copy of the Financial statement should be delivered
(at least 21 days before it is presented to the GM) to every member of the co, every
holder of the company’s debentures and other persons so entitled.
AUDIT.
Section 357 provides for the appointment of independent external auditors to
confirm the veracity of the information contained in the financial statement
prepared by the Company and make an “auditor’s report229” in that regard. They
are granted wide powers230 in performing their research and investigation.
Information should not be withheld from them else they would “qualify” their

226
In practice, the Chief Financial Officer would be the one preparing. His role has been recognised by the Financial
Accounting Practice.
227 which is the overall statement of the financial position of the co. sets out all the assets of the company. They may

include; physical assets (like land), Intangible assets (like intellectual property, trademarks, goodwill, patent) Short-
term Assets (i.e. the working assets) and long-term assets (Like building).
228 Two directors would sign on the BODs behalf.
229 Provided in Section 579.
230 Under Section 360 CAMA
 report. This mean that they are saying that the report may not be a fair one. Such
representation would scare investors.
Note that the company also has their own internal auditors and audit committee to
check the financial statement and state of affairs of the company. This time rather
than for regulatory but for planning and strategic purposes. These internal auditors
can be removed in a similar way as directors discussed earlier see Section 362 for
removal of auditors
BENEFITS OF PREPARING FINANCIAL STATEMENTS.
1. It shows a true and clear view of the financial position of the co.
2. It serves as an instrument for giving account of stewardship by the directors of the
co.
3. Shareholders are able to determine by reading the account, how the affairs of the
co has been conducted by management and the board.
4. It helps the creditors in the determination of whether or not the co is in a position
to meet and respond to its obligation s to them. The creditors are looking at the
5. It enables the Directors who are not involved in the day to day running of the
company to assess the state of affairs of the company.
Negligence in Preparing Financial Statements: Woolf J. in JEB Fasteners Ltd V
Marks, Bloom and Co and Lord Steward in Twomax Ltd V Dickson, Macfarlane
and Robinson have noted that auditors and directors owed a duty of care in
preparing the accounts. Hedley Byrne V Heller and Partners provides liability for
negligent misstatements. Note however the decision of Caparo Industries V
Dickman which tries to limit the liability to instances where it is reasonably
foreseeable that a shareholder or an outsider would rely on the statement and suffer
loss. This would usually be the case where the statement was knowingly made
with intent to defraud.

DIVIDENDS. Is simply returns from investment.

From the interpretation of Sections 379-386 we would note that:
- The shareholders declare dividends at the general meeting (on the
recommendation of the Board of Directors231).
- A company can only declare dividend if it has made profit because doing otherwise
would result in a reduction of the company’s capital. This restriction seeks to
protect creditors of the company.
- If the directors knowingly declare dividend where no distributable profit have been
made by the company the directors shall be jointly and severally liable-Section
386.
- The fact that a co has made profit doesn’t mean that it must declare dividend. The
directors may deem it fit to plough the profit back into the business.

231
The BOD should recommend.
 - Once the company has declared dividend, that dividend becomes a debt due to the
shareholders enforceable by legal action.
- The co should publish the names of those that have not claimed their dividends
and after 3 months, the co may do what it likes with the dividend-Section 382

MERGERS AND ACQUISITIONS.

Companies may desire to restructure232 or increase shareholder base and generally
rearrange business for increased efficiency and profitability.
MERGER is the fusion of two or more corporate entities into one… largely on
equal terms. While; ACQUISITION is the purchase by one company of all or a
substantial interest of another company.
The Investment and Securities Act (ISA) regulates mergers and acquisitions233.
From Section 119 ISA a merger can be seen as an amalgamation of two or more
businesses234
A takeover is defined in Section 117 as … the acquisition by one company of
sufficient shares in another company to give the acquiring company control over
that other company..
Section 119(2) provides; A merger contemplated in subsection (1) of this Section
may be achieved in any manner, including through- (a) purchase or lease of the
shares, interest or assets of the other company in question; or (b) amalgamation
or other combination with the other company in question
Under Section 119(2)(b) the merger may be by:
- Vertical merger: where two businesses in different lines/industry merge. E.g.
Fishery company with transport company.
- Horizontal merger: where two companies in the same line of business amalgamate.
- Conglomerate Merger: this is just a combination of businesses that are so diverse.
Artificial transactions may be refused by SEC. Moreover, such merger should not
create anti-trust or monopoly. I.e. it should not push other people in the industry
out.
PURPOSES/ADVANTAGES OF MERGERS AND ACQUISITION.
1. To comply with government policy: e.g. in 2005, the CBN directed that banks
must have at least 25 billion naira. Some banks (like unity bank) merged to meet
up.
2. Safeguards economic interest: e.g. a processing co may merge with the supply co.
3. Sustainability and acquisition of experts: by merging, the company is likely to
inherit highly skilled and competent managers.
4. Increased market share: They become bigger in the market. But if such merger

232 I.e. change the organisation structure of the co. Departments may be merged, scrapped,
233
It was formerly the CAMA that regulated.
234 A similar definition is provided in Blacks Law Dictionary.
 would result in a monopoly, it may be rejected by SEC.
5. Risk diversification and expansion: e.g. a company based in Lagos can merge with
a co based in United States thereby expanding its tentacles.
6. Increase of profit and averting business failure: A successful application of the
above would result in an economies of scale which would result in higher profit
for the co.
POSSIBLE DISADVANTAGES.
1. Certain offices/officer may become redundant and the employees would be laid
off/retrenched.
2. In vertical mergers, there may be duplication and over-capacity. This usually leads
to retrenchment.
3. Clash of cultures which affect performance. People from the old and new company
may not really fuse. Everybody is usually clannish… forming cliques and all. E.g.
year 2 fusion of UTME with Diploma.
4. The success of the new entity is not secured.
PROCEDURES FOR MERGERS.’
In Re Lipton Nigeria Ltd, the court held that each of the companies giving or
receiving in a merger are making an arrangement pursuant to the relevant sections
under the Companies Act and each of the two company’s shareholders should be
consulted and their consent obtained in the manner laid out in the Act. Moreover,
that the court must satisfy itself that the class of members of the company
summoned to the meeting were fairly represented by those who attended. That at
least ¾ of those present in the meeting of both shareholders and creditor of the
merging companies approved the scheme.
On procedure, see also In the Matter of John Holt Investment Ltd Scheme of
Arrangement FHC/L/MS/80.
The approval of the Securities Exchange Commission is required for certain
categories of mergers235. Section 120 ISA 2007 enables the SEC to prescribe
amount for small merger, intermediate and large merger these are the three
thresholds.
- Small Mergers: where the amount concerned is below one billion naira. SMs do
not need the approval of SEC-Section 122. Rule 421 SEC Rules
- Intermediate merger: 1bn-5bn.
- Large merger: 5bn and above.

