COMPANY LAW AND PRACTICE

COURSE OUTLINE

 CORPORATE AFFAIRS COMMISSION (CAC)

 FORMATION OF A COMPANY
– Taking instructions from the client.
– Preparation of the incorporation documents.
– Filing and Registration at the CAC.
– Effect of Incorporation.
 3. ALIEN PARTICIPATION IN BUSINESS
 Right of foreigners to do business in Nigeria.
 Procedure for alien participation.
 Permits and Approvals for alien participation.
 4.RELIEFS AND INCENTIVES FOR DOING
BUSINESS IN NIGERIA
 5.ALTERATION OF MEMORANDUM AND
ARTICLES OF ASSOCIATION.
 6.CONVERSION AND RE-REGISTRATION
OF COMPANIES.
 7.PRELIMINARY MATTERS BEFORE
COMMENCEMENT OF BUSINESS.
 Promoters
 Nature of Company Contracts.
 Pre-incorporation Contracts.
 8.DIRECTORS
 9.SECRETARY
 10. MEMBERSHIP OF A COMPANY.
 11. MEETINGS AND PROCEEDINGS
OF A COMPANY.
 12. QUORUM FOR MEETINGS.
 13. RESOLUTIONS
 Ordinary
 Special
 14. MAJORITY RULE AND MINORITY
PROTECTION
 15. COMPANY SECURITIES
 Shares
 Debentures (loans)
 16. PUBLIC ISSUE OF SECURITIES
 17. FINANCIAL STATEMENT AND
AUDIT
 18. ANNUAL RETURN
 19. UNIT TRUST
 20. RECONSTRUCTION AND
AMALGAMATION OF COMPANIES
 Arrangement on Sale of Company’s Property
– Section 538 of CAMA
 Arrangement and Compromise – Sections
539 – 540 of CAMA.
 Merger.
 Take Over.
 21. WINDING UP
 PART B
 22. PARTNERSHIP AND
REGISTRATION OF BUSINESS NAME
 PART C
 23. INCORPORATED TRUSTEES
HISTORY OF COMPANY LAW IN
NIGERIA

 Strictly speaking, there was no local company’s statute in

Nigeria before 1912. The English Common Law, the Doctrines
of Equity and the Statute of General Application in so far as
they applied to Company Law were made applicable in Nigeria
and have since formed part of Nigerian Company Law subject
to any later relevant local statutes, for example, the concept of
separate legal personality as stated in the case of SALOMON
V. SALOMON (1897) AC 22, the doctrine of ultra vires as
stated in the case of ASHBURY RAILWAY CARRIAGE AND
IRON COMPANY V. RICHE (1875) LR 7HL 655 which has now
been modified when so received.
 The first attempt to promulgate local company
legislation was made in 1912 when Companies
Ordinance of 1912 was promulgated. This law was
based on the UK Companies Act of 1908, which was
then the current Companies Statute in England. The
Ordinance applied only to the Colony of Lagos until
1917 when it was amended and extended to apply to
the whole country by Companies Ordinance
(Amendment and Extension) Ordinance of 1917.
 In 1922, the previous Ordinances were
repealed and replaced with the Companies
Ordinance of 1922. This Ordinance was
subsequently amended in 1929, 1941 and
1954.
 In 1963, the 1922 Ordinance (as amended) was
re-designated “Companies Act” and continued in
operation until it was repealed and replaced by the
Companies Act of 1968. The 1968 Act was
remarkable in certain aspects. For example, it made
provisions for accounts and encouraged greater
accountability and more effective participation of
shareholders in the affairs of the company.
 Nevertheless, it was still found to be
inadequate for so many reasons as a result
of which the Nigerian Law Reform
Commission was directed to undertake a
review and reform of the Nigerian Companies
Law in 1987.
 The Law Reform Commission examined the existing Company
Law in Nigeria and the UK, the relevant Common Law and
Doctrines of Equity alongside laws of several foreign countries,
like Canada, India, Australia, Ghana et cetera. The Report of
the Commission was considered by the Consultative Assembly
on Company Law in 1988 and subsequently the Companies
Act of 1968 was reviewed and repealed and replaced with the
Companies and Allied Matters Decree of 1990 (No. 1 of 1990)
which took effect from 1st January 1990 and which was later to
be found in Cap 59 LFN 1990 as Companies and Allied Matters
Act (CAMA) which is also later referred to as Companies and
Allied Matters Act (Cap. C.20) LFN 2004.
The major reforms made by CAMA
include the following:

 Codification of Common Law Rules and

equitable principles and modification of
same, where necessary, for example, the
doctrine of ultra vires, provisions relating to
promoters, existing laws pertaining to pre-
incorporation contracts were modified.
 The Act now incorporates Table A of the
Companies Act, 1968.
 Provisions for Special Units like Business
Names and Incorporated Trustees are now
contained in the Act.
 Provision was made for the Corporate
Affairs Commission (CAC).
 The CAC was established as a distinct unit to
administer the CAMA. Before the enactment of
CAMA the administration of Companies Act was
vested in the Companies Registry which was a unit
within the Federal Ministry of Trade and which made
the administration of Companies Act to be slowed
down by unnecessary bureaucracy. The Corporate
Affairs Commission has its Headquarters in Plot 565
Ndola Square, Wuse Zone 5 Abuja.
 Section 7(1)(b) of CAMA enjoins the
Commission to set up an office in each State
of the Federation. The Commission has
zonal offices now in the following States:
 Abuja, FCT – Headquarters.
 Asaba, Delta State.
 Benin, Edo State.
 Calabar, Cross River State.
 Enugu, Enugu State.
 Ibadan, Oyo State.
 Ikeja, Lagos State.
 Jos, Plateau State.
 Kaduna, Kaduna State.
 Kano, Kano State.
 Maiduguri, Borno State.
 Makurdi, Benue State.
 Owerri, Imo State.
 Port Harcourt, Rivers State.
 Uyo, Akwa Ibom State.
 Yola, Adamawa State.
 Section 2 of the Act provides that the
Commission shall consist of 15 members
with the Chairman appointed by the
President. The Registrar-General must have
at least 10 years post-call experience.
Section 7 of the Act sets out the functions of
the Commission and they are:
 To administer the Act including the regulation
and supervision of formation, incorporation,
registration, management and winding up of
companies.
 To establish and maintain a Companies
Registry and offices in all the States of the
Federation.
 To arrange and conduct investigations into the affairs
of any company where the interest of shareholders
and the public so demands.
 To perform such other functions as may be specified
by any Act or other enactments.
 To undertake such other activities as may be
necessary or expedient for giving full effect to the
provisions of CAMA.
CODIFICATION OF NIGERIAN
COMPANY LAW

 The Nigerian Company Law is essentially

codified in the sense that the entire Chapter
17 as it appeared in the 1990 Companies
and Allied Matters Act (CAMA) has been
omitted from the Act and re-enacted under
the Investments and Securities Act (ISA),
Cap 124, Laws of the Federation of Nigeria,
2004
 There are three functional parts of CAMA.
They are:
 PART A
 Part A deals with the incorporation,
management and winding up of companies
in Nigeria.

 PART B
 Part B deals with registration, management and
dissolution of sole proprietorship and partnership.
 PART C
 Part C deals with Incorporated Trustees. These
are non-profit oriented outfits.
 The Investments and Securities Act (ISA) deals
with securities in respect of merger, takeover,
acquisition of unit trust, public offer and sale of
shares, international agency agreement and
intellectual practice.
ACCREDITATION OF PROFESSIONALS

 In order to allow for the efficient execution of

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

 In respect of which part of CAMA do you

require accreditation?
ANSWER

 It is only in respect of Part A. You do not

need accreditation with respect to other
parts, that is, Parts B and C.
PROCEDURE FOR ACCREDITATION

 A person applying for accreditation must

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

 Section 18 of CAMA provides that any two or

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

 The exceptions are with respect to the

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

 Taking instructions involve obtaining

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

 Where the name is available, it will be

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

 PROHIBITED NAMES – (SECTION 30 OF

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

 No company may be formed with the

following names except the CAC consents to
it:
 Name that includes the words such as
“Federal”, “National”, “Regional”, “State”,
“Government” or such other names that may
suggest government patronage, for example,
“Ministry” or “Government Department”.
 Names that contain the words such as
“Municipal” “Chartered” or suggest any
connection with municipality or local
authority.
 Names containing the words “Co-operative”
or “Building Society”.
 Names that contain the words “Group” or
“Holding” unless the permission of the CAC
has been obtained.
CAPACITY TO FORM A COMPANY –
(SECTION 20 OF CAMA)

 Section 20 of CAMA provides that an individual shall

not be eligible to incorporate a company if:
 he is less than 18 years of age, unless there are two
other persons of “full age and capacity” who have
already subscribed to the Memorandum of
Association of the company.
 A person who is of unsound mind and has been so
found by a Court in Nigeria or elsewhere.
 A person who is an undischarged bankrupt,
and
 A person who is disqualified under Section
254 of the Act from being a Director of a
company – having been convicted.
 Section 20(3) of the Act also provides that a
corporate body in liquidation shall not join in
the formation of a company under the Act.
 Section 20(4) of CAMA provides that an alien
may join in the formation of a company
provided he complies with the provisions of
any enactment regulating the rights of aliens
to engage in business in Nigeria.
ALIEN PARTICIPATION

 For example, Sections 19 and 20 of the

Nigerian Investments Promotion Council Act
provide that before an alien can join in the
formation of a company in Nigeria, he is
required to register with the Council, among
other requirements, failing which such an
alien will lack capacity as provided under
Section 20(4) of CAMA.
CLASSIFICATION OF COMPANIES

 There are three classes of companies. They

are:
 CHARTERED COMPANIES
 These are companies incorporated by the
grant of a Charter by the Crown under the
Royal Prerogative or a special statute, for
instance, BBC in England. In Nigeria, we do
not have such companies.
 2. STATUTORY COMPANIES
 These are companies incorporated by an Act
of Parliament or a National Assembly and are
normally formed to carry out special public
duties, for instance, the Federal Mortgage
Bank.
 3. REGISTERED COMPANIES
 We have Registered Companies incorporated under
the Companies Act. This is the most common type
of companies in Nigeria today and the most suitable
business organisation for running an investment for
profit.
 For the purpose of our lecture, we shall be
concerned mainly with registered companies.
 Basically there are three types of companies
provided in Section 21(1) of CAMA. These are:
 Company Limited by Shares.
 Unlimited Company and
 Company limited by guarantee.
 Any of these three companies may either be
a private or public company. From this, this
picture will emerge:
 Public Company limited by shares.
 Private Company limited by shares.
 Public Company limited by guarantee.
 Private Company limited by guarantee.
 Public Unlimited Company and
 Private Unlimited Company.
IMPLICATIONS OF EACH COMPANY
COMPANIES LIMITED BY SHARES –
(SECTION 21(1)(A) OF CAMA)

 When it is said that a company is limited by shares, it

means that the liabilities of the members of the
company is limited to the amount unpaid on the
shares held by the Members. Liability attaches only
to members and not to the company.
 This type of company is used for business purposes
and they constitute the largest type of registered
companies.
 The limitation of liability enables the shareholder to
determine his level of involvement in a company
immediately the shares are taken.
UNLIMITED COMPANIES – (SECTION
21(1)(C) OF CAMA)

 This is a company where the liabilities of

Members of a company, whether private or
public, are unlimited, that is, members of the
company may be personally liable for the
debts of the company.
 This feature makes it unattractive for
business purpose. Unlimited company may
be used for working a patent or oil
prospecting.
PRIVATE COMPANIES – (SECTION
22(1) OF CAMA)

 According to Section 22(1) of CAMA, it is a

company in which it is stated in its
Memorandum of Association that it is a
private company. It must by its Articles of
Association restrict the transfer of its shares.
 Section 22(3) of the Act provides that the
total number of its members of a private
company must not exceed 50
CONSEQUENCES OF DEFAULT IN COMPLYING WITH
CONDITIONS CONSTITUTING A PRIVATE COMPANY –
(SECTION 23 (1) AND (2) OF CAMA)

 A private company is prohibited from inviting the public

to subscribe to its shares or debentures or to deposit
money for a fixed period or payable at call whether or
not there is interest unless it is authorised by law. See
Section 22(5) of CAMA. Where a private company
fails to observe this provision, it ceases to be entitled
to the privileges conferred on a private company as
such. Example of these privileges may include:
 Exemption from Statutory Meeting.
 Simpler mode of appointing over-aged
directors.
 Passing of a formal written resolution.
 The minimum share capital of a private
company is N10,000 as opposed to
N500,000 in the case of public companies.
PUBLIC COMPANY – (SECTION 24 OF
CAMA)

 Section 24 of CAMA provides that a public

company is one other than a private
company and its Memorandum of
Association shall state that it is a public
company. Note, however, that a private
company may be re-registered as a public
company, vice versa.
SMALL COMPANY – (SECTION 351 OF
CAMA)

 According to Section 351 of CAMA, a

company may qualify as a small company in
a year if for that year the following conditions
are satisfied:
 It is a private company having a share
capital.
 The amount of its turnover for that year is not
more than N2 million or such amount as may
be fixed by the CAC.
 Its net assets value is not more than N1 million or
such amount as may be fixed by the CAC.
 None of its members is an alien.
 None of its members is a Government or a
Government corporation or agency or its nominee,
and
 The directors between them hold not less than 51
per cent of its equity share capital.
HOLDING COMPANY – (SECTION
338(5) OF CAMA)

 A company shall be deemed to be the

holding company of another if the other is
its subsidiary.
 A company shall be deemed to be a
subsidiary of another company if:
 The company -
 is a member of it and controls the composition of its
Board of Directors; or
 holds more than half in nominal value of its equity
share capital.
DISTINGUISH BETWEEN PRIVATE COMPANIES
AND PUBLIC COMPANIES

 1. A private company can allot its shares

without any external control by the Securities
and Exchange Commission (SEC). But by
virtue of Section 45 of the Investments and
Securities Act (ISA), a public company
cannot allot its shares to the public without
the approval of SEC.
 2. The name of a private company must end with
the word ‘LTD’ whereas that of a public company
must end with the word ‘PLC’. See Section 29 (1)
and (2) of CAMA.
 3. A private company shall not, unless authorised
by law invite the public to subscribe to its shares and
debentures or deposit money for fixed periods
whereas a public company is at liberty to do so.
 4. The total number of members of a private
company cannot exceed 50 whereas
excluding persons who are bona fide in the
employment of the company or who have
retired as employees but still continue to be
members whereas the total number of
members of a public company is unlimited.
 5. Section 211 of CAMA provides that a
public company must hold its General
Meeting of the members, referred to in the
Act as ‘Statutory Meeting’ and file a statutory
Report within 6 months of its incorporation,
failing which it may be wound up whereas a
private company is not required to hold
Statutory Meeting or file a Statutory Report.
 6. Section 234 of CAMA provides that all
resolutions of a public company must be
passed at a formal General Meeting for those
resolutions to be effective but by virtue of a
proviso to that Section, a private company is
entitled to pass a written resolution signed by
all the members of the company but not in a
formal meeting.
 7. A public company must give additional
notice by advertisement in at least two daily
newspapers to members at least 21 days
before the General Meeting of the company
after members have been notified individually
but a private company is not required to give
this additional notice.
 Section 295 of CAMA permits a private
company to appoint anybody that possesses
the requisite knowledge and experience as
Company Secretary. With respect to a public
company, the Company Secretary shall be a
member of:
 The Institute of Chartered Secretaries and
Administrators or
 A legal practitioner within the meaning of the
Legal Practitioners Act, 1975 or a Member of
the Institute of Chartered Accountants of
Nigeria (ICAN) or
 Any person who has held the office of the
Secretary of a public company for at least
three years of the five years immediately
preceding his appointment in a public
company.
 9. A private company must by virtue of Section
22(2) of CAMA restrict the transfer of its shares and
because of this the directors of a private company
have absolute discretion without giving any reasons
to refuse to register any transfer of shares whether
or not the shares are fully paid up. But the directors
of a public company can only refuse the transfer of
shares only when the shares are not fully paid up or
there is a lien on the shares.
 10. The Articles of Association of a private
company always carries what is called ‘Pre-
emptive Rights’ whereas that of a public
company does not carry such. If the Articles
of a public company carry pre-emptive rights,
it will be inconsistent with the law.
 11. A proxy can speak at a meeting of a
private company but not in a public company.
 12. No prospectus or a statement in lieu of
prospectus is required with respect to a
private company but a public company must
issue a prospectus before its shares are
floated.
DISTINGUISH BETWEEN COMPANIES LIMITED BY
SHARES
AND UNLIMITED COMPANIES

 Whereas the liability of members of a

company limited by shares is limited to their
respective shareholdings in the company,
the liability of members of an unlimited
company is unlimited and they may be
liable to the full amount of the company’s
debts in the event of liquidation.
 There are standard abbreviations provided
by Section 29 of CAMA for each company
whether a company limited by shares or an
unlimited company. With respect to private
company limited by shares, its name must
end with the word ‘Limited’ or ‘Ltd’ whereas
the name of an unlimited company must
end with the word ‘Unlimited’ or ‘Ultd’.
 In the case of an unlimited company,
members guarantee the obligations of the
company without any limit on the amount
whereas members of an incorporated
company are not personally liable for its
debts since members’ liability is limited by
shares.
DISTINGUISH BETWEEN COMPANIES LIMITED BY SHARES
AND COMPANIES LIMITED BY GUARANTEE

 Whereas one of the objects of a company

limited by shares is to make profit, a
company limited by guarantee must not carry
on business for profit. The income and
property of the company must be applied
solely towards the promotion of its objects
and no part of it must be paid and transferred
either directly or indirectly to the members.