235initially when the CAMA used to regulate mergers and acquisition. However, with the enactment of 1999 CAMA,
part 9/10 relating to mergers and acquisition has been put under the ISAct. When the CAMA used to govern, there was
no discrimination into threshold.
 In determining whether or not to approve a merger, the SEC is to consider the
desirability of such merger, public interest, anti-trust issues, the need to prevent
monopoly236, and so on-Section 121 ISA, 423 SEC Rules 2013.
There are other industry specific statutes which require additional approval of
certain requisite bodies. E.g. Banks need the additional approval of the CBN (See
Section 7 BOFIA), Telecoms needs additional approval of NCC (See Section 45
NCCAct Insurance companies would need additional approval from NAICOM
(see Section 30 Insurance Act.
Section 122. Section 125 and 126 (for Small, Intermediate and Large Mergers)
provide that the SEC should respond within the requisite time (20 days or
additional days not exceeding 40 days). Section 122(6) then provides that: If the
merger is approved by the Commission, the parties shall apply to the court for the
merger to be sanctioned and when so sanctioned, the same shall become binding
on the companies…
Once the court sanctions the arrangement, the merger becomes complete. On
further reading of Section 122(6), we would realise that the rights and Liabilities
of the previous companies is then transferred to the new entity in such way as the
court deems fit and proper to make the merger reasonable-Commercial Bank
(Credit Lyonnais Nig. Ltd.) V Rose Okoli.
The court with jurisdiction in mergers is the Federal High Court-Section 251(e)
CFRN, Afolabi V Western Steel Works Ltd237.
Having noted the procedure, there appears to be an issue thrown up by Section
538 of the CAMA (concerning Arrangement on sale of company's property
during members' voluntary winding up) which allows an arrangement similar
to a merger. The question is whether parties can evade the obligations (like prior
notification and approval by the SEC) imposed by ISA by basing their agreement
under Section 538 of CAMA. This question is solved by Section 118 ISA which
provides; Notwithstanding anything to the contrary contained in any other
enactment, every merger, acquisition or business combination between or among
companies shall be subject to the prior review and approval of the Commission.
Same point is also maintained in HC Rule 423 and 424.
EFFECTS OF A MERGER.
The emerging company takes over the assets, rights, duties and liabilities of the
scheme. The legal personality of the merging companies are transformed into the
new emerging company. Note that a document showing merger may be required
to prove the merger in court-Afolabi V Western Steel Works Ltd 2012 17 NWLR
page 303.
236
There is currently a bill at the NASS for a bill on the Competitions Commission which would be a government
agency saddled with the responsibility of ensuring that there is no monopoly or anti-trust. These already exist in some
other jurisdictions like the US. Federal Competitions and Consumer Credit Bill Nigeria.
237 2012 17 NWLR page 303.
 ACQUISITION.
In addition to the principles discussed earlier note the following for Acquisition.
:: Merger looks at fusing more than one company while Acquisition looks at one
company taking control of another company.
:: SEC also regulates Acquisitions and takes certain things into consideration like
effect of acquisition, future plan, treatment of dissenting holder, etc where
necessary.
:: Both companies (Board and Members) should have passed a resolution
authorising such endeavour. Then both companies should present the resolutions
with Certificates of Incorporation, CTC of MEMO and Article, Annual Reports
and account of both, CAC Form 07 (Particulars of Directors), then application
(50k) and processing fee. SEC then considers the application.

SHAREHOLDING AND MEMBERSHIP.

A shareholder is one who holds shares in a company238. By owning shares, the
shareholder becomes a member239 of the company240 and certain rights241 are
conferred therewith242
Shares are derived from the share capital which is divided into units of shares for
subscription. Section 116 provides generally that each share carries one vote
notwithstanding a contrary stipulation in the article-Webb V Earle, Will V United
Lanket Plantations Co Ltd, Re Crichton’s Oil Company. There are exceptions in
Section 143(1) upon certain resolutions.
What is a Share? Under the CAMA, a share is defined as “the interest in a
company’s capital or income…”
Farwell J in Borland’s Trustee V Steel Brothers and Co ltd defined a share as
“the interest of a shareholder in the company measured by a sum of money, for the
purpose of liability… A share is not a sum of money… but is an interest measured
by a sum of money and made up of various rights contained in the contract,
including the right to a sum of money of a more or less amount.”
1. A share is a unit of investment in a company.
2. A share is not a sum of money.
3. But it is an interest measured by a sum of money.
4. It is measured by a sum of money for the purpose of liability.
5. It is also measured by a sum of money for the purpose of interest.
6. It confers rights of membership under the articles of association.

238
Note that a co limited by guarantee cannot have shares.
239
A member is defined in CAMA as;
240 A shareholder though part of the company does not own the company’s assets.
241 Like right to attend general meeting and vote.
242 See Section 114
 7. It confers right of return of capital of a more or less amount.
These 7 statements encompass what Fawell J said in the case.
CLASSES OF SHARES. Section 118 AND 119 CAMA.
The companies are empowered to create two or more classes of shares with
different rights attaching to each class provided that at least one shareholder of
every company must be an ordinary shareholder-Andrews V Gas Meter Co.
The most common are:
- Ordinary/equity Shares: Is the primordial class of company’s shares. They
carry the residual rights in the company. In the sense that their holders would be
entitled to the residue/surplus of the dividend (and or repayments as the case may
be) after the preference shareholders have been paid/settled. The elders who take
the last drop. See Re Wharefedale Brewery Co243. See Section 144.
- Preference Shares: confers a preference on their holders. Their holders are
entitled to dividend and return of capital before same is paid to the ordinary
shareholders. The nature of preference shares and the rights attached to them is a
question of construction of the memorandum and articles of terms of issue-Lord
Simonds in Scottish Insurance Corporation Ltd V Wilsons and Clyde Coal Co.
From Section 114 and 116 we can see that shareholders are entitled to attend
meetings and vote. The argument therefore is that the preference shareholders are
at an advantage since their rights are enhanced under the CAMA. Dimbulla Valley
(Ceylon) Tea Co ltd V Laurie. White V Bristol Aeroplane Co Ltd. Redeemable
preference shares Section 122 CAMA.
- Deferred/Founders Shares: usually rank next in priority to ordinary shares.
Entitle the holder to profits after the ordinary and preference shareholders have
been paid dividend.
VARIATION OF CLASS RIGHTS.
When the rights attached to a particular class of shares are sought to be modified.
Section 141 requires the written consent of holders of ¾ of the shares of that class
or an extraordinary resolution passed at a separate meeting of that class.
Consent of the court should be sought in accordance with Section 312(4) CAMA.
Holders of not less than 15 percent of the shares who did not consent may apply
to the FHC within 21 days (after the consent resolution) to have the variation
cancelled. Such petition may be victorious if the alteration is tainted with fraud or
unfairly prejudices the minority.
Rights are better protected if they are in the memorandum since the memorandum
is superior to the Articles and variation of class rights would also translate to
alteration of the memo. See Section 141.

243Where it was held that this right was enjoyed to the exclusion of preference shareholders See also Scottish Insurance
Corporation Ltd V Wilsons and Clyde Coal Co. Although an opposite stance was taken in Re Wood Skinner and Co
Ltd.
 If the Class rights are set out in the Articles, then a special resolution altering the
articles would be needed-Section 48 CAMA. Note that if it is just a minor
adjustment and the legal nature of the rights remain the same, it is better called an
alteration rather than a variation-Greenhalgh V Ardene Cinemas Ltd, White V
Bristol Aeroplane Co Ltd, Newspapers Group Ltd V Cumberland and
Westmoreland Herald Newspapers and Printing Co. Ltd.
ACHIEVING MEMBERSHIP.
From the interpretation of Section 79 CAMA, one may become a member through
the following:
1. By subscribing to the memorandum of association when the company is being
incorporated: Nichol’s Case. In Evans’s Case [1867] 2 Ch. App. 42, Mr A had
subscribed to the Memorandum. As a holder of 10 shares. No shares were ever
allotted to him nor was his name entered into the register of members. The court
held that his name ought to have been put in the register of members. See also Orji
V Dorji Textile Mills.
2. Other Methods: Note that every person under this category must have his/her
name entered in the register of members to qualify.
a. By agreeing to take shares in the company-Sparks Electric Ltd and Anr V
Ponmile, Berliet Nigeria Limited V Mordi Francis.
b. By taking a transfer of shares.
c. By inheriting shares of a deceased shareholder-Section 155. On death, the shares
of a member passes to his heirs, executors or administrator.
d. By holding or allowing himself to be held out as a member-Crawley’s Case.
e. Buying shares in the company-Orji V Dorji Textile Mills Ltd, Oilfield Supply
Centre Ltd V Johnson.
An infant can become a member but he can repudiate the contract within a
reasonable time of attaining majority244. A company can become a member of
another company where authorised by its memorandum. It shall be represented at
meetings by an officer appointed by resolution of board of Directors-Section
231(1a).
How to get/apply for shares: First, an offer245 (which may be oral or written246)
is made. The company may accept (by allotment of shares) or reject (by notifying
you).

ISSUE, SALE AND TRANSFER OF SHARES.

ISSUE OF SHARES: Issuing is the process by which a co makes its shares
available for subscription. Issue of shares is peculiar to what we refer to as the
244
Although the court may sometimes require the applicant to show total failure of consideration-Steinberg V Scala
(Leeds) Ltd.
245 In the case of public companies, the offer should generally be accompanied by a prospectus-Section 71(1) ISA.
246 Berliet Nigeria Limited V MordiFrancis.
 primary market for security .The Primary Market for Security refers to those
instances where a co issues its shares for subscription. The secondary market
involves those instances where those shares that have already been issued are sold
by their holders.
A contract for the sale of shares is like any other contract. The basic principles of
offer, acceptance and consideration applies here. Although it must be written and
consideration should be adequate.
Modalities/Mechanisms for Issue: A co may issue its shares for subscription by
way of the following:
a. An offer for Subscription: In an offer for subscription the co makes a direct
invitation to members of the public to subscribe for its capital. May usually be an
initial public offer. The issuing company (otherwise referred to as the issuer) may
acquaint a financial intermediary (issuing house) who then offers the shares to the
public on behalf of the company.
b. Offer for sale: This refers to a situation where the co offers existing shares for sale
to the public.
c. A Rights Issue: Where a co issues it shares to existing members to subscribe
proportionate to their existing share percentage.
d. A Capilatization/Bonus issue: “capitalisation” looks at converting profit into
equity (shares). When profit is made, instead of paying it to the shareholders (in
form of dividend), the company decide to retain it by passing a resolution to
capitalise profit. The price of conversion may be reduced to sway shareholders in
accepting the proposal for substituting cash for dividend.

SALE OF SHARES: Section 115 CAMA provides that; the shares or other
interests of a member in a company shall be property transferable in the manner
provided in articles of association of the company. The ordinary rules of offer
acceptance and consideration applies. Note however that Section 22 CAMA
mandates private companies to restrict the transfer of their shares. Section 67 ISA
too. No restriction per se for public companies. In Nigeria, the NSE is the
recognised stock exchange.
Some useful terms here summarised (Just look at the class note to know the ones
you are to read).
Acceptance/Allotment: acceptance is constituted when a letter of allotment is
dispatched to the applicant247. He is then deemed to be a shareholder. Acceptance
must be unconditional… there should be no variation of terms-The Household
Fire and Carriage Accident Insurance C (Ltd) V Grant. Forget V Cement

247
Notwithstanding that the letter never got to the applicant-The Household Fire and Carriage Accident Insurance
C (Ltd) V Grant.
 Products Co of Canada. Where there is undue delay in acceptance/allotment, the
applicant may repudiate-Remsgate Victoria Hotel Co Ltd V Montesfiore.
Underwriting: here, a person (called underwriter) promises to take up the
remaining shares or debentures that are not taken up by the public. However, if the
public subscribes for all the securities/shares, the underwriter earns his
commission-Re Consort Deep Level Gold Mines Ltd. Usually necessary for
public issue of shares.
Commissions and Discounts: a co in need of capital may find it necessary to pay
commission to a person willing to introduce capital. Section 131 CAMA allows
this. Provided:
- Such (payment of commission) is authorised by the company’s articles.
- The commission does not exceed 10 percent of the price at which the shares are
issued or the rate authorised by the articles (whichever is less).
- The number of shares which the person wishes to subscribe for is disclosed.
- If it is a public company, the rate should also be disclosed in the prospectus or a
written statement delivered to the CAC.
This Section prevents companies from issuing at a large commission. See Hilder
V Dexter.
Payment for shares: until an allottee pays for the shares and has his name entered
in the register of shareholders, he merely has equitable interest. Payment may be
in cash or in kind248-Oilfield V Johnson. In Spargo’s Case, the debt which the co
owed the allotee was added to his shares. See also Pellatts Case 1867 2 Ch app
527. A company can purchase assets and pay for them in shares-Re Wragg
provided there is no fraud or overstatement of value. Section 130
and 131
Issue of share at a discount: this entails where the consideration received for the
share is lower in value than the nominal amount of the shares. Issue of share at a
discount is forbidden under Section 121 see also Ooregum Gold Mining Co of
India V Roper, Pell’s Case. Notwithstanding authorisation by the memorandum
or articles-Welton V Saffrey, Hilder V Dexter. Except where the issue has been
authorised by a resolution.
- The resolution must specify the maximum rate of discount.
- The resolution must have been passed in the general meeting.
- The resolution must have been approved by the court.
- The issue at a discount must be done within one month of the Court’s approval.
Maximum commission is also pegged at 10 percent

248
Provided the company consents. certain conditions must be satisfied.

- A contract should evince the agreement.

That the consideration received in lieu of cash must be commensurate to the shares received
 Issue of shares at a premium: this entails where consideration received for the
shares exceeds the nominal value of the shares. This enhances the company’s
capital. No restriction. Provided that a sum equal to the premium received on those
shares shall be transferred to the “share premium account”. See Section 120,
Henry Head and Co Ltd V Ropner Holdings Ltd. Generally, the account cannot
be reduced/withdrawn without the leave of the court.
Register of members: Section 83 requires this to be kept in the company’s
registered office or other office where the work of making it up is done. This
register can be inspected by members and non-members-Section 87. An
application may be made to the court for rectification of the register-Section 90.
The court can order for rectification before or during the winding up-Re Sussex
Brick Co.
Share Certificate: should be given to the shareholder for the shares allotted to
him-Section 146. Each member should have at least one share certificate which
evinces shares held by him-Section 147. Oil Field Supply Centre Ltd V Johnson.
Transfer and Transmission of Shares: should be in the manner prescribed by
the Articles-Section 115, Weston’s Case 1868 LR 4 Ch App. 20. “Transfer” is
done voluntarily by the shareholder inter vivos while “transmission” occurs by
operation of the law249. Private companies are mandated to restrict rights to
transfer shares by their articles-Section 22(2) CAMA. Public companies on the
other hand are not mandated to restrict transfer but the directors250 can refuse251 to
register a transfer if it is in the interest of the company-Re Smith and Fawcett Ltd,
Re Bede Steam Shipping Co. Refusal must be communicated within 2 months of
lodging the transfer? Section 153 else fine of 200,000.
Procedure for transfer: See Section 151 and 152. Where the shares are in a
warrant, the delivery of the warrant connotes transfer. Where represented in a
share certificate the following steps are taken:
- The shareholder delivers the share certificate together with a properly executed
instrument of transfer to the buyer.
- The buyer executes the transfer certificate and sends it together with the share
certificate to the company.
- The company may then register the name of the buyer in place of the seller’s
(within 2 months) and issue a new share certificate to the buyer252. It appears
however that where there are more than one buyer or only a part of the share is