 Whereas Section 21(1)(a) of CAMA provides that
the liability of a member of a company limited by
shares to contribute to the company’s assets in the
event of liquidation is limited to the amount, if any,
unpaid on his shares, members of a company
limited by guarantee shall be personally liable in
the event of liquidation of the company and the
total liability of the members to contribute to the
assets of the company shall not at any time be less
than N10,000.
 The Association Clause of a company
limited by shares is quite different from the
Association Clause of a company limited by
guarantee. The form of Association Clause
of a company limited by shares is as
follows:
 “We the several persons whose names and
addresses are subscribed are desirous of
being formed into a company in pursuance
of this Memorandum of Association and we
respectively agree to take the number of
shares in the capital of the company set
opposite our respective names.”
 This is provided in Schedule 1, Tables B
and D whereas in the case of a company
limited by guarantee, the Clause ends at
the word “Association” since there are no
shares to take.
ASSIGNMENT

 QUESTION
 Look at the effect of Section 39(2) to (4) of
CAMA on the Common Law doctrine of
ultra vires and the position before 1990
and after 1990
ANSWER
 In answering this question, it is necessary to state the
provisions of Section 39(1) to (4) of CAMA 1990.
 Section 39(1) of CAMA provides that a company shall not
carry on any business not authorised by its Memorandum
and shall not exceed the powers conferred upon it by its
Memorandum or the CAMA.
 Section 39(2) is to the effect that where a company engages
in an ultra vires transaction, a member may bring an action
either under Sections 300 to 313 or under Section 39(4) of
the Act.
 Under Sections 300 to 313 of the Act, on the application of a
member, the court may by injunction or declaration restrain
the company from the following:
– Entering into illegal or ultra vires transaction.
– Committing fraud.
– Benefiting from their negligence or from their breach of duty.
 Section 39(4) makes provision for those who may sue on
ultra vires transaction. These are:
– A member or a shareholder of the company.
– A creditor or holder of a debenture secured by a floating charge.
 It should be noted that Section 39(3) of the Act
has whittled down the provision of Section 39(1)
by encouraging a company to engage in an ultra
vires transaction since it declares that the property
can be kept under such transaction.
 The implication of these provisions is that ultra
vires acts can go on unabated in a company until
shareholders or creditors sue. However, when
they sue, the court can, by way of injunction,
prohibit such transaction not stated in the object
clause.
EFFECT OF ULTRA VIRES DOCTRINE
BEFORE PROMULGATION OF CAMA 1990

 A person can neither sue nor be sued on an ultra

vires contract that is still executory.
 If the ultra vires contract is executed, a supplier of
goods cannot sue to recover the price. He can
also follow the goods he had supplied and recover
them if he could still identify them. But where the
goods have been consumed, then he is not entitled
to anything as was decided in the case of RE: JON
BEAUFORTE (1953) 1 CH. 131.
 However, where he had lent the company money for ultra
vires purpose and the company used the money to pay off
an intra vires debt, on the authority of the case of SINCLAIR
V. BROUGHAM (1914) C 398, the lender can recover any
money lent if it is traceable by seeking the equitable doctrine
of restitution.
 By the decision of the House of Lords in ASHBURY
RAILWAY CARRIAGE COMPANY LTD V. RICHE (1875) LR
HL 653, the act is null and void and not even the unanimous
consent of all the shareholders can revive it.
EFFECT OF ULTRA VIRES DOCTRINE

 AFTER THE PROMULGATION OF CAMA

1990
EFFECT OF ULTRA VIRES DOCTRINE

 It should be noted that the Companies and Allied

Matters Act (CAMA) 1990 has by the enactment
of Section 39(1) to (5) of the Act removed the
adverse effects of the ultra vires doctrine as
stated above. Section 39(1) makes it mandatory
that a company shall not carry on any business
not authorised by its Memorandum and shall not
exceed the powers conferred upon it by its
Memorandum or the Act.
 These harsh effects of the Common Law doctrine
of ultra vires have further been dealt with by the
enactment of Sections 300 to 313 of the Act.
Section 39(2) now provides that a breach of the
prohibition contained in Section 39(1) may be
asserted in any proceedings under Sections 300
to 313 in order that the minority rights of
shareholders against oppressive acts of the
majority can be protected.
 Also, under Section 39(4), on the application of a minority
shareholder, the court may prohibit by way of injunction
the doing of any act or the transfer of any property in
breach of Section 39(1) of the Act. Section 39(5) of the Act
provides that if the transaction sought to be prohibited
under the proceedings are in respect of a contract to
which the company is a party, the court may set aside the
contract and prohibit its performance and may allow to the
company and the other party compensation for loss or
damage sustained thereby.
 Finally, Section 39(3) of the Act provides that even if a
company engaged in an ultra vires act, it will not be
declared invalid. Hence the third party will be estopped
from using the provision of Section 39(3) of the Act as an
instrument of fraud. In CONTINENTAL CHEMIST V.
IFEAKANDU (1966) 1 ALL NLR 1, the Supreme Court held
that where the company sues for breach of contract, it will
not be in a better position than the third party since ultra
vires contract is void. The IFEAKANDU’s case will be
decided differently today.
OBJECTS OR BUSINESS OF THE COMPANY –
(SECTION 27(1) OF CAMA)

 The counsel would need to take instruction as to the

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

 Generally, the capital of a company connotes

the totality of its assets including borrowed
money, which is loosely called “loan capital”.
Specifically, however, the capital of a
company refers to the share capital.
 1. NOMINAL OR AUTHORISED SHARE
CAPITAL – (SECTION 27(2) OF CAMA)
 This is initial capital with which the company
is registered. It does not change except the
capital is increased or reduced. It is,
therefore, the share capital of a company at
any given time.
 Section 27(2)(a) and Section 99 of CAMA
provide that the authorised minimum share
capital of a private company shall be
N10,000 while the authorised minimum share
capital of a public company is N500,000.
 The subscribers of the Memorandum must
together take shares of a value not less than
25 per cent of the authorised share capital.
This is provided in Section 27(2)(b) of the
Act. Note that the division of authorised or
nominal shares into shares of a fixed amount
must be stated in the Memorandum of
Association. See Section 27(2)
 Section 27(4)(b) of the Act provides that the
minimum total guarantee of a company
limited by guarantee is N10,000.
 Section 99(1) to (5) of CAMA provides for the
enforcement of the minimum share capital of
a company and also spells out penalty for
breach. In the case of a company, the fine is
N2,500 and every officer who is in default
shall be liable to a fine of N50 for every day
during which the default continues.
2. ISSUED SHARE CAPITAL –
(S.99(4) OF CAMA)

 According to Section 99(4) of CAMA, the

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

 The issued share capital shall not be less

than 25 per cent of the authorised capital. In
other words, issued capital is the total
number of shares taken by the subscribers
as contained in the Memorandum.

 3. PAID UP SHARE CAPITAL
 This is part of the share capital which has
been issued to and paid for by subscribers or
shareholders of the company.
CLASSES OF SHARES

 A company may, where authorised by its

Articles issue classes of shares. See Section
118(1) of CAMA.
 Shares represent the interest in the
company’s share capital of a member who is
entitled to share in the capital or income of
such company.
 A share is a transferable property. It can
be sold or mortgaged. See Section 115 of
CAMA which provides that the shares or
other interests of a member in a company
shall be property transferable in the manner
provided in the Articles of Association of the
company.
 Subject to the above, a company may
issue shares having preferred,
founder/deferred or other special rights or
restrictions such as dividends or return on
capital. See Sections 119 and 144 of CAMA.
 1. ORDINARY SHARES
 Ordinary shares usually attract no special
rights and carry no fixed rate of dividend or
interest. They bear the major financial risk of
the company and are, therefore, often the
“equity shares of the company”.
 They carry the remaining of distributed profits
after the preference shareholders have been
paid their fixed dividend. Therefore, they
assume greater risk than preference shares.
When the business is unsuccessful, ordinary
shareholders bear the loss.
 2. PREFERENCE SHARES – (SECTION
567 OF CAMA)
 Section 567 of CAMA, the Interpretation
Section, defines preference share as a
share, by whatever name designated, which
does not entitle the holder of it to any right to
participate beyond a specified amount in any
distribution, whether by way of dividend or on
redemption, in a winding up or otherwise.
 Where dividend is declared, preference
shareholders are entitled to a specified
percentage even if dividend is not paid to
ordinary shareholders. They are more or
less ‘creditors of the company’.
 As between ordinary shares, preference
shares and deferred shares, preference
shares are usually more expensive so that if
an ordinary share goes for N1.00, for
instance, a unit of preference share may go
for as much as N20.00.
 Section 143(1) of CAMA provides that in
certain circumstances, a preference share
may carry more than one vote although this
section conflicts with Section 116(1)(b) of the
Act which provides that every share of a
company must not carry more than one vote
from the date of commencement of the Act.
 Preference shares may be redeemable,
cumulative, participatory and convertible.
 DEFERRED OR FOUNDERS SHARES
 Deferred shares are so called because
payment of dividends and return of capital
are deferred until payment has been made in
respect of other classes of shares.
 Deferred or founders shares are usually
taken up by the founders or the promoters of
the company. For instance, a promoter of a
company may sell his property to the
company in exchange for deferred or
founders shares which gives special rights.
 Dividend must be paid to deferred
shareholders before ordinary shareholders
receive their own dividends. In other words,
it has priority over ordinary shares.
 Note that Section 116 of CAMA has abolished
the issuance of weighted share or a share that
carries more than one voting right. Non-voting share
is a share that has no right of vote. Before the
enactment of CAMA in 1990, under the 1968
Companies Act, it was permissible to create shares
that have no voting right.
 Note also that the number of deferred shares
issued must be disclosed in the prospectus as
stipulated by Schedule 15 paragraph 1(a) of the Act.
PAYMENT FOR SHARES

 Sections 135 and 136 of CAMA provide that

shares of a company and any premium on
them shall be paid for in cash but where the
Articles permits, payment may be made by a
valuable consideration other than cash or
partly in cash and partly by a valuable
consideration.
 APPOINTMENT OF AN INDEPENDENT VALUE –
 (SECTION 137 OF CAMA)

 Note that if payment is to be made in consideration other

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

 Subscribers are persons who sign the

Memorandum and Articles of Association of the
company for a number of shares. Instruction must
be taken as to the full particulars of the
subscribers and his interest in the company.
 By virtue of Section 20 of CAMA, subscribers must
have capacity to form a company and must not
suffer from any disability.
 Also the subscribers must not be less than two in
number.
 In addition, subscribers must subscribe to
at least 25 per cent of the authorised share
capital of the company.
 If a subscriber is holding shares in trust
for another person, he must disclose the
fact and must also name the beneficiary in
the Memorandum.
 Section 20(4) of CAMA provides that
aliens may join in forming a company.
However, such aliens must comply with the
under listed enactments regulating their
rights and capacities to engage in any
business in Nigeria. These laws include:
– Investments and Securities Act No. 45 of 1999 (ISA).
– Companies and Allied Matters Act (CAMA).
– Nigerian Investments Promotion Council (NIPC) Act No. 16 of 1995.
– The National Office of Technology Acquisition and Protection, which
deals with (transfer of technology, trade marks, patent, engineering
drawings, machinery) in order to check price and prevent abuse.
– Immigration Act.
– Foreign Exchange (Monitoring and Miscellaneous Provisions) Act
No. 17, Cap. F34 LFN 2004.
– Industrial Inspectorate Act to obtain a Certificate of Acceptance, and
– Central Bank Act.
MEMBERSHIP OF THE COMPANY –
(SECTION 79 OF CAMA)

 The members may be either the subscribers

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

 If the company intends to employ foreigners

it has to obtain expatriate quota on behalf of
the employees. See Section 8 of the
Immigration Act.
REGISTERED OFFICE OF THE COMPANY –
(SECTION 27 OF CAMA)

 Section 27(1)(b) of CAMA provides that

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

 Section 33 of CAMA provides that there shall

be registered with the Memorandum of
Association, Articles of Association signed by
the subscribers to the Memorandum of
Association and prescribing regulations for
the company.
APPOINTMENT OF DIRECTORS –
(SECTION 246 OF CAMA)

 Section 246 of the Act provides that the

company must have at least two directors.
You must also bear in mind that the first
directors are determined and named by the
subscribers or they are named in the
Articles of Association of the company.
 Section 246(1) of the Act provides that any
existing company having less than 2 directors
shall not later than 6 months after the
commencement of the Act have at least 2
directors.
 Section 246(2) provides that where at any given
time the number of Directors of a company falls
below two, the company shall appoint at least a
director to make the number to be at least two and
that such a company shall not carry on business
one month after the number of directors has fallen
below two.
 Section 246(3) of the Act provides that any
director of member of a company who
knows that the number of directors of that
company has fallen below two for more
than six months shall be liable for all
liabilities and debts incurred by the
company during that period when the
company so carried on business.
 You must bear in mind those that are
disqualified from being directors of a company
under Sections 254 and 257 of CAMA.
Section 254 deals with restraint of fraudulent
persons. By fraudulent persons means:
– Any person who had been convicted by a High Court of any
offence in connection with the promotion, formation or
management of a company.
– Any person who has otherwise been guilty of fraud or any
breach of duty in the course of his duty as an officer of a
company.
 Section 257 of CAMA deals with
disqualification for directorship on ground
of incapacity of:
 an infant under the age of 18 years.
 A lunatic or person of unsound mind.
 An insolvent or an undischarged bankrupt person
as provided in Section 253 and Section 258
respectively.
 A corporation.
CONTROL AND MANAGEMENT

 Control and management of a company may

be achieved through the control over the
appointment of directors by the appointment
of one or more as life directors. It can also
be achieved through the distribution of
shares of the company.
MATTERS UPON WHICH TAX RELIEF
ARE CLAIMED

 You must also take instruction with regard to

any mater upon which tax relief may be
claimed. For example, under the Industrial
Development Income Tax Relief Act, pioneer
status may be granted to companies that are
into agro-allied products. Note that this
should be reflected in the Articles of
Association of the company.
PREPARATION OF INCORPORATION
DOCUMENTS

 The documents to be prepared for the

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

 You have been instructed by the promoters of a new company to be

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

 When you want to prepare your own

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

 The Name Clause:

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

 The Memorandum of an unlimited company

is similar to the Memorandum of a company
limited with shares but with the following
modifications. See Section 29(4) of CAMA.
The name must end with “Unlimited” or
“Ultd”.
 Liability Clause will state that the liability
of members is unlimited. See Section 27 of
CAMA on the Memorandum.
ARTICLES OF ASSOCIATION –
(SECTION 33 OF CAMA)

 Section 33 of CAMA provides that the Articles of Association of a

company must be signed by the subscribers to the Memorandum of
the company and it shall prescribe regulations for the company.
 Section 34 of the Act provides for the form and content of the
Articles. See Table A of Schedule 1 of CAMA, Parts I, II, III and IV.