249
e.g. on death or bankruptcy of a member.
250
By way of special resolution at a board meeting (only).
251 The courts are hesitant to interfere especially where the articles gave them absolute discretion to reject without need

to state reasons-Berry V Tottenham Hotspur Football Co. However, where the article stipulates grounds, the refusal
should fall within one of the stipulated grounds.
252 A co may be estopped from denying the title the person to whom it issues a share certificate in an action by that

person-Balkis Consolidated Co Ltd V Tumkinson.

 transferred, the old certificate is lodged with the co who then issues new ones (to
the purchaser, then buyer(s)) evidencing the rights therein.
- The co may refuse to register the transferee (buyer/new holder) and communicate
same to the buyer within 2 months. In such case he may be a holder in equity if he
has already paid the transferor(shareholder)-Hardon V Belilios. London
Founders’ Association V Clarke.
See also Section 157.
For forged transfers, the true owner can compel the co to restore his name to the
register-Re Bahia and San Francisco Railway, Co Ltd. The company may then
claim damages from the person who sent the forged transfer.
In Palomi V Palomi the court noted that “usual or common form” for the transfer
certificate is that it must contain some salient info like:
- Name and address of seller.
- Name and address of the buyer such that can be entered into the register of
members pursuant to Section 81 (which requires names of shareholders to be
entered and changes updated).
- The number of issue/securities that are being transferred should be specified in the
instrument of transfer.
- The price or other consideration.
- The insignia of authority… in other words; the signature.
The co may also adopt standard forms with variations to meet their peculiarities
provided these salient features are contained.
For transmission: the deceased’s executors or administrators shall (in claiming
right to be registered in deceased’s stead) produce the letters of administration or
probate to the company. The beneficiary is entitled to have himself registered as
the holder of the shares-Section 155d Tika Tore Press Ltd V Abina.
Pre-Emption Clauses: confers a right to acquire shares of a company before
others can. E.g. “if you want to sell your shares, tell A. If A does not want to buy,
then you can sell to another person. Sha ask A first”. The shareholders or directors
may be given pre-emption rights to take up shares253 and if they don’t want, the
shares can be issued to others. The courts have held that the acceptance must be
unconditional. Noting that the person with pre-emption rights must take up all or
none of the shares offered-Philips V Manufacturers’ Securities Ltd. In Ocean
Coal Co V Powell Duffryn Coal Co, the offer of 135,000 shares was countered
with an offer to take only 5,000. Held that there was no acceptance.

GOING PUBLIC. I.e. where the co wishes the public to invest in it. i.e. the co
offering its securities to the public. This may be done through -direct offer to the
public (i.e. the co goes direct to ask public to invest) or -offer for sale (i.e. through

253
At a fair price to be determined by the directors or auditors.
 an issuing house which offers to the public and bears the risk) or private placement
(through issuing house which offers (not to the public at large) but to specified
investors like insurance companies, pension funds, etc.). It may also be through
electronic offer-Eze Oluchi V Gosord Securities Ltd.
This is serious business and is strictly governed by the Investment and Securities
Act. Therefore, once you are offering to the public/going public, you must comply
with the laid down requirements and procedure.
Just note the following:
:: Section 69 of the ISA tells you about when an offer is made to the public. The
key element is that it is made so generally that the issuer (the company itself) does
not know who the likely recipient is. On the other hand, where the application is
addressed to a person e.g. Mabel, and only Mabel can accept, the co knows it is
addressed to her therefore it is a private offer/placement. A private placement is a
one on one solicitation-Re Government Stocks and other Securities Ltd V
Christopher.
Section 71 ISA mandates that public invitations be accompanied by a prospectus.
A prospectus is broadly defined in Section 567 CAMA but has been narrowed
down in Section 79 ISA by mandating that it must contain certain information
contained in Part I254 and II255 of the Third Schedule to the ISAct See also Rule
288 SEC Rules 2013. Don’t overstress, the summary of the combined
interpretation is that: the information required (in the prospectus) is such that
would sufficiently inform the public about the company.
Professor Abugu has likened these provisions to a marriage proposal where both
parties are required to reveal their true identities as going into a marriage is a
serious business. So also is buying shares in a company.
Section 85 and 86 ISA imposes criminal and civil liabilities for untrue statements
contained in the prospectus. In essence, don’t give falsehood-Similar liabilities can
be found in Rule 292 and 294 SEC Rules 2013.
Note also that the prospectus is registerable with the Securities and Exchange
Commission.

CAPITAL MARKET MANIPULATIONS AND INSIDER DEALINGS.

Section 71. This provision relates to secondary market dealings in Company’s
security.
The Stock Exchange is a market where sellers of shares meet with buyers of shares.
The price at which shares are traded on the market are determined basically by the

254 Like name of co, its object, list of directors and shareholders, branches, performance in the past years.
255
Part 2 mandates certain reports (like the 5 year accounting audited report, director’s report on the health
of the company, expert’s report. These expert reports are usually unimpeachable.
 forces of demand and supply. They should not be manipulated by other fraudulent
and artificial means256.
Section 109-111 of ISA is instructive on this.
In ensuring a level playing field, Section 109 prohibits dissemination of false
information, manipulative tendencies. Section 110 on its part prohibits artificial
and deceptive transactions. Note Section 107 which prohibits false information
that can affect the forces of supply. Section 108 also prohibits the dissemination
of misrepresentation/misleading statements.
Insider Dealings: Section 111 provides; (1) Subject to Section 104 of this Act, a
person who is an insider of a company shall not buy or sell, or otherwise deal in
the securities of the company which are offered to the public for sale or
subscription if he has information which he knows is unpublished price sensitive
information in relation to those securities. This provision also extends to those
that are not insiders- Section 315 but have gotten information from the insider.
This is to prevent him from having undue advantages over other members of the
public. Remember that the law seeks to create a level playing field. Section 112
deals with official insiders. Note however that certain exceptions are contained
under Section 113. Sanctions are imposed under Section 115 and 116.
In conclusion, Section 13 ISA charges the ISC to regulate and ensure the integrity
and principle of fairness in the Securities Market. Section 106(5) too.

WINDING UP AND LIQUIDATION.