 Part I provides for the Articles of a public company limited by
shares.
 Part II is regulation for the management of a private company
limited by shares.
 Part III is regulation for the management of a company limited by
guarantee.
 Part IV is regulation for the management of an unlimited
company.
 Note the following:
 Articles of Association must be printed.
 It must be divided into paragraphs and numbered
consecutively.
 It must be signed by each subscriber in the presence of at least
one witness who shall attest to the signature.
 The Articles generally provide for shares, meetings, directors
secretaries, Common Seal, audit, dividends, accounts, winding
up and indemnity.
 The Articles shall bear the same stamp duty as if it were a
Deed.
THE EFFECT OF MEMORANDUM AND ARTICLES OF
ASSOCIATION – (S.41(2) OF CAMA)

 Section 41(2) of CAMA provides that subject to the

provisions of the Act, the Memorandum and Articles
when registered shall have the effect of a contract
under seal between the company and its members
and officers, between the members and officers
themselves whereby they agree to observe and
perform the provisions of the Memorandum and
Articles as altered from time to time in so far as they
relate to the company’s members or officers as such.
 In the case of WOOD V. ODESSA WATERWORKS
CO. (1889) 42 CH D 636, Starling J granted an
injunction at the instance of a member to restrain the
defendant company from contravening the Articles.
He held that the Articles of Association and
Memorandum constitute a contract not merely
between the shareholders and the company but also
between each individual shareholders and every
other.
 The implication of this provision is that a
shareholder may, therefore, bring an action
to enforce any personal right contained in the
Articles.
 Also a company is entitled to sue its
members for the enforcement of and to
restrain the breach by them of its Articles and
to treat as irregular anything which is done in
contravention thereof.
DOCUMENTS OF INCORPORATION –
(SECTION 35 OF CAMA)

 Memorandum and Articles of Association

 This must be duly signed and stamped as a
deed. The stamp duty payable on the
Memorandum and Articles is N500.
 Notice of Statutory Change of Registered
Address
DOCUMENTS OF INCORPORATION –
(SECTION 35 OF CAMA)

 This is referred to as “Form CAC 3”. Note that a

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

 Certificate of incorporation is a prima facie evidence that all

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

 From the date of incorporation, the

company shall:
 Become an independent corporate being or
entity and
 Shall be capable forthwith of exercising all
the powers and functions of an incorporated
company including the power to hold land.
CERTIFICATE OF INCORPORATION –
(EFFECT OF REGISTRATION)

 Having perpetual succession and

 A Common Seal.
CERTIFICATE OF INCORPORATION –
(EFFECT OF REGISTRATION)

 In SALOMON V. SALOMON AND

COMPANY LTD (1897) AC 22, the House of
Lords unanimously reversed the decision of
the Court of Appeal and held that the
company was a separate and distinct person.
The House of Lords, in a judgment delivered
by Lord Machnaghten inter alia said:
CERTIFICATE OF INCORPORATION –
(EFFECT OF REGISTRATION)

 “The company is at law a different person altogether from the

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

 1. An American multinational company

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

 Itemise the documents you will deliver to CAC in

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

 They are to take the shares in the proportion of 5: 3: 2 respectively.

They are also to be the first directors of the company.
 3.
– What further instruction would you take to enable you prepare the
Memorandum of Association?
– What are the shares of each of the subscribers to be entered into (the
number of shares taken) column of the subscription clause?
– What formalities do you need to comply with before you can use the
said name of the company?
– What clauses would you insert in the Articles to give Chief Ikeson
Pebble upper hand in the management of the company? State the
purpose served by each Clause.
– Under what circumstances can the CAC refuse to register the said
company and what is the remedy against non-registration? See
Section 36(1) and (2) of CAMA.
FORMALITIES AFTER INCORPORATION
BEFORE COMMENCEMENT OF BUSINESS

 As soon as the certificate of incorporation is

issued by CAC, the company should do the
following:
 Display its nameplate – signBoard at its
office(s).
 Print letterhead with the company’s name,
registration number, address, names and
nationality of directors.
 Make its Common Seal.
ALIEN PARTICIPATION IN BUSINESS
IN NIGERIA

 Section 650 of CAMA defines an alien as a person or

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

 BY AN ALIEN

 Preparation of Joint Venture Agreement

and other necessary pre-incorporation
contracts.
 Formation and Registration of a
company by the CAC.
 Application for registration with the NIPC.
 Application to the Securities and Exchange Commission
for the registration of securities. See Section 8(k) of the
ISA, 1999.
 Application for other permits including application to the
Nigerian Embassy or Consular Office in the country of
the investor for the grant of a business visa, subject to
the regularisation.
 Importation of capital through an authorised dealer.
 Please note also that the NIPC is charged with the
responsibility of co-ordinating, monitoring and
facilitating investments in Nigeria.
REGISTRATION OF SECURITIES –
(SECTION 8(K) OF ISA)

 Section 8(k) of the Investments and

Securities Act (ISA), 1999 provides that the
Securities and Exchange Commission is
required to keep and maintain separate
registers of foreign direct investments and
foreign portfolio investments.
PROCEDURE FOR PURCHASE OF
SHARES

 The alien is first of all expected to apply for the

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

 Applications for business permits and expatriate quotas are

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

 A. BUSINESS PERMITS – (SECTION 8(1)(B) OF IMMIGRATION

ACT)
 This is the operational licence granted to an expatriate to enable
him carry on business activities in Nigeria. Section 8(1)(b) of the
Immigration Act, LFN, 1990 provides that no person other than a
Nigerian citizen shall, on his own account or in partnership with any
other person, practise a profession or establish or take over any
trade or business whatsoever or register or take over any company
with limited liability for any purpose without the written consent of
the Minister of Internal Affairs. The consent of the Minister of
Internal Affairs is issued in the form of Business Permit.
 Note that the permit is now issued through the NIPC.
 B. EXPATRIATE QUOTA – (SECTION 8(1)(A) OF THE
IMMIGRATION ACT)
 This is the official approval granted to a company to enable it
employ individual expatriates to specifically designated jobs and the
quota must state its duration. Section 8(1)(a) of the Immigration
Act LFN 1990 provides that “no person other than a citizen of
Nigeria shall accept employment, not being employment with the
Federal or a State Government, without the approval of the Chief
Federal Immigration Officer. The approval is what is known as
“Expatriate Quota”.
 There are two types of expatriate quotas:
– Permanent Until Reviewed (PUR), and
– Temporary Quota (TQ).
 (i) Permanent Until Reviewed
 This is usually granted to the Chairman of the Board of a company
or the Managing Director. As the name implies, it is permanent
until there is a supervening circumstance, which will necessitate its
review.
 (ii)TEMPORARY QUOTA
 This is usually granted to the directors or other employees of the
company. The maximum time usually granted is 5 years subject to
renewal for another term of two years.
 Note that the quota position attaches to a particular post hence
different persons can be covered by the same quota. It is the duty
of the company to apply for the quota and not that of the employee.
See the case of OIL FIELDS SUPPLY CENTRE LTD V. JOHNSON
(1987) 18 NSCC 725.
 C. RESIDENCE PERMIT
 An alien may enter Nigeria with a Tourist
Visa or Short Visit Visa and stay therein for
a period of three months without a
Residence Visa. However, any person
who is not a Nigerian citizen and who
desires to enter Nigeria for the purposes of
residence must first of all obtain a
Residence Permit.
 The application for residence permit is made by the
employer company to the Nigerian Embassy or Consular
Officer in the country where the applicant resides by way of
a letter accompanied by a valid passport of the alien from
the company requesting permission to employ the alien to
the Immigration Department (via Consular authorities). Also
to be attached is a letter of employment and the photocopy
of the Expatriate Quota.
 On approval, the alien is then granted an STR Visa which on
arrival in Nigeria will be regularised and the alien issued a
work permit.
TRANSFER OF TECHNOLOGY –
(SECTION 5(2) OF NOTAP ACT)

 Every contract or agreement entered into by any person in

Nigeria with another person outside Nigeria involving the
transfer of foreign technology to Nigerian partners shall be
registered with the National Office of Technology Acquisition
and Promotion (NOTAP) in the prescribed manner, that is, not
later than 60 days from the execution of the agreement. See
Section 5(2) of the National Office of Technology Acquisition
and Promotion Act.
 An agreement involves transfer of technology if its
purpose or intent is, in the opinion of NOTAP, wholly or partially
connected with any of the following matters:
 The use of trademarks.
 The right to use patented inventions.
 The supply of technical expertise in the form
of the preparation of plans, diagrams,
operating manuals or any other form of
technical assistance of any description
whatsoever.
 The supply of basic and detailed
engineering.
 The supply of machinery and plant, and
 The provision of operating staff or managerial
assistance and the training of personnel. See
Section 4(d) of the Act.
 Section 6(1) of the Act provides that every
application for the registration of a contract or
agreement shall be addressed to the Director of
NOTAP and shall be accompanied by such number
of certified true copies of such contract or agreement
and by all other related documents and information
as may be specified in any particular case by the
Director.
 The director may refuse to register a
contract which falls within 18 specifications,
for example:
 Where its purpose is the transfer of the
technology freely available in Nigeria.
 Where the price is not commensurate with
the technology in question.
EFFECT OF NON-REGISTRATION

 Non-registration of a contract does not

render the contract void or unenforceable
between the parties but merely frustrates
transfer of any fees or payment due under
the contract to the account of the aliens
outside Nigeria. See BEECHAMS’s case
(1985) 3 NWLR (PT. 12).
INTENTION TO INCUR CAPITAL EXPENDITURE –
(SECTION 3(1) OF THE INDUSTRIAL INSPECTORATE ACT)

 Section 3(1) of the Industrial Inspectorate Act provides that any

person proposing to start a new undertaking or in the case of
an existing undertaking, to incur additional expenditure of not
less than N20,000 must give to the Director of the Industrial
Inspectorate Division of the Federal Ministry of Industry notice
of his intention. Application which is on Form 1 (2 copies) is
obtainable from the Federal Ministry of Industries, Inspectorate
Division.
 If the Director is satisfied with the valuation for the
property, he issues a certificate of acceptance, which binds
other government agencies, for example, the Board of Customs
and Excise, the Federal Board of Inland Revenue
RELIEF: TAX REBATE AND
CONCESSION

 There are a number of fiscal incentives and

relief that are designed to boost industrial
and agricultural productions.
 1. PIONEER STATUS – (SECTIONS 1 AND
10 OF INDUSTRIAL DEVELOPMENT ACT)
 Under the Industrial Development Act, Cap 179 LFN 1990, a
company may be granted exemption for a period of three years
in the first instance and may be extended for a further period of
two years. To qualify the applicant must be a public company.
 2. Secondly, the investment must be in respect of industry or
products designated as pioneer, for example, agro-allied or
export goods and solid minerals.
 3. The estimated cost of qualifying capital expenditure on or
before the production date is not less than N50,000 for an
indigenous company and N150,000 in any other case. See
Sections 1 and 10 of the Industrial Development Act.
TAX RELIEF UNDER THE COMPANIES INCOME TAX
(CIT) ACT,
CAP 60 LFN, 1990

 Under this Act, profits exempted from taxation are

profits made by cooperative societies, religious or
charitable organisations, sporting activities, et cetera
are all exempted from taxation.
 Also the profit made by a Nigerian company in
respect of goods exported from Nigeria are
exempted from taxation provided the proceeds from
such export are repatriated to Nigeria and are used
exclusively for the purchase of raw materials, plants,
equipment and spare parts.
 Also to enjoy exemption from taxation is the profit of a
company for the first N6,000. See Section 29 of the
Companies Income Tax Act LFN, 1990.
 Relief is also available where a Nigerian company is liable
to pay a Commonwealth Tax. See Section of the CIT Act.
 Also there is relief from payment of double taxation if there
are bilateral agreements with other countries. See Sections 34
and 35 of the CIT Act. Note the arrangement between the
Government of the Federal Republic of Nigeria and the
Governments of Great Britain and Northern Ireland.
 Note that there is also tax exemption for foreign
loans not less than N150,000 granted to a Nigerian
company when it is not repayable within 10 years.
See Section 9(1) of the CIT Act.
 Interests payable on bank loan granted for
agricultural trade and business also enjoy tax
concession.
 Bank loan granted to a company engaged in
agricultural business and fabrication of local plant
and machinery also enjoys concession.
 Deposit accounts or domiciliary accounts of a
foreign non-residence company are also exempted
from taxation provided that the account consists
mainly of foreign currencies imported into Nigeria on
or after 1st January 1990 though the CBN or any
other authorised bank.
 Bank loans for manufacture of goods for export
are also tax-free.
 Please note that stocks and shares of any
description have been removed from the list of
assets liable to Capital Gains Tax (CGT).
DUTY DRAWBACK AND SUSPENSION
SCHEME

 The Customs and Excise Management Act, Cap

84, LFN 1990 and also the Customs Duty
Drawback Scheme/Regulation provides for the
refund of import duties on:
 all imported goods used in manufacturing goods
meant for export. In such cases, 100 per cent
refund of import duties is granted.
 Papers used in the manufacture of goods supplied
for educational purposes to educational institution
recognised by the Minister of Education. In such
cases, 100 per cent refund of import duty is
granted.
 Goods exported in the same States as that
in which they were imported.
 Various other incentives are granted for:
 Export. See Export Incentives and
Miscellaneous Act Cap 118 LFN, 1990.
 Utilization of Associated Gas. Petroleum
Profit Tax Act.
 Investments in Export Processing Zones.
Section 28(k) of CIT Act.
 Investments in economically
disadvantaged areas. In such cases, 100
per cent rebate is normally granted for a
period of 5 years.
 Local Raw Material Utilisation 30 per cent
concession is normally granted for 5 years
to industries that attain the minimum local
raw material utilisation in agro allied,
engineering and chemical industries.
 Investments in solid minerals. Sections 18,
19 and 22(2) of the Minerals and Mining
Act No. 34 of 1999.
 Research and Development carried out in Nigeria.
Sections 20 and 23(3) of the CIT Act.
 Rural Investment Allowance. This allows for
graduated allowance for capital expenditure on
facilities such as electricity, water, tarred roads
and telephone located at least 20 kilometres away
from such facilities provided by the government
under Section 28(j) of the CIT Act.
QUESTION
 An alien has instructed you to do a due diligence on him in a
financial services sector of the economy. He is particularly
interested in setting up an Investment Bank to help finance the
moribund investment industry in Nigeria.
 He has also advised you to lay special emphasis on the
provisions of the enabling laws. He wants to know your opinion
on the best type of company he can use as an investment
vehicle. He, of course, wants to take up residence in Nigeria.
 Please advise him.
 _____________________
PROMOTERS

 PROMOTERS, PROMOTION AND

 PRE-INCORPORATION CONTRACTS
 PROMOTERS – (SECTION 61 OF CAMA)
DEFINITION OF PROMOTERS
 The idea of forming a company is usually conceived by a
person or group of persons who in furtherance of this idea, will
begin to take necessary steps to incorporate the company. For
example, they may have to source for funds, find directors,
acquire properties, prepare the prospectus and may also have
to pay for the printing and all other expenses incidental in
bringing the company into the world. The law regard such
persons as promoters of the company.
 Section 61 of the Companies and Allied Matters Act (CAMA)
defines a promoter as:
 “Any person who undertakes to take part in forming a company with
reference to a given project and to set it going and who takes the
necessary steps to accomplish that purpose, or who, with regard to a
proposed or newly formed company, undertakes a part in raising
capital for it, shall, prima facie be deemed a promoter of the company:
 Provided that a person acting in a professional capacity for persons
engaged in procuring the formation of the company shall not thereby
be deemed to be a promoter.
 What the proviso to Section 61 of CAMA is saying is that a
solicitor or valuer does not become a promoter merely by acting in a
professional capacity to a promoter. The only exception is where a
solicitor negotiates property for the proposed company at a profit.
 See the following cases:
 In TWYCROSS V. GRANT (1877) 2 CPD
469, particularly at 541, Cockburn C.J said
that
 “a promoter is one who undertakes to form a company with reference
to a given project and to set it going and who takes the necessary
steps to accomplish that purpose. They framed the scheme; they not
only provisionally formed the company but were to the end its creators.
They found the directors and qualified them. They prepared the
prospectus, they paid for the printing and advertise the undertaking
before the world….”
 In ADENIJI V. STARCOLA LTD. (1972) 1 SC 202, Kazeem J.
described a promoter as:
 “Any person who undertakes to take part in forming a company or who
with regard to a proposed or newly formed company undertakes a part
in raising capital for it is prima facie a promoter of the company
provided he is not acting in his professional capacity.”
 Note that a person who instructs a solicitor to
prepare a Memorandum and Articles of Association
and register a company for him is a promoter.
 In SPICER (KEITH) LTD. V. MANSELL (1970) 1
WLR 333, the Court held that a person who
purchased a property expressly as trustee for an
intended company would by so doing be deemed a
promoter.
 A person may become a promoter of a
company even after registration of a
company. For example, if he had assisted in
procuring capital for the company to pay
promotion expenses when the company was
newly formed.
 Note also that an existing company may be a promoter for
another new company.
 A solicitor who prepared the Articles and Memorandum of
Association and registered a company for his client who paid
him (the solicitor) his professional fees is not a promoter. In
RE: GREAT WHEAL POOLGOOTH LTD (1883) 53 LJ CH 42,
the Court said inter alia that a solicitor who drafts the
Memorandum and Articles of Association in line with the
promoters instructions and the accountant who values the
assets of a business to be purchased are only giving expert or
professional assistance to the promoters and will be paid for
their services; they are not promoters.
 If, however, the solicitor and accountant did more by
way of helping his client to obtain directors for the
company, they would be regarded as promoters.
 The law looks at the facts in determining
whether or not a person is a promoter. In the case
of GLUCKSTEIN V. BARNES (1900) AC 240 the
court held that a person who purchased property for
his own use and later decided to form a company to
acquire the property became a promoter only from
the time when he took steps to form the company.
 Can a promoter be regarded as an agent or
trustee of a company? No. A promoter cannot be
regarded as an agent or trustee of a company but he
occupies a fiduciary relationship with the company.
That was the decision in GARBA V. SHEBA
INTERNATIONAL (NIGERIA) LTD. (SUPRA) page
401.
 From which point will a person be regarded as a
promoter of a company?
 A person becomes a promoter from the very moment
he begins to take part in forming a company or in
setting it going.
CONTRACTS OF PROMOTERS –
(SECTION 72 OF CAMA)

 In contrast to the Common law rule, Section 72 of

CAMA provides that a contract or other transaction
purporting to be entered into by the company or by
any person on behalf of the company prior to its
formation may be ratified by the company after its
formation and thereupon the company shall become
bound by and entitled to the benefit thereof as if it
has been in existence at the date of such contract or
other transaction and had been a party thereto.
CONTRACTS OF PROMOTERS –
(SECTION 72 OF CAMA)

 Section 72(2) of CAMA provides that

 “Prior to ratification by the company, the
person who purported to act in the name of
or on behalf of the company shall, in the
absence of express agreement to the
contrary, be personally bound by the contract
or other transaction and be entitled to the
benefit thereof.”
DUTIES AND LIABILITIES OF PROMOTERS –
(SECTION 62 OF CAMA)

 Section 62(1) of CAMA provides that a promoter stands in a fiduciary

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

 “Promoters have in their hands the creation and

moulding of the company. They have the power of
defining how and when and in what shape and under
what supervision it shall start into existence and
begin to act as a trading corporation”.
 Statutory recognition has been given to the
duties and liabilities of promoters in Section 62 of
CAMA which is summarised hereunder:
DUTIES AND LIABILITIES OF PROMOTERS –
(SECTION 62 OF CAMA)

 1. The promoter stands in a fiduciary

relationship to the company and must
observe utmost good faith in transaction
entered on behalf of the company.
 2. The promoter must account for any profit
made from the use of information on property
acquired in the course of his duty to the
company.
DUTIES AND LIABILITIES OF PROMOTERS –
(SECTION 62 OF CAMA)

 3. The transaction between the promoter and the company can be

rescinded by the company except where after full disclosure by the
promoter, such transaction is ratified on behalf of the company by
either an independent Board of directors (that is, independent of the
promoter) or at a General Meeting at which such promoter cannot
vote. In ERLANGER’s case, a syndicate of which he was the head,
purchased an island in the West Indies said to contain valuable mines
of phosphate for 55,000 pounds. He formed a company to buy this
island and a contract was made between “X”, a nominee of the
syndicate, and the company for its purchase at 110,000 pounds. It
was held that there had been no disclosure by the promoters of the
profit they were making. Therefore, the company was entitled to
rescind the contract and recover the purchase money from him and
other members of the syndicate.
DUTIES AND LIABILITIES OF PROMOTERS –
(SECTION 62 OF CAMA)

 There is no limitation period for company to

sue promoter under this section but the court
may give relief from liability to the promoter if
it deems it equitable to do so.
 REMEDIES FOR BREACH OF DUTIES
DUTIES AND LIABILITIES OF PROMOTERS –
(SECTION 62 OF CAMA)

 Basically, there are three major remedies:

 The company may sue the promoter for
damages for breach of his fiduciary
obligation to the company. That was the
decision in the case of RE: LEEDS AND
HANLEY THEATRE OF VARIETIES LTD
(1902) 2 CH 809.
DUTIES AND LIABILITIES OF PROMOTERS –
(SECTION 62 OF CAMA)

 The company may rescind the contract and recover the

purchase money paid where the promoter sold his own
property to the company. In ERLANGER V. NEW SOMBRERO
PHOSPHATE LTD. (SUPRA) the Court held that the law
requires the promoter to disclose such fact before he can be
relieved of any liability for failure to disclose. Where he
discloses such facts, it will no longer be regarded as secret
profit and he may be allowed to keep it. Disclosure must be
made to:
– The Board of Directors who must be independent of the control of
the promoters or
– Where no such Board exists then disclosure must be made to the
shareholders either in a General Meeting or in a circular or
prospectus issued by the promoters on behalf of the company.
DUTIES AND LIABILITIES OF PROMOTERS –
(SECTION 62 OF CAMA)

 The promoter may be compelled by the

company to account for any profit he made.
See the case of GLUCKSTEIN V. BARNES
(SUPRA).
REMUNERATION OF PROMOTERS –
(SECTION 72 OF CAMA)

 In the case of GARBA V. SHEBA (SUPRA), particularly at page

401, the court held that it has always been the case that a
promoter has no right against the company for payment of
services rendered before the incorporation of the company and
that a promise to pay him by the company is neither binding
and nor enforceable against the company because the
consideration is a past consideration.
 The company can adopt the promise to pay the promoter in
which case the promoter can sue if the company reneges. See
Section 72(1) of CAMA.
PRE-INCORPORATION CONTRACTS

 Before a company is formally registered, a promoter may have

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

 In the case of KELNAR V. BAXTER

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

 Where the promoter signed the contract for and on behalf of

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

 “Any contract or other transaction purporting

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

 In other words, the company can ratify after formation as if it

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

 “The object Clause is no more than a list of the

objects the company may lawfully carry out. They
are certainly not objects that the company must
execute. The inclusion of the terms of the pre-
incorporation contracts in the Memorandum of a
company is an indication of a strong desire… that
the proposed company after incorporation should
execute the terms of the agreement so included.
PRE-INCORPORATION CONTRACTS

 On when can pre-incorporation contract be binding, the

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

 The following may be the subject of pre-incorporation

contract:
 Joint Venture agreement especially between
Nigerians and aliens.
 Payment of Promoters’ expenses.
 Directors’ service contract.
 Shareholders’ agreements.
 Agreement for the acquisition of business or property.
 Conversion of partnership to incorporated
companies.
COMPANIES CONTRACTS – (SECTION
71 OF CAMA)

 Section 71 of CAMA provides for the permissible form in which a

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

 By seal or deed.
 Under CAMA, Section 71 provides that a
company can enter into any of the three types
of contract:

1. Oral or Parol Contract
 2. Written Contract
 3. Contracts Under Seal
COMPANIES CONTRACTS – (SECTION
71 OF CAMA)

 1. ORAL OR PAROL CONTRACT – (SECTION 71(1)(C) OF

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

 2. WRITTEN CONTRACT – (SECTION 71(1)(B) OF CAMA)

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

 Section 71(1)(a) of CAMA allows a company

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

 Any contract can be under seal. However, certain

contracts are required by law to be under seal. For
instance, a conveyance of land or a lease exceeding
three years must be made under seal. See Section
77(1) of the Property and Conveyancing Law (PCL)
and Section 3 of the Law of Real Property Act, 1845.

 Note that when a company contracts under seal, the

company’s seal must be affixed in accordance with
the formalities laid down in the Articles of the
Association. See Schedule 1, Part 1, Table A,
Article 11 of CAMA.
COMPANIES CONTRACTS – (SECTION
71 OF CAMA)

 It is usually the practice for the Articles to

provide that the document on which the seal
is affixed must be signed by a director and
counter-signed by the secretary or a second
director.
COMPANIES CONTRACTS – (SECTION
71 OF CAMA)

 A company writing under seal may empower

any person as its attorney either generally or
for a specific purpose to execute deed on its
behalf in any place within or outside Nigeria
and a deed executed by such a person binds
the company as if the document were sealed
by the company.
COMPANIES CONTRACTS – (SECTION
71 OF CAMA)

 Also note that a company may provide otherwise for the use of its seal in its
Articles of Association. See Section 34(1) of CAMA. Where a company is a
party to a contract either under seal or in writing, the contract must be validly
executed. For instance, it will be invalid execution where the proper phrase like
“Ltd” or “Plc” or “Limited by Guarantee”, that is, “Ltd/Gte” is not added to the
name; that will be an invalid execution. See Section 29(1) to (5) of CAMA and
also see the case of WESTERN NIGERIAN FINANCE CORPORATION V.
WEST COAST BUILDERS LTD. (1971) 1 UILR 93. In this case, the plaintiff
claimed from the defendant a sum with respect to a contract purportedly
entered into by the defendant. The defendant averred that the agreement was
not binding on it as it was not executed by the company but by “West Coast
Builders” which was not before the court. It was held that there can be no valid
execution of an agreement by a limited company unless the agreement bear
the word “Limited” or “Ltd” as the last word of its name and the Common Seal
and that the defendant West Coast Builders, having not executed the
agreement as required by the Companies Act, could not be held liable under
the agreement.
OTHER TRANSACTIONS OF A
COMPANY

 BILL OF EXCHANGE AND PROMISSORY NOTE –

 (SECTION 73(1) OF CAMA)
 A person acting pursuant to a company’s authority can
make, accept or endorse a Bill of Exchange or a
Promissory Note on behalf of the company provided
such transactions is disclosed to have been done
under the company’s authority. See Section 73(1) of
CAMA.
 COMMON SEAL AND OFFICIAL SEAL FOR USE
ABROAD –
 (SECTIONS 74 AND 75 OF CAMA RESPECTIVELY)
OTHER TRANSACTIONS OF A
COMPANY

 Section 74 of CAMA requires every company to have

a Common Seal. The use of the Common Seal shall
be regulated by the Articles.
 In addition where a company is permitted by its
object to transact business in foreign countries,
subject to the Articles of Association, the company
may make provision for an Official Seal which may
be used in countries outside Nigeria.
 AN OFFICIAL SEAL
OTHER TRANSACTIONS OF A
COMPANY

 An Official Seal is a facsimile or a replica of the Common Seal

with the addition on its face of the name of the country where it is to be
used.
 Pursuant to Section 76 of CAMA, a company may under its Common
Seal appoint an attorney to execute deeds on its behalf within or
outside Nigeria. See the case of POWELL V. LONDON AND
PROVINCIAL BANK (1873) 2 CH D. 555.
 Section 77 of CAMA provides that a document or proceeding requiring
authentication by a company may be signed by a director, secretary or
other authorised officer of the company. Such document need not be
under the company’s seal. See the case of SHELL PETROLEUM
DEVELOPMENT COMPANY NIGERIA LTD V. ALAKUTA (2005) 9
NWLR (PT. 931) 475.
AUTHENTICATION AND SERVICE OF
DOCUMENTS –
(SECTION 77 OF CAMA)

 Section 77 of CAMA provides that a document or

proceedings requiring authentication by a company
may be signed by a director, secretary, or other
authorised officer of the company and need not be
under its Common Seal.
 A court process shall be served on a company in line
with rules of court while other documents may be
served by post or by leaving it at the registered office
or head office of the company. See Sections 77 and
78 of CAMA and also Supreme Court case of MARK
V. EZE (2004) ALL FWLR (PT. 200) 1455.
QUESTION

 Mr. Davis Martins began a scheme which

was designed to form a company for the
purpose of canning fruits. He informed Alhaji
Usman, an estate valuer, of his plans and
Alhaji Usman promised him to secure a
property for the company to take off, and he
did so.
QUESTION
 Alhaji Usman also spoke to his wife, Hajia Usman who is
an Accountant about the company’s need for a qualified
director and Hajia Usman obtained one director for the
company. Barrister Udo assisted in providing the funds needed
for the incorporation of the company. He also prepared the
Memorandum and Articles of the company and also registered
the company.
 Mr. Davis Martins, Alhaji Usman, Hajia Usman, Mrs. Jane
Makanju subscribed to the Memorandum and Articles of the
company and also became the first directors of the company.
The questions before the court are:
QUESTION

 Who among the aforementioned parties could be

regarded as a promoter and why?
 It was discovered that 10 years earlier, Alhaji Usman
bought the property he bought for the company for
N5,000,000 and sold it to the company for
N10,000,000. What is your advice to the company in
this situation?
 Assuming Mr. Davis Martins, Alhaji Usman and Hajia
Usman have jointly sued the company for the payment
of promotion expenses, what would be your advice to
the company?
QUESTION
 Would your answer be different assuming the agreement to pay
for promotion expenses was incorporated into the object clause
of the Memorandum of the company?
 Would your answer also be different if the company in fact
ratifies the agreement to pay all promotion expenses in its first
annual General Meeting which all the members of the company
attended and also voted?
 Assuming the fruits Mr. Davis Martins bought on credit for the
first production of canned fruits before the issuance of
certificate of incorporation to the company has not been paid
for up till now, what will be your advice to the seller of the
fruits?
QUESTION

 Assuming Mr. Davis Martins signed the

contract for the fruits as the agent of the
company, would your answer be different?
 Assuming Mr. Davis Martins signed the
contract for the fruits as the company itself
and in fact affixed the proposed Common
Seal of the company, would your answer be
different?
 ­
CONVERSION AND RE-REGISTRATION
OF COMPANIES

 A company may decide to change its status and this

may be done without having to incorporate a new
company. The Companies Act provides for how the
change of status can be carried out.
 The major reason for re-registration of a
company, among others, is due to the rise or fall in
the fortunes of the company. Where, for example,
the business of a private company grows, it may be
re-registered as a public company.
CONVERSION AND RE-REGISTRATION
OF COMPANIES

 Under CAMA, the conversion of companies is

permissible under the following:
 A private company limited by shares may be
converted to a public company by following the
procedure laid down in Section 50 of the Act.
 A company limited by shares may be converted to an
unlimited company by following the procedure laid
down in Section 51 of the Act.
CONVERSION AND RE-REGISTRATION
OF COMPANIES

 An unlimited company may also be re-registered as

a company limited by shares by complying with
Section 52 of the Act.
 A public company may be converted to a private
company under Section 53 of the Act.
 Upon the re-registration of a company, the CAC will
grant the new company a new certificate of
incorporation showing the new status of the
company and the certificate is prima facie evidence
that:
CONVERSION AND RE-REGISTRATION
OF COMPANIES

 The requirement of the Act in respect of re-

registration and of matters precedent and
incidental thereto have been complied with;
CONVERSION AND RE-REGISTRATION
OF COMPANIES

 The company has acquired the new status.