Definition of Winding up: Winding up signifies the process by which the existence
of a company is brought to an end. Black’s Law Dictionary sees it as the process
of settling accounts and liquidating assets in anticipation of a corporation’s
dissolution.
Liquidation is the process of determining the liabilities and distributing the assets
of an entity especially in bankruptcy and dissolution.
Winding up and liquidation are synonymous but the latter (liquidation) refers to
settling all obligations by payment to extinguish a debt.
:: The grant of a winding up petition does not ipso facto terminate the life of the
company the company ceases to exist in law only by the formal act of dissolution

256
This requirement is predicated on the “Fool’s Theory”. This theory presumes that everybody in the Stock
Market is a fool. E.g. the seller would say; only a fool would buy this my shares that I am abandoning. While
the buyer would say; only a fool would sell his shares (which is an investment) to me. The reason for this is
that the buyer and seller have information (which may be based on Historical, Present and Speculative
Information) which is only known to them. This results in the “Random Walk” doctrine which means that
the prices/value of shares fluctuate from individual to individual based on information available to them.
Thereby resulting in an unevenly distributed information. What the law then tries to do is to create a level
playing ground.
 which occurs after winding up is completed-Progress Bank Nigeria Ltd V O.K
Contact Point Holdings Ltd.
:: The distinction between winding up and Bankruptcy lies in the fact that the
former applies to companies while the latter is concerned with individuals and only
applies to a debtor who is usually insolvent.
:: The Broad distinction between a liquidator and receiver is that a liquidator is
someone that is appointed to manage the winding up of a company (when the life
of the company is being brought to an end). He gathers the assets to pay off
creditors and shareholders. A receiver on the other hand is one that takes over the
affairs of a co with a view to using the profit derived therefrom to settle the creditor
that had appointed him.
In England the procedure is contained in the English Insolvency Act.
TYPES OR INSTANCES OF WINDING UP:
- By Court (Compulsory Winding Up): See Section 408.
- Voluntary Winding up: Provided under Section 459 CAMA. e.g. where the co
was set up for a particular purpose which has been concluded.
- Winding up under supervision of the court: usually done when some people are
not happy with the way winding up proceedings are being conducted. They then
apply to the court for it (the court) to supervise the winding up process. See Section
407 CAMA.
Jurisdiction for Winding Up by the Court?
It is the FHC (withing the area of the company’s registered or head office) that has
jurisdiction-Section 407(1)CAMA, Section 251(e) of the 1999 Constitution.
Section 407(2)257 defines these. In Medicore Nigeria Ltd V Lasbwares Nigeria
Ltd258, the registered office was in Illorin while the Winding up petition was filed
in the Lagos Division of the FHC. Petition was held to be incompetent. Also, in
IMB V Lomay Nig Ltd. A petition was brought in Lagos whilst the registered
office was in Jos. Petition held to be incompetent.
When can a company be wound up by the Court?
Section 408 provides (the provisions shall be in bold and italicised):
A company may be wound up by the court if‐
(a) the company has by special resolution resolved that the company be wound
up by the court; The meeting where the special resolution was passed should have
been properly constituted (proper quorum) and the resolution should have been
passed by ¾ majority. Lord Dennning in UAC V MacFoy

257
(2) For the purpose of this section, "registered office" or "head office" means the place which has longest been
the registered office or head office of the company during the six months immediately preceding the presentation
of the petition for winding up.
258 1989 FHCLR 280.
 (b) default is made in delivering the statutory report to the Commission or in
holding the statutory meeting; which is in default of Section 211 and 212
CAMA. A contributory (or even creditor) can bring a petition for the winding up
of the co. Note that statutory meeting only applies to public companies. Guardian
Express Bank Plc V Odukwu and Antoher259.
(c) the number of members is reduced below two: Section 18 CAMA requires at
least 2 persons to form a company.
(d) the company is unable to pay its debts: Professor Olawoyin San believes this
to be the most popular provision regarding winding up of a co. Section 409 tells
us what “inability to pay debts” means. In essence when the co is unable to pay its
debt (which must be more than #2,000) after due demand to pay has been made by
the creditor himself260. The co has a grace period of 3 weeks-Unifarm Ind Ltd V
Oceanic Bank International Nig Ltd261. The demand should expressly state the
amount being owned and the required payback period-Capital Investments and
Trust Ltd V 150 Estates Ltd262. For a company, the demand should be sealed and
signed by the authorized officer on the company’s behalf-Tate Industries Plc V
Devcom Merchant Bank263, Also C and I Leasing Plc V Indemnity Finance
Company Limited264.
This Section is not meant to be abused for malevolent intention when the petitioner
is just seeking to recover debt-Air Via Ltd V Oriental Airlines Ltd265 Also the case
of In the matter of Yanju International Motel Ltd266 where the court noted that
doing so would amount to an anomaly.
(e) the court is of opinion that it is just and equitable that the company should
be wound up: under this provision, you need not be saying that the company is
unable to pay its debts. Any person under Section 410 can petition the court to
wind up a company where he can prove that it would be just and equitable to do
so. Ebrahimi V Westbourne Galleries. Note however Section 312 which gives
the court wide discretion to grant alternative remedies where winding up would be
too fatal. See the earlier discussion on Majority Rule and Minority Protection.
General and Aviation Services Ltd V Thahal267. Companhia Brazileria Des
Infrastructura V COBEC Nigeria Ltd268.

259
2009 14 NWLR part 1160 at page 43.
260
Not his agent or representative.
261 2005 3 NWLR Part 91 at page 83.
262 1986 FHC at page 158/156.
263 2004 17 NWLR Part 901 at Page 182.
264 1 FHCL at page 277.
265 2004 9 NWLR part 878 at page 298.
266 1990-1991 FHCR at page 17.
267 2004 10 NWLR part 880. at page 50.
268 2004 13 NWLR part 890 at p 376.
 When can a Company be Voluntarily Wound Up?
Section 457 CAMA provides Any company may be wound up voluntarily‐ (a) when
the period, if any, fixed for the duration of the company by the articles expires, or
the event, if any, occurs, on occurrence of which the articles provided that the
company is to be dissolved and the company in general meeting has passed a
resolution requiring the company to be wound up voluntarily; (b) if the company
resolves by special resolution that the company be wound up voluntarily and
references in this Act to a "resolution for voluntary winding up" means a
resolution passed under any of the paragraphs of this section.
This resolution must be published in a Gazette within 14 days of making the
resolution-Section 458. The voluntary winding up shall be deemed to commence
from the time the resolution is made-Section 459 CAMA.
Note also that the BOD must pass a declaration of solvency before the co can
resolve to be wound up. Declaration of solvency means that it has enough money
to pay its debts and meet up with liabilities-CAC V Davies269.
A liquidator is then appointed with powers to do such things as he can to ensure a
smooth winding up and settlement of claims-Section 425 CAMA.
LEGAL CONSEQUENCE OF WINDING UP.
1. The directors power of management lapses while the liquidators take over.
2. The company is divested of the beneficial ownership of its assets.
3. No action can commence against the co without the leave of the court.
4. The employees of the co are ipsofacto dismissed.
5. The co maintains it corporate status and powers until a formal act of dissolution
by the court.

CASE REPORTS FOR WINDING UP AND LIQUIDATION.

ADAMU MOHAMMED GBEDU V JOSEPH I. ITIE. 2010 10 NWLR PT 229
CA. gbedu V itie
Facts: 3rd Respondent petitioned for a winding up on 18th March 2005 on the
grounds of the 2nd Respondent’s inability to pay debts. The following principles
were reiterated:
- The making of a winding up order meant that the servants/employees of the 2nd
respondent were ipso facto dismissed.
- Upon the order of winding up, the Liquidator’s powers supplants the power of the
Board of Directors.
Held: Reliefs granted. Liquidator (1st respondent) appointed.