 That a company changes its status does not mean it
has changed its legal personality or that its rights
and liabilities under the former status are now
extinguished. The legal personality rights and
liabilities of the old company are continued in the
new status. Therefore, any debt, obligation incurred,
contract entered into or legal proceedings by or
against the company will continue.
RE-REGISTRATION OF A PRIVATE COMPANY TO
A PUBLIC COMPANY – (SECTION 50 OF CAMA)

 Section 50 of CAMA provides that a private limited company

may be re-registered as a public limited company, subject to
the following conditions:
 The company must pass a Special Resolution that it be so re-
registered as a public company. The Special Resolution must
effect necessary alterations in the Memorandum and Articles of
Association of the company.
 An application for re-registration together with the prescribed
document must be delivered to the CAC. The Special
Resolution must effect the following changes:
RE-REGISTRATION OF A PRIVATE COMPANY TO
A PUBLIC COMPANY – (SECTION 50 OF CAMA)

 A.
 i) The Memorandum must state that the company
is a public company. See Section 50(2)(a) of the
Act.
 ii) Necessary changes must be made in the
Memorandum of Association of the company to bring
it in line with the Memorandum of a public company
as provided under Section 27 and Section 29(2) and
(5) of CAMA, that is, the name of the company will
now end with “Public Limited Company” or “Plc”.
RE-REGISTRATION OF A PRIVATE COMPANY TO
A PUBLIC COMPANY – (SECTION 50 OF CAMA)

 iii) The Capital Clause must be altered to

state an amount not less than N500,000
required for public company and the
subscribers must take not less than 25 per
cent of the authorised capital.
 B. In the Articles –
 i) The clause restricting transfer of share
must be removed.
RE-REGISTRATION OF A PRIVATE COMPANY TO
A PUBLIC COMPANY – (SECTION 50 OF CAMA)

 ii) Any clause permitting appointment of

directors without age limit must be amended.
 In the Articles, any provision permitting
written resolution must be removed.
 There may also be the need to make the
retirement of directors rotational.
PROCEDURE FOR RE-REGISTRATION OF A
PRIVATE COMPANY
TO A PUBLIC COMPANY

 Application must be made to the CAC in

the prescribed form and must be signed by
at least a director and the secretary.
PROCEDURE FOR RE-REGISTRATION OF A
PRIVATE COMPANY
TO A PUBLIC COMPANY

 A printed copy of the Memorandum and

Articles of Association as altered in
pursuance of the resolution.
 A copy of the written statements on Oath
by the directors and secretary showing the
paid-up capital of the company which, as at
the date of the application, is not less than
25 per cent of the authorized share capital.
PROCEDURE FOR RE-REGISTRATION OF A
PRIVATE COMPANY
TO A PUBLIC COMPANY

 A copy of the Balance Sheet of the company as at

the date of the resolution or the preceding six
months, whichever is later.
 A statutory declaration in the prescribed form by a
director and secretary that:
– A Special Resolution required under Section 50(1) and
(2) of the Act has been passed and
– that the company’s net assets are not less than the
aggregate of its paid-up capital and the undistributed
reserves.
PROCEDURE FOR RE-REGISTRATION OF A
PRIVATE COMPANY
TO A PUBLIC COMPANY

 A copy of any prospectus or statement in

lieu of prospectus delivered by the
company within the last 12 months to the
Securities and Exchange Commission
(SEC). See Section 50(3)(e) of the Act.
 A copy of the printed notice of the
company’s resolution. This is not a
statutory rule; it is a matter of practice.
RE-REGISTRATION OF A COMPANY LIMITED BY SHARES
TO UNLIMITED COMPANY – (SECTION 51 OF CAMA)

 A company limited by shares may, with the assent of

all the members, be re-registered as an unlimited
company. See Section 51 of CAMA. The situation
presents the most potential danger to members.
Hence, their assent is required for the conversion.
 The application for conversion must be made in the
prescribed form and signed by a director and the
secretary of the company. The documents to be
lodged with the CAC include the following:
RE-REGISTRATION OF A COMPANY LIMITED BY SHARES
TO UNLIMITED COMPANY – (SECTION 51 OF CAMA)

 The application for re-registration.

 The prescribed form of assent to the company being re-
registered as an unlimited company subscribed by or on behalf
of all the members of the company. See Section 51(6)(a) of
CAMA.
– A statutory declaration by the directors of the company that the
persons by whom or on whose behalf the form of assent is
subscribed constitute the entire members of the company.
– If any of the members of have not subscribed to the form
themselves, that the directors have taken all reasonable steps to
satisfy themselves that each person who subscribed to the form on
behalf of a member was lawfully empowered to do so.
RE-REGISTRATION OF A COMPANY LIMITED BY SHARES
TO UNLIMITED COMPANY – (SECTION 51 OF CAMA)

 A printed copy of the Memorandum and Articles of

Association incorporating the alterations set out in
the resolution. See Section 51(6) of CAMA for the
documents generally.
 If the Commission is satisfied that the company may
be re-registered, it will retain and register the
application and issue a certificate of incorporation to
reflect the new company.
RE-REGISTRATION OF A COMPANY LIMITED BY SHARES
TO UNLIMITED COMPANY – (SECTION 51 OF CAMA)

 Note the following:

 That an unlimited company that is re-registered as a
limited company cannot revert back to be registered
as an unlimited company under CAMA. See Section
51(2) of CAMA.
 A public company or a company which has
previously been re-registered as an unlimited
company, shall not be re-registered under Section
51(3) of the Act.
RE-REGISTRATION OF UNLIMITED TO
A COMPANY LIMITED BY SHARES – (SECTION 52
OF CAMA)

 An unlimited company, that is, a company registered with

unlimited liability, may be re-registered as a company limited by
shares.
 To effect re-registration, the company must pass a Special
Resolution to that effect and lodge the resolution together with
an application for re-registration signed by the director and
secretary of the company. See Section 52 of CAMA. The
Special Resolution must state the proposed share capital and
make necessary alterations in the Memorandum and Articles of
Association to meet the requirements of a company limited by
shares.
RE-REGISTRATION OF UNLIMITED TO
A COMPANY LIMITED BY SHARES – (SECTION 52
OF CAMA)

 The specific requirements are as follows:

 The application for re-registration.
 A printed copy of the Memorandum and
Articles of Association as altered, and
RE-REGISTRATION OF UNLIMITED TO
A COMPANY LIMITED BY SHARES – (SECTION 52
OF CAMA)

 The Special Resolution.

 Note that the documents must be lodged
with the Commission (CAC) within 15 days of
the passing of the resolution provided that
the application must be lodged not earlier
than the day in which the resolution was filed
if it was filed pursuant to Section 237 of
CAMA.
 Also note the following:
RE-REGISTRATION OF UNLIMITED TO
A COMPANY LIMITED BY SHARES – (SECTION 52
OF CAMA)

 That an unlimited company cannot re-register

as a public company or a company limited by
guarantee.
RE-REGISTRATION OF UNLIMITED TO
A COMPANY LIMITED BY SHARES – (SECTION 52
OF CAMA)

 A company limited by shares but re-registered as

unlimited cannot re-register as a limited company
under this section. See Section 52(2) of CAMA.
 Re-registration under this Section does not affect the
rights and liabilities of the company in respect of any
duty or obligation incurred or any contract entered
into by or on behalf of the company before re-
registration. See Section 52(9) of the Act.
RE-REGISTRATION OF A PUBLIC COMPANY TO
A PRIVATE COMPANY – (S. 53 OF CAMA)

 Section 53 of CAMA permits a public company to convert its

status to that of a private company on the following conditions:

 The company must pass a Special Resolution to that effect.

 Application in the prescribed form and duly signed by a director
and secretary must be delivered to the CAC and
 The application must be accompanied by the printed copy of
the Memorandum and Articles of Association as altered by the
Special Resolution.
RE-REGISTRATION OF A PUBLIC COMPANY TO
A PRIVATE COMPANY – (S. 53 OF CAMA)

 Before the application is made, the time for

the application for cancellation must have
either expired or must have otherwise been
dealt with. See Section 53(1)(c) of CAMA.
 Note that the resolution must alter the
Memorandum and Articles to show that the
company is a private company instead of a
public company.
RE-REGISTRATION OF A PUBLIC COMPANY TO
A PRIVATE COMPANY – (S. 53 OF CAMA)

 The law makes provision for members to object to the re-

registration of a public company as a private company. The
objection is made by way of allegation to court for cancellation
of a Special Resolution. See Section 53(3) of the Act. The
persons entitled to make the application are:
 Holders of not less in the aggregate than 5 per cent in the
nominal value of the company’s issued share capital, or any
class thereof; or
 not less than 5 per cent of the company’s members but not by
a person who has consented to or voted in favour of the
resolution.
PROCEDURE FOR MAKING
OBJECTION

 The application must be made within 28 days of the passing

of the Special Resolution.
 The applicant must immediately inform the CAC of the fact
that they have applied to the court. The duty to inform the
CAC of the application is on the applicant.
 When the application is heard, the court may make an order
either cancelling or confirming the resolution.
 The company shall within 15 days from the court’s order or
such other period as the court may direct, deliver to the CAC
a certified true copy of the order of court. See Section 53(6)
of the Act.
PROCEDURE FOR MAKING
OBJECTION

 Where no application for cancellation of the Special

Resolution is made, the company can apply to register the
resolution after the end of the 28 days allowed for making the
application and in case the delivery to the CAC is found
satisfactory, the CAC will retain and register the application
and the company will be issued with a certificate of
incorporation as a private company.
 Note that conversion of a public company to a private
company is optional pursuant to Section 53 of CAMA.
However, where a company registers the share capital and
the court confirms the reduction, if such reduction brings the
share capital of the company before the statutory minimum
prescribed for a public company, then conversion becomes
compulsory.
PROCEDURE FOR MAKING
OBJECTION

 On the issue of the certificate, the company becomes a

private company and the alteration in the Memorandum and
Articles set out in the resolution will take effect accordingly.
See Section 53(9) of CAMA.
 The certificate is prima facie evidence that the
requirement of Section 53 of the Act in respect of re-
registration and of matters precedent and incidental to it
have been complied with and that the company is now a
private company. See Section 53(10) of CAMA.
 The company must alter its seal, nameplate and other
documents of the company to show that it has converted to a
private company.
QUESTION

 Bagauda (Nigeria) Ltd is a private company that

operates in Tiga/Bebeji Local Government of
Kano State. The company is engaged in road
construction. At the General Meeting of the
company held on 11th June 2004 at Rock Castle
Hotel, Tiga, the following Resolution was
proposed and duly passed. “That the company
be re-registered as a Public Company by the
name Bagauda (Nigeria) PLC.
QUESTION

 As the Company Secretary, state the

procedure to re-register the company
(including all documents to be filed).
 State two consequential alterations to be made in the
Memorandum of Association of the company to bring
it in line with that of a public company.
 State two consequential alterations to be made in the
Articles of Association to bring it in line with the
Articles of Association of a public company.
 ALTERATION OF CONDITIONS OF THE
MEMORANDUM AND
 ARTICLES OF ASSOCIATION
 ALTERATION OF THE MEMORANDUM –
 (SECTIONS 31 OF CAMA)
 (SECTION 45 OF CAMA)
 (SECTIONS 100 TO 111 OF CAMA)
 Except in cases and in the manner and to the
extent expressly provided for in CAMA, a
company may not alter the conditions in its
Memorandum of Association. This means a
company cannot go outside the express
provisions of the Act to alter the conditions in
its Memorandum of Association.
 Section 45 of CAMA makes provision for how each
condition can be changed. With respect to the name of the
company, Section 31 must be complied with in its alteration.
Section 31 provides that if a company is registered under a
name identical with that by which a company in existence is
previously registered or so nearly resembling it as to be likely to
deceive, the first mentioned company may, with the approval of
the Commission, change its name and if the Commission so
directs within six months of its being registered under that
name, the company concerned shall change its name within a
period of six weeks from the date of the direction or such longer
period as the Commission may allow.
 As regards the business or object clause of the company,
its alteration must be in accordance with Section 46 of the Act
which provides that notice must be given to members by
Special Resolution.
 With respect to the alteration of any restrictions on the
powers of the company, you have to comply with Section 46 of
the Act.
 For the alteration of capital, Sections 100 to 111 of the Act
must be complied with. These sections deal with alteration of
share capital by consolidation, conversion and subdivision of
shares, cancellation and reduction of shares etc.
CHANGE OF NAME
 There are three situations whereby the name of the company can be
changed.
 SITUATION 1
 Change the name which conflicts with an existing registered name.
See Section 31(1) of the Act.
 Where a company is registered under a name, which is identical
with that of a company in existence, or so nearly resembles that name
as to be calculated to deceive, the new company may change such
name with the approval of the CAC. Or alternatively if the CAC so
directs within six (6) months of the registration of the company, the
company must change its name within 6 weeks from the date of the
direction or any extension of time granted by the CAC.
 SITUATION 2
CHANGE OF NAME

 Voluntary Change of Name

 This is a situation where a company in
existence is desirous of changing its name
for one reason or the other.
 PROCEDURE FOR VOLUNTARY CHANGE
OF NAME
CHANGE OF NAME
 There must be a resolution of the directors authorising the
change of name and also directing the Company Secretary to
take steps to have the name of the company changed.
 The Secretary will search for availability of name and, if
necessary, seek reservation of the name.
 The Secretary will convene a General Meeting or an
extraordinary meeting of the company giving 21 days notice of
such meeting and specifying in the notice an intention to pass a
Special Resolution to change the name of the company in the
meeting. Generally, the resolution will be reproduced on the
notice of the meeting.
CHANGE OF NAME

 After the passing of the resolution by the company,

the following documents must be delivered to the
CAC.
 A notice of the Special Resolution.
 A letter to the CAC requesting its consent to the
change of name.
 The original certificate of incorporation.
 Memorandum and Articles of Association of the
company as altered to reflect the new name.
CHANGE OF NAME

 SITUATION 3
 The Name may be changed at the instance of the
CAC
 The name of the company may be changed if it is
discovered to conflict with an existing trademark or
business name registered in Nigeria. The change
here is at the instance of CAC which may require
such change unless there is evidence that the owner
of the trademark or business name has consented to
the use of it.
CHANGE OF NAME
 Note that when a company changes its name, CAC must
enter the new name on the Register in place of the former
name and issue a new certificate of incorporation showing the
new name which is in accordance with Section 31(5) of the Act.
 Note that the change of name does not affect the rights
and obligations of the company before the change of name.
 Note also that legal proceedings commenced before the
change may be continued or a new one commenced against
the company in its new name. This is provided in Section 31(6)
of CAMA.
 STEPS TO BE TAKEN BY THE COMPANY
AFTER
 SUCCESSFUL CHANGE OF NAME
 OR
 POST-REGISTRATION PROCEDURE
 Alteration of the Common Seal, Share
Certificates, letter heads, nameplates and
other documents of the company to reflect
the new name.
 Any Memorandum or Articles issued after
the alteration must reflect the change of
name.
 The change of name shall be advertised in a daily
newspaper circulating nationwide.
 It is prudent for persons dealing with the company
to be notified directly of the change of name of the
company.
 It is now the duty of the CAC to advertise the
change of name in the Official Gazette of the
Federation as provided in Section 31(7) of the Act.
NOTE

 Please, learn how to draft a letter to the CAC

for change of name of a company.
EXAMPLE
 BAGAUDA NIGERIA LIMITED
 NO. 2 LAKESIDE ROAD,
 BAGAUDA, KANO.
 11th May 2006
 The Corporate Affairs Commission,
 Plot 565 Ndola Crescent,
 Wuse Zone 5,
 Abuja,
 Sir,
 REQUEST FOR APPROVAL TO CHANGE THE NAME OF
 BAGAUDA NIGERIA LTD
 I am directed by the Board of Directors of the above company to apply for approval of the
Commission for the name of the above company to be changed to “BAGAUDA FISHERIES LIMITED.
 2. I enclose herewith a printed copy of a Special Resolution of the company duly passed on the 8th
day of May 2006 sanctioning the proposed change of name.
 3. The name is being changed so as to reflect the nature of the main object of the company.
 Yours faithfully,
 SALAKO ADEBIYI,
 COMPANY SECRETARY
 Encl.
ALTERATION OF THE BUSINESS/
OBJECT CLAUSE IN THE MEMORANDUM –
(SECTIONS 45 AND 46 OF CAMA)

 The business or object clause in a

company’s Memorandum may be altered by
Special Resolution. See Sections 46(1) and
45(2) of CAMA.
ALTERATION OF THE BUSINESS/
OBJECT CLAUSE IN THE MEMORANDUM –
(SECTIONS 45 AND 46 OF CAMA)

 By giving 21 days notice of meeting and specifying in

the notice the intention to pass a resolution as a
Special Resolution. The notice of meeting must be
sent to all members of the company and to all
holders of debentures secured by floating charge of
the company.
 At the meeting, a Special Resolution must be passed
by ¾ of members voting in person or by proxy.
ALTERATION OF THE BUSINESS/
OBJECT CLAUSE IN THE MEMORANDUM –
(SECTIONS 45 AND 46 OF CAMA)

 Application for cancellation of Resolution shall

be made to the Federal High Court within 28
days of the passing of the Resolution by
holders of 15 per cent in nominal value of the
company’s issued share capital or holders of
not less than 15 per cent of the company’s
debentures secured by a floating charge. See
Section 46(2)(a) and (b) of CAMA.
ALTERATION OF THE BUSINESS/
OBJECT CLAUSE IN THE MEMORANDUM –
(SECTIONS 45 AND 46 OF CAMA)

 Note that any member who voted in

favour or consented to the resolution cannot
apply for cancellation.
 Note also that it is not stated in the CAMA
the ground for application for cancellation. It
follows from this that an applicant may apply
for cancellation on any ground at all as long
as he can convince the court.
NOTIFICATION TO CAC

 WHERE AN APPLICATION IS MADE TO

COURT FOR CANCELLATION
 The company must forthwith give notice
of making such application to the CAC. After
the notice and within 15 days of making an
order by the court and in the case of refusal
to confirm the resolution, a certified true copy
of the order must be delivered to the CAC.
NOTIFICATION TO CAC
 In the case of confirmation of the resolution, the
company shall deliver a certified true copy of the
order with a printed copy of the Memorandum as
altered. A notice of the Special Resolution must also
be delivered.
 WHERE NO APPLICATION IS MADE TO THE
COURT
 Where no application is made to the court within
the specified 28 days, a copy of the Special
Resolution must be delivered to CAC within 15 days
from the end of the 28 days waiting period.
NOTIFICATION TO CAC
 If CAC is satisfied with the resolution then a printed copy
of the memorandum as altered will be delivered to it. See
Section 46(8)(a) of CAMA.
 But if, on the other hand, CAC is not satisfied, it will notify
the company in writing of its dissatisfaction and the company
has 21 days from the date of receipt of the notice to appeal
against the decision of the CAC. If, for any reason, the
company fails to serve the notice required by Section 46(8)(a)
of the Act within the stipulated time, it may apply to court for an
extension of time to deliver the document. See Section 46(8)
of the Act.
NOTIFICATION TO CAC

 The circumstances in which such application can

be made is when the company fails to notify CAC of
the order of the court made upon application for
cancellation.
 Note that where the alteration has not been
properly made application may be made to the court
within 21 days of the passing of the resolution to have
the alteration declared invalid.
 Any member can apply to have the resolution
declared invalid notwithstanding the number of shares
he has subscribed to.
ALTERATION OF THE CAPITAL CLAUSE – (SECTION
45(4) OF CAMA)

 Section 45(4) of CAMA provides that Capital Clause

may be altered by Ordinary Resolution in
accordance with Sections 100 to 111.
 By virtue of Section 100(a) of the Act, a
company may consolidate and sub-divide its shares
into larger amount. For example, if a company has
10,000 shares of N1.00 each, it can consolidate the
shares to 5,000 shares and sub-divide it to N2.00
each.
ALTERATION OF THE CAPITAL CLAUSE – (SECTION
45(4) OF CAMA)

 Now, Section 100(1)(b) of the Act provides that a

company on sub-dividing its shares or any of them
into shares of smaller amount, for example, 5,000
shares of N2.00 each can again be sub-divided into
10,000 shares of N1.00 each.
 Section 100(1)(c) of the Act allows a company to
convert paid-up shares into stock and to also
reconvert stock into paid-up shares.
CANCELLATION OF UNISSUED SHARES –
(SECTION 100(1)(D) OF CAMA)

 Section 100(1)(d) of the Act makes for

cancellation of an unissued shares. The
company may cancel shares which have not
been issued because so long as the shares
have not been issued to members, no
member is committed to pay for them and if
the shares are cancelled, no member will be
prejudiced by so doing.
CANCELLATION OF UNISSUED SHARES –
(SECTION 100(1)(D) OF CAMA)

 Note that where a company takes any of

these steps in Section 100 as shown above,
it must give notice to the CAC specifying, as
the case may be, the shares consolidated,
divided, converted, sub-divided, cancelled or
the stock re-converted within one month of
so doing.
INCREASE IN CAPITAL – (SECTION 102
OF CAMA)

 Another alteration which may be made by

Ordinary Resolution is increase of capital
which is provided under Section 102 of
CAMA.
 A company limited by shares may in
General Meeting and not otherwise increase
its share capital by creating new shares.
This is done by Ordinary Resolution.
PROCEDURE FOR INCREASE

 There must be a Board resolution to the

effect that the capital of the company be
increased and also authorising its
Secretary to take necessary steps to effect
the increase.
 Notice of meeting must be given to
members who are entitled to attend the
General Meeting of the company.
PROCEDURE FOR INCREASE
 A General Meeting will be convened where an Ordinary Resolution
to increase the capital of the company will be passed.
 After the resolution is passed and within 15 days of the passing of
the resolution permitting the increase the following documents must
be delivered to the CAC.
– A copy of the resolution authorising the increase.
– A notice of increase stating the class or classes of shares involved and
special rights attached to them, if any.
– A statement of increase duly stamped. Note that two copies of
statement of increase must be taken to the Federal Commissioner of
Stamp Duties. The stamp duty to be paid is calculated at the same rate
with the stamp duty paid on the authorised capital when incorporating
the company originally. The Commissioner for Stamp Duty will retain a
copy of the statement of increase and return a stamped copy to you,
which you will include in the documents to be filed with the CAC.
PROCEDURE FOR INCREASE
 Within 6 months of giving the notice of increase to the CAC, you
must ensure that not less than 25 per cent of the share capital
including the increase has been issued and unless this is done, the
increase cannot take effect. See Section 103 of CAMA.
 After issuing the share capital, up to 25 per cent of the directors of
the company must deliver to the CAC a statutory declaration that
the shares of the company have been issued up to 25 per cent of
the authorised capital of the company. And unless this is done, the
increase will not take effect.
 A certificate of increase must be obtained from the CAC.
 A copy each of the resolution and certificate of increase must be
annexed to the Memorandum of the company.
REDUCTION OF CAPITAL – (SECTION
106(1) OF CAMA)

 Section 105 of CAMA provides for restriction on

reduction of issued capital except in accordance with
the procedure laid down in CAMA.
 A company limited by shares may reduce its capital
by Special Resolution if authorised by its Articles and
subject to confirmation by the court. See Section
106(1) of CAMA.
 Section 106(2) of the Act provides that a
company may:
REDUCTION OF CAPITAL – (SECTION
106(1) OF CAMA)

 Extinguish or reduce the liability on any of its shares in respect

of share capital not paid up; or
 Either with or without extinguishing or reducing liability on any
of its shares, cancel any paid-up share capital which is lost or
unrepresented by available assets; or
 Either with or without extinguishing or reducing liability on any
of its shares, pay off any paid-up share capital which is in
excess of the company’s wants, and the company may, if and
so far as is necessary, alter its memorandum by reducing the
amount of its share capital and of its shares accordingly.
PROCEDURE FOR REDUCTION OF
CAPITAL

– Directors must meet to resolve that the share

capital be reduced.
– The scheme of reduction will be prepared.
– The General Meeting has to be convened. The
Notice of Meeting should be accompanied by
explanatory circular and the scheme of
reduction.
PROCEDURE FOR REDUCTION OF
CAPITAL

– At the meeting, a Special Resolution must be

passed reducing the capital and approving the
scheme of reduction.
PROCEDURE FOR REDUCTION OF
CAPITAL

– Application must be made to court to confirm

the reduction and also approve the Scheme of
Reduction. If the court is satisfied that the
creditors have duly consented or that adequate
provisions have been made to discharge or
secure their debts or claims or that the debts as
determined and the capital does not by this
reduction fall below the authorised minimum, it
may by order confirm the reduction. See
Section 108(1) of the Act.
PROCEDURE FOR REDUCTION OF
CAPITAL

 Note that creditors who would be entitled to make a claim on

the company are entitled to object to the reduction. See
Section 107(2) and (3) of the Act.
– After the order of the court confirming the reduction, a copy of the
order and a copy of the minutes approved by the courts showing
particulars of the capital as altered must be delivered to CAC.
– A certificate of registration of the order and Minutes will be
obtained from the CAC.
– The approved Minutes and order of reduction shall be annexed to
the Memo of the company. Note that the Minutes are deemed to
be substituted for the corresponding part of the company’s
memorandum as well as an alteration of the memo of the
company. See Section 109(5) and (6) of CAMA.
ALTERATION OF THE REGISTERED
OFFICE CLAUSE

 There is no specific provision in the CAMA for the

alteration of the Registered Office clause. Note that
any other provisions in the Memorandum of
Association of the company the alteration of which is
not specifically provided for in the Act may be altered
by complying with Section 46 of CAMA unless there
is a provision to the contrary. See Section 45(5) of
the Act. General provisions for alteration of clauses
in the Memorandum or Articles not specifically
contained in the Act.
ALTERATION OF THE REGISTERED
OFFICE CLAUSE

 Note that if the Memorandum states that

the registered office will be situated in
Nigeria then there is no need for it to be
altered but if the Memorandum states that
the registered office should be situated in a
particular place or state, for example, Lagos
or Kaduna, the clause may need to be
altered if such a place or State is changed.
ALTERATION OF THE RESTRICTION OF
THE POWERS OF THE COMPANY CLAUSE – (SECTION 45(2)
OF CAMA)

 This clause is alterable in the same manner

as the object or business discussed earlier.
See Section 45(2) of the Act.
ALTERATIONS OF PROVISIONS IN THE MEMORANDUM
WHICH MIGHT LAWFULLY HAVE BEEN CONTAINED IN THE ARTICLES –
(SECTION 47(1) OF CAMA)

 Examples of this provision is the restriction

on the powers of directors. This can be
altered by Special Resolution but if
application is made to the court for the
alteration to be cancelled, it will not have
effect except in so far as it has been
confirmed by the court. See Section 47(1) of
the Act.
PROCEDURE FOR ALTERATION OF
CANCELLATION

 The procedure to be adopted for alteration (or

cancellation) here is that under Section 46 earlier
discussed with the exceptions of the provisions
under Section 46 of the Act relating to debenture
holders, that is, Section 46(2)(b), (5), (6) and (10).
 However, the provision in Section 47 will not
apply where the Memorandum provides or prohibits
the alteration of those provisions.
ALTERATION OF ARTICLES OF ASSOCIATION –
(SECTION 48 OF CAMA)

 Section 48 of CAMA gives a company power to alter or add to

its Articles by Special Resolution but subject to the provisions
of the Act and to the conditions or other provisions contained in
the Memorandum of the company. Any alteration so made shall
be as valid as if originally contained therein and be subject in
like manner to alteration by Special Resolution. See Section
48(1) and (2) of the Act. In the case of ANDREWS V. GAS
METER COMPANY (1897) 1 CH 361, the original Articles
contained no provision to issue preference shares but the
company, by Special Resolution, altered its Articles so as to
have power to issue preference shares accordingly. The
alteration was held to be effective.
PROCEDURE FOR ALTERATION OF
ARTICLES

 There must be a Board meeting whereby a

resolution will be passed to alter the
Articles.
 A notice of 21 days must be given to the
Members accompanied with the proposed
Special Resolution.
 A general meeting will be convened
whereby a Special Resolution to alter the
Articles will be passed.
PROCEDURE FOR ALTERATION OF
ARTICLES

 The printed copies of the Articles and printed copy of the Special
Resolution must be delivered to the CAC within 15 days of the
passing of the resolution. See Section 237(1)(4)(a) of the Act.
 The resolution must be annexed to every copy of the Articles issued
after the passing of the resolution.
 Note that the alteration must not go contrary to the Act, particularly
Section 49 which provides that a member of a company shall not be
bound by any alteration made in the Memorandum or Articles of the
company requiring him on or after the date of the alteration to –
– take or subscribe for more shares than he held at the date on which he
became a member or
– increase his liability to contribute to the share capital of the company; or
– pay money by any other means to the company.
RUNNING THE COMPANY
PRELIMINARY MATTERS BEFORE
COMMENCEMENT OF BUSINESS

 As a solicitor you must draw the attention of

your client to the need of a nameplate which
must be legible and conspicuously placed
outside the business place or office of the
company. The nameplate must also have on
it the company’s (CAC) registered number.
RUNNING THE COMPANY
PRELIMINARY MATTERS BEFORE
COMMENCEMENT OF BUSINESS

 There is a need to tell your client to write

the name and the registered number of the
company on all documents and all official
publications of the company.
 The company must also have a Common
Seal with its name and registered number on
it.
RUNNING THE COMPANY
PRELIMINARY MATTERS BEFORE
COMMENCEMENT OF BUSINESS

 The company is also expected to keep some statutory

books which are:
 REGISTER OF MEMBERS – (SECTIONS 83 AND 84 OF
CAMA)
 This is provided under Sections 83 and 84. The register is
supposed to contain the names, addresses, descriptions of all
the members and the number of shares and class of shares
held by each member. The amount paid on the shares, how
the amount was paid, for example, by cash or other
consideration. The register must also contain the date, the
particular name of a shareholder and when he was registered
as a member.
RUNNING THE COMPANY
PRELIMINARY MATTERS BEFORE
COMMENCEMENT OF BUSINESS