269
2008 1 NWLR part 1067 at page 60.
 MOS ENGINEERING SERVICES LTD V FOOTWEAR AND ACCESSORIES
MANUFACTURING AND DISTRIBUTION PLC. 2010 4 CLRN FHC.
Facts: The appellants (MOS Engineering Services Ltd) commenced a winding up
proceeding against the respondent (Footwear Accessories Manufacturing and
Distribution) by filing a petition at the FHC. The respondent filed a preliminary
objection noting that the financial officer who signed the petition was not a
principal officer within the contemplation of the law.
The principles Reiterated Include:
- A winding up petition made by a company must be verified by an affidavit made
by the company’s director, secretary or other principal officer or agent of the
company. (Relying on Rule 18(1) Companies Winding Up Rules 2004, Re Farmart
Produce and Shipping Line, Melwani V Feed Nation Industries Ltd, Section 77
and 650 CAMA, SPDCN V Alla PUFA).
- Rules of courts cannot override statutory provisions. “they are mere handmaids for
a smooth administration of justice” Okaroh V State.
Held: Finance officer can pass as principal officer. Therefore, objection overruled
(i.e. Held in favour of the petitioner).

OCEANIC BANK INTERNATIONAL NIGERIA LIMITED V SUNGOLD

INTERNATIONAL LIMITED. 2007 2 CLRN HC.
Oceanic bank commenced a Winding Up proceeding (on 13th August, 1996)
against Sungold Int. on the ground that the company had become insolvent and
unable to pay debt.
- Nwodo J: The petitioner must establish that there is in fact a particular sum being
owed as debt. The petition must be brought in good faith. In this case, the petitioner
failed to prove these therefore the petition was incompetent. (Relying on Hansa
Inter Construction Ltd V Mobil Producing Nigeria, Oriental Airlines Ltd V Air
Via Ltd, Onocie V Alan Dick and Co).
- Where the debt is disputed, the court cannot proceed until the debt is ascertained
(Relying on Weide and Co Nigeria V Weide and Co Hemburg and Hansa
International Construction Ltd V Mobil Producing Ltd). Notwithstanding that in
this case, the Chairman had offered to use his personal property to repay because
of threats of arrest and detention by using military.
 TATE INDUSTRIES PLC V DEVCOM MERCHANT BANK LIMITED. (2004)
17 NWLR (PT 901) 182 CA.
Facts: Winding up petition filed on the grounds that the appellant was unable to
pay 48,498, 672.47k being owed to the respondent. The debt was incurred by
overdraft facilities granted to the appellant which the appellant was unable to pay
despite repeated demands. The appellant however contended that he has paid
9million as partial fulfilment and by agreement, the respondent conceded to forego
45 percent of the interest. He also noted that they have not been able to work out
the real balance of the loan since then.
Trial Court Held: For the respondent. (I.e. That the appellant be wound up).
Court of Appeal: (Quoting Section 77, 408 and 409 CAMA and heavily relying
on Oriental Airlines Limited V Air Via Ltd). Highlighted the following principles:
- A winding up order (though not a mere remedy for the recovery of debt only) is
predicated on a debt being owed. When a debt is disputed (as in this case), an order
for winding up would not be made. The dispute about the debt amount should first
be resolved before the court can proceed to consider the winding up petition.
- A demand for the debt owed must be made by the creditor himself not his agent.
For a company, it would suffice if the demand is made by persons so authorised
and signed with the seal of the company. In this instant case, the demand letter was
not written by the creditor himself but his solicitor.
- Winding up is a very serious matter and requires strict compliance-Jaber V Basma,
Warner V Warner International Associates, Nigerian Breweries V Adetoun
Oladeji.
Held: non-compliance with the above rendered the petition incompetent.

PROGRESS BANK OF NIGERIA PLC V O.K. CONTACT POINTS

HOLDINGS LIMITED. (2008) 1 NWLR (Pt. 1069) 514 CA.
Winding up petition brought also… The following principles were laid:
- The fact that a winding up has been decreed or a liquidator has been appointed
does not automatically mean that the company is dead. “it is alive but perhaps
sick… it can sue and maintain an action in court but no action or proceeding can
be brought against it except with leave of the court”. (At page 517 relying on Co-
operative and Commerce Bank Plc V Mbakwe).
- It is only when the affairs of a company have been fully wound up and the
liquidator intimates the court in that regard that the court shall order the
“dissolution” of the company. “A company dies once the court orders the
dissolution of a company”-(at page 518 relying on Section 454(1) Nzom V
Jinadu).

ADO IBRAHIM AND CO LTD V BENDEL CEMENT COMPANY LIMITED.

(2007) 15 NWLR (Pt. 1058) 538 SC.
Facts: The appellant filed a petition in 1995 for winding up of the respondent. The
appellant averred that it held 20 percent of the share capital of the respondent while
the government of former Bendel had 80 percent. The appellant averred that it later
acquired the respondent’s shares. It further averred that since it acquired the
respondent’s shares in 1976 it had not been paid any dividend because the
respondent operated at a colossal loss. The respondent filed a counter affidavit that
it had always declared profit whenever any profit was made.
At Trial Court: Since the debt was in dispute and uncertain, the petition was
incompetent. At Court of Appeal: The trial court’s contention was upheld and was
also confirmed at the Supreme Court. (relying on Section 408, 410). It suggested
that the appellant could have brought the petition as a contributory as in the
Ebrahimi’s case rather than on the basis of a debt being owed. However, a party
would not be granted a relief it did not seek.

GENERAL AVIATION SERVICES LTD V CAPTAIN PAUL THAHAL (2004)

10 NWLR (PT. 880) 50 SC.
Respondent petitioned for winding up of the appellant on the ground of oppression
by his co shareholder (the managing director of the appellant company) who has
been running the business as his private business to the exclusion of the
respondent. The respondent also alleged that the MD was dissipating resources
and members of his family occupied top posts. He also changed the name of the
Co from General Aviation Services to Gen Air.
The Respondent thus petitioned that it would be just and equitable to wind up the
company on the basis of the alleged oppression.
The managing director (appellant) filed a counter affidavit denying the allegation
and alleging that he tried to encourage participation of the respondent and served
notices of meetings.
The trial court (holding for the respondent) granted the orders sought and this was
affirmed at the Court of Appeal. At the Supreme Court where the following were
laid out:
- The affidavit contained bare allegations not supported/established by facts or
documents as required by Rule 21 of the Companies Winding Up Rules 1983.
- In winding up matters, the court is to act with circumspection… the appointment
of a liquidator by the trial court was uncalled for.
- A judgment given in contravention of the law or without jurisdiction can amount
to a nullity-Madukolu V Nkemdilim.
Held: decisions of the trial and Court of Appeal overturned.

AIR VIA LTD V ORIENTAL AIRLINES LTD. 2004 0 NWLR PT 878 298 SC
The appellant filed a petition at the Federal High Court Lagos seeking for the
respondent company to be wound up on the ground that it was unable to pay its
debt of USD $823, 545. The respondent however averred that it was the appellant
that was indebted to him to the tune of USD $100,280.
The trial court held for the appellant while the Court of Appeal struck out the claim
since the debt was disputed (i.e. it held for the respondent). The appellant was
dissatisfied and appealed to the Supreme Court.
The Supreme Court noting the following: (that)
- There must have been a demand for the debt which the debtor can respond to by
admitting the debt, denying the debt, counter claiming or setting off the debt…
and in this case, the dispute as to who owes who ought to be resolved first before
a petition for winding up can be filed. The fact that the respondent had paid part
of the debt does not translate to proof of indebtedness.
- The court should not hastily grant an order winding up a company-Union Bank of
Nigeria Ltd V Tropic Foods Ltd.
Held: Appeal Struck out.