 It should be noted that the name of a member must be

registered within 28 days of his acquiring the shares and in the
case of a subscriber within 28 days of incorporating the
company.
 INDEX OF MEMBERS( SECTION 85 OF CAMA)
 The purpose of the Index of Members is to list out the names of
members and the page. The name can be found on the
Register of Members. Where the company arranged that the
Register of Members also include an index, there will be no
need for a separate book as Index of Members.
RUNNING THE COMPANY
PRELIMINARY MATTERS BEFORE
COMMENCEMENT OF BUSINESS

 Note also that the index of members is only required

where the membership of the company is more than
50.
 THE REGISTER OF SUBSTANTIAL INTEREST IN
SHARES OF THE COMPANY (SECTIONS 95 AND
97 CAMA)
 Note that this is only required for public companies.
Its purpose is to register those who have up to 10
per cent and above of the total shares of the
company.
RUNNING THE COMPANY
PRELIMINARY MATTERS BEFORE
COMMENCEMENT OF BUSINESS

 REGISTER OF DIRECTORS’
SHAREHOLDING (SECTION 275 OF CAMA)
 This register is a must for all companies,
whether private or public.
 REGISTER OF DIRECTORS AND
SECRETARIES (SECTION 292 OF CAMA)
RUNNING THE COMPANY
PRELIMINARY MATTERS BEFORE
COMMENCEMENT OF BUSINESS

 This is also for all companies. It must contain the

names, usual residential address, nationality, date of
birth and particulars of other directorship held by
them.
 REGISTER OF CHARGES – (SECTIONS 191 AND
197 OF CAMA)
 Securities or debentures charged on the properties
of the company either on land, machinery or unpaid
shares of the company or book debt of the company
have to be included on the register. See Sections
191 and 197 of the Act.
RUNNING THE COMPANY
PRELIMINARY MATTERS BEFORE
COMMENCEMENT OF BUSINESS

 REGISTER OF DEBENTURE HOLDERS -

(SECTION 193 OF CAMA)
 The register shall contain the names and
addresses of the debenture holders, the
principal of the debenture and the
debentures held by each of them, et cetera.
 ACCOUNTING RECORDS – (SECTIONS
331 AND 332 OF CAMA)
RUNNING THE COMPANY
PRELIMINARY MATTERS BEFORE
COMMENCEMENT OF BUSINESS

 This is also a must for all companies and it shall show and
explain the transactions of the company, the financial position
of the company and its assets and liabilities. Section 331 to
332(1) of the Act.
 THE MINUTES BOOK (SECTIONS 241 AND 242(1))
 This is also a must for all companies and it must contain the
minutes of proceedings of general meetings, Directors (Board)
meetings and Minutes of its Managers’ Meeting. This Minutes
Book shall prima facie be evidence of the proceedings.
DIRECTORS – (S. 244 OF CAMA)

 Directors are persons appointed to direct and manage the

business of the company. See Section 244 of CAMA.
Directors need not be shareholders except where there is
share qualification in the Articles of Association. S.251 Every
company registered under CAMA must have a minimum of two
directors. See Section 246 of CAMA. There is no statutory
maximum but the company may by its Articles provide for
maximum number of directors.
 In the case of RE: FOREST OF DEAN COAL MINING
COMPANY, Sir Jessel M. R. stated as follows:
DIRECTORS – (S. 244 OF CAMA)

 “Directors have sometimes been called trustees or commercial

trustees and sometimes they have been called managing
partners. It does not matter what you call them so long as you
understand what their true position is, which is that they are
really commercial men managing a trading concern for the
benefit of themselves and all other shareholders in it…”
 Section 244(2) of the Act provides that there shall be
every rebuttable presumption that all persons who are
described by the company as directors whether as Executive or
otherwise, have been duly appointed.
APPOINTMENT OF FIRST DIRECTORS
– (S.247 OF CAMA)

 The first directors of a company are appointed in writing by the

subscribers to the Memorandum of Association or a majority of
them. The first directors may also be appointed by naming
them in the Articles of Association. See Section 247 of CAMA.
Subsequent directors are appointed by members in a General
Meeting.
 The Articles of Memorandum may also empower other
person or officer to appoint subsequent directors and where
such power exists, it may be enforced by a third party or a
conferee may enforce the power even where he is not a
member of the company. See Section 41(3) of the Act.
DISQUALIFICATION FOR
DIRECTORSHIP – (S.257 OF CAMA)

 By virtue Section 257 of CAMA, the following

persons cannot be appointed as directors,
that is, they are disqualified from holding
positions as directors:
– An infant, that is, a person under 18 years of age.
– A lunatic or a person of unsound mind.
– Any person disqualified under Sections 253, 254
and 258 of the Act.
DISQUALIFICATION FOR
DIRECTORSHIP – (S.257 OF CAMA)

 Recall that Section 253 relates to insolvent

persons while Section 254 relates to persons
convicted of fraud in relation to management
of a company and Section 258 relates to
circumstances where a director should vacate
his office.
– A corporation, that is, a company other than a
person appointed to represent a company on a
Board.
TYPES OF DIRECTORS

 Although there is no legal classification of

directors, it is possible to identify different
types of directors. These include:
 (a) SHADOW DIRECTOR – (SECTION 245
OF CAMA)
TYPES OF DIRECTORS
 Section 245 of CAMA provides that directors include any person
at whose instructions or directions directors are accustomed to act.
Accordingly, where a person is in the habit of giving instructions or
directions to directors and the directors are in the habit of obeying such
instructions or directions, that person is deemed to be a shadow
director.
 What this shows is that a shadow director is never appointed by
anybody. His existence is by the operation of the law and only for the
purpose of making him liable in the circumstances provided by CAMA.
He is not entitled to benefits, rights and responsibilities of directors
generally.
 Directors shall include any person on whose instructions and directions
the directors are accustomed to act. Thus, the Chairman and
proprietor of the company is a director for the purpose of the Act.
TYPES OF DIRECTORS

 b. EXECUTIVE OR SPECIAL DIRECTOR

 The Articles of Association of a company
usually give the directors or the company
power to appoint executive, special or
alternate directors.
TYPES OF DIRECTORS
 In practice, an “executive” or “special” director is an
employee of the company whose status has been raised to that
of a director but who continues essentially as such employee,
for example, Sales Director. His status is usually limited by the
Articles but he may eventually be elevated to full directorial
status.
 c. ALTERNATE DIRECTOR
 An alternate director is appointed by a Director to sit on
the Board in place of an Executive or Special Director. The
power to make such an appointment must be provided in the
Articles and details of the relation between the director and his
alternative director, the remuneration and other matters should
also be clearly stated in the Articles.
NUMBER OF DIRECTORS – (SECTION
246 OF CAMA)

 First, it is a requirement of the law under Section 246

of CAMA that every company registered after the
commencement of the 1990 Act must have at least
two directors. Those registered before the
commencement of the Act, that is, before 1st
January 1990, with one Director were given six
months from that day to regularise their position or
face the consequence in Section 246(3), that is, loss
of the privilege of limited liability status for the
culpable director or member and the lifting of the veil
to affix personal liability on the members who are
aware of the breach.
NUMBER OF DIRECTORS – (SECTION
246 OF CAMA)

 Section 249(3) of the Act provides that

the directors may increase the number of
directors so long as it does not exceed the
maximum allowed by the Articles but the
General Meeting shall have power to
increase or reduce the number of directors
generally and may determine in what rotation
the directors shall retire.
APPOINTMENT OF DIRECTORS

 FIRST DIRECTORS – (SECTIN 247 OF CAMA)

 First Directors are appointed in two ways:
– The number of the directors and the names of the first
directors shall be determined in writing by the First
subscribers to the Articles and Memorandum of Association
of a company or majority of them, or
– The First Directors may be named in the Articles.
 This is provided in Section 247 of the Act.
APPOINTMENT OF DIRECTORS

 2. SUBSEQUENT APPOINTMENT OF
DIRECTORS – (SECTION 248(1) OF CAMA)
 Section 248(1) of the Act provides that
the members at the Annual General Meeting
shall have power to re-elect or reject
directors and appoint new ones.
APPOINTMENT OF DIRECTORS

 In the event of all the directors and shareholders dying,

any of the personal representatives of the shareholders may
apply to the court for an order to convene a meeting of all the
personal representatives of the shareholders entitled to attend
and vote a general meeting to appoint new directors to manage
the company.
 Section 248(2) of the Act provides that if the personal
representatives of the shareholders fail to hold a meeting, the
creditors if any, may do so. This is a clear manifestation of the
perpetual succession of a company as shown in the case of
SALOMON V. SALOMON CO. LTD. (SUPRA) and Section 37
of the Act.
RETIRING DIRECTORS – (SECTION
258(2) OF CAMA)

 Reappointment of retiring directors is one of the

ordinary business at an Annual General Meeting.
 Section 258(2) of the Act provides that where a
director presents himself for re-election, a record of
his attendance at the meeting of the Board during
the preceding one year must be made available to
the members at the annual meeting where he is to
be re-elected.
CASUAL VACANCIES OF DIRECTORS
(S.249(1) & (2) OF CAMA)

 Section 249 (1) and (2) of the Act provides

that casual vacancies arising out of death,
resignation, retirement or removal may be
filled by the Board of Directors. The
person(s) so appointed shall hold office till
the next AGM.
ROTATION OF DIRECTORS –
(SECTION 259 OF CAMA)

 Unless otherwise provided by the Articles of

Association of a company, at the first AGM, all
directors shall retire from office and at the AGM in
every subsequent year, one third of the directors for
the time being, or if their number is not three or a
multiple of three, then the number nearest to one
third shall retire from office as provided in Section
259(1) of the Act.
 A retiring director who offers himself for re-
election is deemed to have been re-elected unless:
ROTATION OF DIRECTORS –
(SECTION 259 OF CAMA)

 Another person is elected to fill his place; or

 It is expressly resolved at the meeting not to
fill the vacancy created by his retirement; or
 A resolution for his re-election has been put
to the meeting and lost. See Section 259(3)
of the Act.
VACATION OF OFFICE OF DIRECTORS
(S 258 OF CAMA)

 Vacation of office of a director may arise from death,

appointment of a liquidator, disqualification, resignation,
retirement or removal. A person appointed director shall
vacate his office:
– if he ceases to be a director for failure to hold qualification shares;
– if he becomes an undischarged bankrupt;
– if he is prohibited by any order of the court made under Section
254 of the Act by reason of his being fraudulent;
– if he becomes of unsound mind, or
– if he resigns his office by notice in writing to the company.
DISQUALIFICATION FOR
DIRECTORSHIP

 The following persons are disqualified from

being directors:
 An infant under the age of 18 years.
 A lunatic or person of unsound mind.
DISQUALIFICATION FOR
DIRECTORSHIP

 An insolvent person disqualified under

Section 253 of CAMA. Where the provision
of the section of this Act is violated, the
person shall be tried and if found guilty, shall
be sentenced to a fine of N500 or an
imprisonment term of not less than six
months or more than 2 years or both.
DISQUALIFICATION FOR
DIRECTORSHIP

 If he becomes prohibited from becoming a director

by an order of a High Court for a period not less than
10 years as provided under Section 254 of the Act in
the following circumstances:
– where he has been convicted of an indictable offence in
connection with the promotion, formation or management of
a company;
– in the winding up of a company, it is found that he has been
guilty of fraudulent trading under Section 513;
– he has been guilty while an office of the company of any
fraud in relation to the company or a breach of duty towards
it.
DISQUALIFICATION FOR
DIRECTORSHIP

 Failure to hold qualification shares. Where

the Articles of Association require one before
one can become a director, such office will
be vacated where the Director fails to obtain
such qualification shares within a period of
two months.
 A corporation other than its representative
appointed to the Board for a given period.
See Section 257 of CAMA.
AGE LIMIT OF DIRECTORS (SECTION
255 OF CAMA)

 Section 255(a) of CAMA provides for the minimum age of

appointment of a person as a director which is 18 years and
above.
 Generally, there is no maximum age for appointment as
directors except that restriction has been placed in respect of a
director of a public company who is 70 years or more. A
person may be appointed a director of a public company
notwithstanding that he is 70 years or more of age but Section
256 of the Act provides that special notice of the resolution
approving the appointment of the director must be given to the
company. The notice to the company and to the members
must state the age of the director.
AGE LIMIT OF DIRECTORS (SECTION
255 OF CAMA)

 Section 252(1) of the Act provides that any

person who is appointed or to his knowledge
proposed to be appointed director of a public
company and who is 70 or more years old shall
disclose this fact to the members at the General
Meeting.
 Failure of any to so do as required under Section
252(2) of the Act shall constitute an offence and that
person shall be liable to a fine of N500.
LIFE DIRECTOR
 Sometimes, the Articles appoint a person life director. In such
a case, it is not necessary to re-elect him and the Articles
usually expressly exclude him from the operation of the clause
relating to retirement by rotation. He is normally given wide
powers of management and in practice, he will probably be a
major shareholder in the company. He is, however, subject to
removal under Section 262 of the Act, that is, by an Ordinary
Resolution of which special notice is given as provided under
Section 255.
 Note that a life director is not subject to retirement by rotation.
MODE OF VOTING ON APPOINTMENT OF
DIRECTORS –
(SECTION 261 OF CAMA)

 Unless the Articles of a company otherwise

provide, appointment of directors is by
Ordinary Resolution.
MODE OF VOTING ON APPOINTMENT OF
DIRECTORS –
(SECTION 261 OF CAMA)

 A private company can and usually appoints its

directors by a single resolution.
 A public company is required to appoint each
director by a separate resolution. However, a public
company may appoint two or more directors by a
single resolution if the meeting unanimously passes
a resolution that it should be so made. See Section
261(1) of the Act.
REMOVAL OF DIRECTORS – (SECTION
262 OF CAMA)

 The Articles of a company or the contract appointing

a director may provide for his removal from office.
However, Section 262(1) of the Act provides that a
company may, by an Ordinary Resolution of which
Special Notice is given, remove a director before the
expiration of his period of office notwithstanding
anything in its Articles or in any agreement between
it and the director. The intention of this provision is
explicit. The shareholders must have power to
remove the Board.
REMOVAL OF DIRECTORS – (SECTION
262 OF CAMA)

 But the director retains his right to claim

compensation or damages for wrongful
termination of his employment.
REMOVAL OF DIRECTORS – (SECTION
262 OF CAMA)

 See the following cases:

 LONGE V. FIRST BANK OF NIGERIA PLC.
 YALAJU AMAYE V. AREC. LTD (1990) 4
NWLR (PT. 145) 422.
REMOVAL OF DIRECTORS – (SECTION
262 OF CAMA)

 OLUFOSOYE V. FAKOREDE
 Special notice is required also of any resolution to appoint
as director some other person instead of the director so
removed at the meeting at which he is removed. See Section
262 of the Act.
 The notice of resolution must be forwarded forthwith upon
receipt to the director who is entitled not only to be heard on
the resolution at the meeting but also to make representation of
reasonable length to be forwarded at his request to the
members who are given notice of the meeting.
REMOVAL OF DIRECTORS – (SECTION
262 OF CAMA)

 A vacancy created by the removal of the

director if not filled at the meeting at which he
is removed may be filled as a casual
vacancy.
REMOVAL OF DIRECTORS – (SECTION
262 OF CAMA)

 Any person so removed is entitled to compensation or

damages payable to him by reason of his termination of
appointment as a director or of any appointment, for example,
as Managing Director. See Section 262(6) of the Act.
 A director who was unlawfully removed could still be
properly removed despite the improper notice and procedure
adopted earlier, since the company has a statutory right to
remove anybody from its Board although that person may apply
for a winding up order of the company on the ground that it is
just and equitable for the court to make such an order. That
was the decision in AREC LTD. V. YALAJU AMAYE (1986)
NWLR 653.
PROCEDURE FOR REMOVAL OF
DIRECTORS UNDER S.262 OF CAMA