COMPANHIA BRASILERIA DE INFRASTRUTUTIRA V COBEC NIG LTD.

(2004) 13 NWLR (Pt. 890) 379 CA. The following were noted:
- A foreign company can sue and be sued in Nigeria provided it was duly registered
and incorporated according to the laws of a foreign state recognised in Nigeria-
NBCI V Europa Traders Ltd.
- The court may refuse a winding up petition where there is an alternative and more
reasonable remedy.
 UNIFAM INDUSTRIES LTD V OCEANIC BANK INTERNATIONAL NIG
LTD.
Respondent filed a petition for winding up dated 20th June 2003 against the
appellant on grounds that the appellant was unable to pay its debt of
#25,941,308.41k plus yearly 38 percent interest. The appellant had already filed
an application on the same ground in April 2002 in the High Court of Abia. The
petition was struck out for being an abuse of court process. Relying on CBN V
Ahmed, African Reinsurance Corp V JDP Construction (Nig.) Ltd, Saraki V
Kotoye, Fasakin Food (Nig) Co. Ltd V Shosanya.

GUARDIAN EXPRESS BANK PLC V BENEDICT OKWUEZE ODUKWU.

1ST respondent at the FHC filed an application for winding up on the basis that the
appellant did not hold the required statutory meeting after six months of
incorporation and they cannot hold the meeting without seeking the leave of court
and the statutory report of the company were not properly certified by the
appellant’s auditors so as to meet the requirements of Section 212 and 211 CAMA
respectively.
The trial court granted the reliefs being sought. Upheld at Court of Appeal and
Supreme Court.

COMMERCIAL BANK (Credit Lyonnais Nig. Ltd.) V Rose Okoli

Sequel to the direction by CBN that banks attain a minimum share qualification of
#25billion, the applicant (a commercial bank) was taken over by Capital Bank
which was subsequently taken over by Access Bank Plc. Meanwhile the applicant
had a pending suit.
- A company taking over is fully empowered to deal with the issues pertaining to
the company that has been taken over-NDIC V FMB Ltd, NDIC V Okem
Enterprises.
Held: Access bank was entitled to be substituted in the pending suit of the
appellant.
NIGERIA DEPOSIT INSURANCE CORPORATION V MOHAMMED SABO
SHERIFF.
Successors in interest/administrators of a deceased creditor’s estate can claim the
debt being owed.
 PARTNERSHIP
Partnership in Nigeria is regulated By:
- Common law rules:
- Rules of equity.
Statutory Enactments: like the UK partnership Act 1890270, 1999 constitution
(provided for in the Concurrent Legislative List), Partnership Laws of the various
states), 1990 CAMA: (Section 19 which mandates registration when parties are
more than 20 excluding lawyers and accountants), State Laws: Like the Lagos
State Partnership Law CAP P1 Laws of Lagos State of Nigeria 2015. This law
consists of 83 Section divided into 5 main parts.
:: A partnership is a relationship between two or more persons who carry on
business271 in common272 with a view to make profit273-Section 3 Partnership
Law of Lagos274. In Smith V Arnesen, it was defined as a participation which is
devoid of a legal entity. A partnership is an association built on trust and
confidence.
Each partners are both agents and principals of one another at the same time. This
is unlike the conventional agency relationship where it is easy to decipher the agent
from the principal.
:: The mere fact that two or more are joint tenants or tenants in common or two or
more are to share profits from an undertaking does not create a partnership-Section
4 PL, Cribb V Korn Nor does granting of loan, proft , remuneration of servants
fro business engaged in or child receiving annuity or deferred creditors. The most
important thing is the intention of the parties-Ford V Conber
:: Partners are collectively known as a firm.
:: The Partnership Legislations govern partnership. The various States have their
partnership laws… The Eastern and Northern States use the Partnership Act
1890.
:: Partnership is a matter on the Concurrent Legislative List275.

270
which is a Statute of General Application.
271 Smith V Arnesen.
272 Lang V James Morrison and Co Ltd.
273 Re Spanish Prospecting Co Ltd. The profit is shared in determined proportion.
274 A similar definition is provided in Section 1 of the UK Partnership Act. See also Section 558 of the

CAMA which defines a firm as a partnership. The word “partnership” is however not defined in CAMA.
275 Unlike the regulation of Companies which is in the Exclusive Legislative List.
 :: Partnership property is separate and not that of a partner. Therefore, it cannot be
used to offset a partner’s debt. However a partner’s interest in the partnership can
be charged to execution of debt-Section 25 PL.
:: The partners are agents276 of one another and agents of the firm when transacting
partnership business. Section 7 and 9. They are accountable to the one another
and the firm. A partner can sue another partner who breaches the partnership
agreement. This should be done timeously-Section 15 PL
Section 25 PL provides the following:
- A partner is entitled to be indemnified for his personal liability incurred in the
execution of partnership business/endeavours.
- Each partner is entitled to partake in the management of the business.
- Partners are generally not entitled to remuneration.
- All existing partners must consent277 before the terms/nature of the partnership
agreement can be varied.
- In ltd partnership no member can be introduced without the consent of other
partners.
- Partnership books must be kept at firm’s principal place of business.
A partnership may be terminated/dissolved
- On the expiration of the fixed term (where any).
- When the purpose/venture for which it was set up has been
accomplished/terminated.
- When a partner seeks to dissolve the partnership after notifying others-Section 33.
- When the business becomes unlawful.
- When a partner dies or goes bankrupt-Section 34-36, Wood V Woad.
- Where there are only two partners and one partner is expelled, the partnership
automatically comes to an end.
LIMITED PARTNERSHIP: This (to some extent) fuses limited liability with the
concept of partnership. A Limited Partnership consists of more than 20 persons
who are either general278 or limited partners279. The LP should be registered with
the Registrar of Limited Partnerships. If there is no registration280, the LP becomes
GP. Note that LPs do not have a separate legal personality and the death or

276
Actual, apparent or ostensible authority
277
Implied, constructive or express
278 With unlimited liability. They (or he) shall be concerned with the management and administration of the

partnership.
279 Who shall only be liable to the amount they have contributed at the time of entering the partnership.
280 Registration is to be done with the registrar of LPs
 bankruptcy of a partner does not serve as a ground for dissolution of the
partnership.
The limited partner’s influence and importance is restricted. E.g.
- He should not be involved in the management of the partnership business else he
would be regarded as a general partner.
- He should seek the consent of the general partners before assigning his interest.
- His consent is not needed when a new partner is sought to be introduced.
- He cannot dissolve the partnership by notice-Section 40-50 Partnership Law Of
Lagos.
The difference between the GP and LP is that in the LP there must be at least one
general partner on whom liability rests.
LIMITED LIABILITY PARTNERSHIP: recently introduced281 by the
Partnership Laws of Lagos State by Partnership Amendment Law 2008 (See
Sections 58-84).
:: Under the LLP, partners can limit their liabilities282 but there must be at least
one partner with unlimited liability.
:: The LLP has a separate personality and property… it can sue and be sued-
Section 58 LLPLLagos.
:: Each partner is an agent of the partnership but not of one another.
:: The LLP should be registered at the Limited Partnership Registry of the State
and “LLP” should appear at the end of its name-Section 59.
:: Unlike under Limited Partnership, under LLP, a partner with limited liability
can take part in the management of the business.
:: There shall be “designated partners283” responsible for the administrative
functions… they shall communicate with and keep the LPP Registry up to date
with changes in the LLP. The designated partners shall also prepare and deliver
annual returns, and act on behalf of the partnership in winding up or dissolution
processes.
The Business liability should also be insured, the LLP should register each
mortgage or charge it creates within 6 days else void.

281
This form of partnership has been in existence in the USA.
282
Such liability can become unlimited where the partner acted in his/her personal capacity or where there
has been fraud, misrepresentation, etc- Section 58 and 72 of the Partnership Law (as amended)
283 Not less than 2 in number. Else, every member of the partnership shall be deemed to be a designated

partner-Section 70.
 Where the partnership is dissolved, the registrar should be notified within 14 days.
:: A partner may cease to be so if
- He resigns after giving reasonable notice to the other partners. Such resignation
shall take effect after the notice has been communicated to the Registrar.
- He dies, goes bankrupt or wound up284 or his estate is levied with execution or he
grants a trust deed for the benefit of his creditors or assigns his share in the LLP
to another.
Section 70 which mandates llps to maintain a professional or business liability
insurance cover against stealing, fraud and dishonesty.
Unlike LPs, LLPs enjoy tax advantages under the cita.

BUSINESS NAME.
Dealt with under Part B of the CAMA. Section 588 provides; "business name",
means the name or style under which any business is carried on whether in
partnership or otherwise.
When to Register Business Name: a business name that is not the full name,
surname, and (or) initials, or surname of the business owner (s) must be registered
within 28 days of commencing business. See Section 573 and 574 CAMA.
A company would be required to register its business name where there is an
addition or substraction to the company’s registered name. that is where the name
in the CAC register is not exactly the name it uses to carry on business. E.g.
Etisalat is known as Etisalat. But in the Companies Register, it is Etisalat
Communications Nigeria Limited. That name Etisalat should be registered.
Registration also NOT needed if a business is carried on by Receiver or manager
appointed by court (just add in receivership to the name) or addition merely
indicates that the business is carried on in succession (just add under new
Management to the name).
Section 574 provides the procedure:
Requisite particulars should be furnished to the Registrar at the Registry in the
state where the principal place of the firm’s business is-Section 574.
Upon receipt, the registrar is to enter the information in the register-Section 575.
The registrar shall then issue a crertificate of registration in this regard-Section
576 after the payment of requisite fees-Section 577, the name may be removed in
deserving circumstances (like where the registered holder neglects to commence
business or the partners are dead-Section 578. Certain names (like Federal,
National, etc.) are prohibited and restricted under Section 579 CAMA.

284
In the case of an individual and co respectively.
 REGISTERED/INCORPORATED TRUSTEE`
Section 590 (1) Where one or more trustees are appointed by any community of
persons bound together by custom, religion, kinship or nationality or by any body
or association of persons established for any religious, educational, literary,
scientific, social, development, cultural, sporting or charitable purpose, he or they
may, if so authorised by the community, body or association (in this Act referred
to as "the association") apply to the Commission in the manner hereafter provided
for registration under this Act as a corporate body. (2) Upon being so registered
by the Commission, the trustee or trustees shall become a corporate body in
accordance with the provisions of Section 679 of this Part of this Act.
Section 591 provides for the procedure for registration. Which should be
accompanied by the constitution of the trust, the name of the secretary of the
trust/association.
Section 591 also mandates that the name of the entity should start with
“Incorporated Trustees of”…
What is a registered Trust? Set up to further a purpose which is usually of a public
character. Like educational, scientific, ecclesiastical or other charitable purposes.
Trustees are appointed to further the purpose.
Registered Trusts/trustees are regulated by the CAMA (Part C, Section 26),
Trustees Act. Trustee Investment Act 1962, Internal rules and Bye Laws, Common
Law and the Doctrines of Equity.
There should be at least 6 trustees to effect the purpose of the Registered Trust-
Section 18.
Legal Status: Section 596: provides that it is a body corporate with perpetual
succession and common seal having power to sue and be sued. It can hold and
transfer property. In essence, it is a legal entity. But the legal entity is vested in the
trustees who are to sue and be sued on behalf of the trust. See NBA V Gani
Fawehinmi.
Qualification to act as trustee: Section 592 must not be: -an infant, -of unsound
mind, -an undischarged bankrupt, - convicted of an offence involving fraud or
dishonesty within 5 years of his proposed appointment.
DUTIES AND RESPONSIBILITIES OF THE REGISTERED TRUSTEE.
The duties and responsibilities are quite onerous. He is expected to:
- Gather the trust property and confirm the veracity of the trust instructions.
- Carry out the objectives of the trust in accordance with the terms of the trust. He
can obtain legal advice where ambivalent-Nestle V National Westminster Bank.
- Exercise reasonable care and prudence in administering the trust: In Re
Waterman’s Will Trust, the court noted that trustee’s diligence should be that
which a prudent businessman would employ in managing his own affair. Where
he is a paid trustee, a higher standard would be expected285.
- Duty to protect the trust property and keep it safe in the interest of the association.
He also has a host of other Fiduciary Duties which include:
- Loyalty and accountability: he should keep and render proper accounts to the
Association and CAC. He should not make secret profits, nor let his interest
conflict with that of the trust-Okesuji V Lawal where the trustee renewed trust
property’s lease in his own name. See also-Re Barber286. In Re Gee the court held
that where trust shares gives the trustee higher voting rights to be appointed as
director, he would have to surrender his salary (gotten from that position) to the
trust.
- He is to treat trust information as private and confidential.
- He should also be impartial in administering trust affairs.
- Duty to act gratuitously as a volunteer-Robinson V Pette287 In Bray V Ford288 the
court noted that he is under a duty not to make profit. Exceptions:
o Where the terms of the trust provide otherwise.
o Where he delegates his duty to a third party, he may prescribe reasonable and just
remuneration for the delegate-Section 603 CAMA.
o He should be reimbursed for out of pocket expenses (where he uses his own
personal money)-Section 603(2b)
o A reasonable289 fee should be paid for services rendered-Section 603(2b).
- Duty to invest: So as to make it productive-Re Power. In Trustees of the British
Museum V AG, the court held that such investments must be authorised by the
Trustee Investment Act or the Trust instrument.
- Duty not to delegate his duty: except it is a matter requiring expertise. He must
exercise due care and skill in selecting his delegatee and constantly supervise the
delegate to ensure conformity with the terms of the trust.
The liability of the trustees is several rather than joint290-Section 12 TA. Except
the breach or wrongdoing occurred as a result of his neglect or default.

285
The duty and care which a specialist would employ.
286
(1886) 34 Ch.D 77 at 81.
287
1873 24 ER 1049
288
1896 A.C. 44 at 51.
289 In determining reasonableness for remuneration, the court would look what the trustee did, the skill and

time required to do it, the level of compensation paid to others rendering the same services in similar
foundation/organizations of similar size.
290 This means that the trustee is accountable only for his own default and not the default of his fellow trustee

or administrator.
Dissolution of Trust is provided in Section 608 CAMA. The trustee can apply that
the registered trust be dissolved. Not less than 50 percent of memmbers can sign
that they want to dissolve. Also the CAC. Grounds for dissolution: Section 608(2).
By performance, expiration of period, illegality of trust, or trust is contrary to
public policy on just and equitable grounds.