 Check to find out if direct and simpler power of

removal other than Section 262 is provided by the
Articles or contract and apply it if available.
 The person(s) wishing to remove the director must
issue(s) notice of the resolution to the company at
least 28 days before the date of the meeting. See
Section 236 of the Act.
 Section 236 of CAMA provides as follows:
PROCEDURE FOR REMOVAL OF
DIRECTORS UNDER S.262 OF CAMA

 Where by any provision contained in this Act, special notice

is required of a resolution, the resolution shall not be
effective unless notice of the intention to move it has been
given to the company not less than twenty eight days before
the meeting at which it is to be moved and the company
shall give its members notice of any such resolution at the
same time and in the same manner as it gives notice of the
meeting or if that is not practicable, shall give them notice
thereof, either by advertisement in a newspaper having an
appropriate circulation or in any other mode allowed by the
Articles, not less than twenty one days before the meeting:
PROCEDURE FOR REMOVAL OF
DIRECTORS UNDER S.262 OF CAMA

 Provided that if, after notice of the intention

to move such a resolution has been given
to the company, a meeting is called for a
date twenty eight days or less after the
notice has been give, the notice though not
given within the time required by this
section shall be deemed to have been
properly given for purposes thereof.
PROCEDURE FOR REMOVAL OF
DIRECTORS UNDER S.262 OF CAMA

 Upon receipt of the notice, the Secretary to the company will:

– send a copy of it to the director concerned;
– issue notice of the meeting at least 21 days before the date of the
meeting. The notice will be accompanied by any representations made
by the director and state the fact of the representations having been
made.
– At the meeting:
 give audience to the director and read to the members his representations if
they were received too late or were not sent to the members owing to the
company’s default.
 Pass ordinary resolution removing the director.
– File form of particulars of directors and of any changes therein, that is,
Form CAC 7 to the CAC to reflect the removal within 14 days of
remove.
– Enter the fact of removal in the Register of Directors and where
necessary also amend the Register of Directors’ Shareholding.
PROCEDURE FOR REMOVAL OF
DIRECTORS UNDER S.262 OF CAMA

 See YALAJU-AMAYE V. AREC LTD

(SUPRA).
DUTIES OF DIRECTORS
 Directors occupy a key position in the management of a
company and are, therefore, subject to certain obligations.
Directors are both trustees and agents of the company they
represent. All the normal rules of agency apply. A director’s
duties are not capable of precise definition although CAMA has
attempted a codification of the duties but they are by no means
exhaustive.
 Broadly speaking, directors owe two duties namely:
 Fiduciary duties and
 Duties of care and skill.
 1. FIDUCIARY DUTIES
DUTIES OF DIRECTORS
 (a) Directors as Trustees – (Section 283(1) of
CAMA)
 Section 283(1) of the Act provides that directors are
trustees of the company’s moneys, properties and
their powers and as such must account for all the
monies over which they exercise control and shall
refund any moneys improperly paid away and shall
exercise their power bona fide and for the benefit of
the company and not in their own interest.
 (b) Directors as Agents – (Section 283(2) of
CAMA)
DUTIES OF DIRECTORS
 Section 283(2) of the Act provides that directors may, when
acting within their authority and the powers of the company, be
regarded as agents of the company. Like other agents,
directors incur no personal liability and are accountable for any
secret profit made. But if directors exceed their authority, they
may become liable for breach of warranty and they will also be
liable if they contract in their own names.
 (c) Fiduciary Relationship of Directors
 i) The Director shall observe the utmost good faith towards
the company in any transaction with it or on its behalf.
DUTIES OF DIRECTORS

 ii) The fiduciary duties of a director also

include where he is acting as agent of a
particular shareholder.
 iii) Where even though the director is not an
agent of any shareholder such a shareholder
or other person is dealing with the company’s
securities. See Section 279(2)(b) of the Act.
DUTIES OF DIRECTORS

 iv) A director shall act at all times in what he

believes to be in the best interests of the
company as a whole so as to preserve its
assets, further its business and promote the
purposes for which it was formed and in such
manner as a faithful, diligent, careful and
ordinarily skilful director would act in the
circumstance. See Section 279(3) of the Act.
DUTIES OF DIRECTORS
 v) The matters to which the director of a company is to have
regard in the performance of his functions include the interests
of the company’s employees in general as well as the interests
of its members. See Section 279(4) of the Act.
 vi) A director shall exercise his powers for the purpose for
which he is specified and shall not do so for a collateral
purpose and such power, if exercised for the right purpose,
does not constitute a breach of duty if it incidentally affects a
member adversely. See Section 279(5) of the Act.
DUTIES OF DIRECTORS
 vii) A director shall not fetter his discretion to vote in a particular way.
They may not, however, use their voting control to ratify their own
fraud. See the case of COOK V. DEEKS (1916) AC 544.
 viii) Where a director is allowed to delegate his powers under any
provision of this Act, such a director shall not delegate the power in
such a way and manner as may amount to an abdication of duty. See
Section 279(7) of the Act.
 ix) No provision, whether contained in the Articles or Resolutions of
a company or in any contract, shall relieve any director from the duty
to act in accordance with this section or shall relieve him from any
liability incurred as a result of any breach of the duties conferred upon
him under this section. See Section 279(8) of the Act.
DUTIES OF DIRECTORS

 x) Any duty imposed on a director under this

section shall be enforceable against the director by
the company.
 (d) Conflicts of Duties and Interests of Directors
 (i) Section 280(1) of CAMA provides that the
personal interest of a director shall not conflict with
any of his duties as a director under this Act. This
may arise in various ways:
DUTIES OF DIRECTORS
 (a) The golden rule is that a director must not, without the
consent of the company, make any profit out of his position in
the company beyond his agreed remuneration. That was the
decision in BOSTON DEEP SEA FISHING CO. V. ANSELL
(1888) 39 CH. D. 339
 (b) The duty of a director not to misuse information obtained
from the company by virtue of his position continues even after
he has ceased to be a director or officer of the company. See
Section 280(5) of the Act. See also the case of INDUSTRIAL
DEV. CONSULTANTS LTD (IDCL) V. COOLEY (1972) 1 WLR
443 where the director resigned but was still held liable to
account.
DUTIES OF DIRECTORS
 (c) The director must not use the company’s property to make
secret profit or achieve other unnecessary benefits.
 (d) By virtue of Section 281 of the Act, holding of multiple
directorship by a person does not preclude him from derogating
from his fiduciary duties to each company of which he is a
director. Therefore, he is not permitted to use the property,
opportunity or information obtained in the course of the
management of one company for the benefit of the other
company or to his own or other person’s advantage.
 2. DUTY OF CARE AND SKILL
DUTIES OF DIRECTORS
 COMMON LAW POSITION
 The Common Law position of a director’s duty of care and skill
was considered at length by ROMER J. in RE: CITY
EQUITABLE FIRE INSURANCE CO. LTD. (1925) CH. 407
where he held inter alia that in discharging his duty, a director
must act honestly. He was not bound to give continuous
attention to the affairs of the company but ought to attend
meetings when reasonably able to do so. Hence, only the
Chairman was liable for the losses. Any negligence of others
was not “wilful” and they were excluded by the Article.”
 Romer J. then laid down the following proposition after
considering all the earlier authorities on the issue.
DUTIES OF DIRECTORS

 “A director need not exhibit in the performance of his

duties a greater degree of skill than may reasonably
be expected from a person of his knowledge and
experience.”
 What this means is that a director will be judged by the
skill (low or high) which he holds out about himself.
 The case of SHONOWO V. ADEBAYO (1969) 2 ALR
COMM.. 419 is a classic example of a company
destroyed by the incompetence and carelessness of
its directors.
DUTIES OF DIRECTORS
 In the case of RE: BRAZILIAN RUBBER PLANTATION
ESTATE LTD. (1911) 1 CH. 425, Neville J. said:
 “A director is not bound to bring any special qualification to his
office. He may undertake the management of a rubber
company in complete ignorance of anything connected with the
rubber without incurring responsibilities for the mistakes which
may result from such ignorance while if he is acquainted with
the rubber business, he must give the company the advantage
of his knowledge when transacting the company’s business.
DUTIES OF DIRECTORS
 A director is not bound to give continuous attention to the
company’s affairs. His duties are of intermittent nature to be
performed at periodical Board meetings and at meetings of any
Committee of the Board upon which he happens to be placed.
He is, however, bound to attend all such meetings though he
ought to attend whenever in the circumstances he is
reasonably able to do so.”
 Thus, at Common Law, a director may safely be ignorant,
inexperience and lacking in judgment so long as he is honest.
 THE POSITION UNDER CAMA
DUTIES OF DIRECTORS

 The duty of care and skill expected of a

director is now clearly stated in Section 282
of CAMA.
DUTIES OF DIRECTORS
 Section 282(1) of the Act provides that every director of a
company shall exercise the powers and discharge the duties of
his office honestly, in good faith and in the best interests of the
company and shall exercise that degree of care, diligence and
skill which a reasonably prudent director would exercise in
comparable circumstances.
 If he fails to observe that degree of care and diligence, he may
be liable for negligence and breach of duty as provided in
Section 282(2) of the Act. The same standard of care is
required for all directors unless there is justification for
exception. See Section 282(4) of the Act.
DUTIES OF DIRECTORS

 But in the case of an Executive Director,

additional liability and benefit may arise
under the contract of employment (express
or implied) between such executive director
and the company.
DUTIES OF DIRECTORS
 In order to deal with a situation where a director deliberately
shirks his responsibility, Section 282(3) of the Act provides that
a director is individually responsible for the actions of the Board
in which he participated and absence from the Board’s
deliberation, unless justified, will not relieve a director of such
responsibility.
 In effect, the new law under CAMA is to the effect that the
standard of care required from a director is an objective one,
that is, it is a fixed standard depending on the skill and
knowledge a reasonable, prudent director of his class would
exercise if faced with similar circumstances.
ENFORCEMENT OF THE DUTIES OF
DIRECTORS

 INTRODUCTION
 As a general rule, it is the company’s responsibility to
enforce the directors’ duties but because of the powerful
administrative machinery of the company at the disposal of
directors, it is not easy for the company to enforce the duties
and so the usual way of doing so is by removing the directors
under powers given by Section 262(1) of the Act which
provides that a company may, by ordinary resolution requiring
special notice, remove a director notwithstanding the provision
in the Articles or even in the agreement between the company
and the director.
ENFORCEMENT OF THE DUTIES OF
DIRECTORS

 It should be noted that in several companies, directors would normally be

the controlling shareholders, a situation which makes their removal difficult and
sometimes impossible. In such a case, the following remedies are available to
shareholders:
– Petition for winding up the company on the ground that it is just and equitable to do so.
See Section 408(e) of CAMA.
– Relief on the ground that the affairs of the company are being conducted in an illegal
and oppressive manner. See Sections 311 to 313 of CAMA.
– To commence misfeasance proceedings against a director or other officers of a
company. Misfeasance means ‘compromised integrity’. See Section 507 of the Act.
This section provides a remedy against the unlawful acts of directors and other officers
and is available only when the company is in liquidation. Where a director (or a
manager or liquidator or any officer of the company) has misapplied or retained or has
become liable for any money or property of the company or is guilty of any
misfeasance or breach of duty in relation to the company which would involve civil
liability at the suit of the company, an application may, after investigation, be made to
the court to compel him to repay or restore the money or property or contribute by way
of compensation towards restoring the company’s assets.
– Investigation of the company’s affairs by the CAC under Sections 314 and 315 of
CAMA
ENFORCEMENT OF THE DUTIES OF
DIRECTORS

 Under Sections 314 and 315 of the Act,

application may be made to the Commission
for an investigation into the affairs of the
company and if satisfied that there is good
ground for this, it will direct the appointment
of an inspector.
REGISTER OF DIRECTORS AND
SECRETARIES

 Section 292(1) of CAMA provides that every company must keep at its
registered office a Register of its Directors and Secretaries.
 The Register must contain the following particulars with respect to
each director, namely,
 (a) his present forename and surname;
 (b) any former forename and surname;
 (c) his usual residential address;
 (d) his nationality;
 (e) his business occupation, if any;
 (f) particulars of any other directorships held by him and
 (g) the date of his birth.
 This is provided in Section 292(2) of the Act.
REMUNERATION OF DIRECTORS – (S
267 OF CAMA)

 Section 267 of CAMA provides, inter alia, that:

 “(1) The remuneration of the directors shall from time to time
be determined by the company in general meeting and such
remuneration shall be deemed to accrue from day to day.
 (2) The directors may also be paid all travelling, hotel and
other expenses properly incurred by them in attending and
returning from meetings of the directors or any Committee of
the directors or general meetings of the company or in
connection with the business of the company.”
REMUNERATION OF DIRECTORS – (S
267 OF CAMA)

 Section 267(3) of the Act provides that

where the Articles fix the remuneration, it can
only be altered by a special resolution.
REMUNERATION OF DIRECTORS – (S
267 OF CAMA)

 The company is not bound to pay remuneration to

directors but where the company agrees to pay, the directors
must pay such remuneration out of the funds of the company
and such payment is apportionable. See Section 267(4) and
(7).
 Where a company goes into liquidation before it has
determined the remuneration of the director as provided in
Section 267(1) of the Act, the director is not entitled to any
remuneration. Nor are directors entitled to preferential
payments of fees in winding up since they are not servants of
the company.
REMUNERATION OF MANAGING
DIRECTOR - (S.268 OF CAMA)

 Although the remuneration of the Managing Director

is regulated by Section 268 of the Act, it shall be
determined by the directors. Section 268 of CAMA
provides as follows:
 268(1): “A Managing Director shall receive such
remuneration (whether by way of salary, commission
or participation in profits or partly in one way and
partly in another) as the directors may determine.
REMUNERATION OF MANAGING
DIRECTOR - (S.268 OF CAMA)

 268(2): Where the Managing Director is

removed for any reason whatsoever under
Section 262 of this Act, he shall have a claim
for breach of contract if there is any or where
a contract could be inferred from the terms of
the Articles.
 268(3): Where he performs some services
without a contract, he shall be entitled to
payment on a quantum meruit.”
LIABILITY OF DIRECTORS

 1. Liability in Contract
 When a director contracts as agents on behalf of the
company, like any other agent, he is not personally
liable on the contract. See Palmer’s Company Law,
paragraph 62-02 at page 922. This is an application
of the general principles of agency and under this
principle, the director may be personally liable where
he contracts in such a way as to assume personal
liability.
LIABILITY OF DIRECTORS

 Note that where a director contracts in his own name

without disclosing that he is acting for a principal, he
may be personally liable to third parties on the
contract. That was the decision in the case of
ELKINGTON AND CO. V. HURTER (1892) 2 CH.
452.
 Even where he contracts as a director but without
using words that bind the company, he will be
personally liable.
LIABILITY OF DIRECTORS

 2. Liability in Tort
 “Any director who personally commits a fraud or any
other tort in the course of his duties is liable to the
injured party. This is based on the principle that
whoever commits a wrong is liable for it himself and
nonetheless so that he was acting as an agent or
servant on behalf, and for the benefit of another.”
See Palmer’s Company Law, paragraph 64-65 at
page 972.
LIABILITY OF DIRECTORS

 A director who has not authorised a fraud

committed by his co-directors cannot be held
responsible for it.
LIABILITY OF DIRECTORS
 Where there is a breach of the duty of care as
explained earlier, the director will be liable to the
company for any loss sustained and action may be
brought by the company to restrain him from
committing or continuing the breach, and if the
breach has been committed, proceedings may be
taken for damages or compensation for restoration
of the property of the company, if traceable, for
rescission of the contract in question or for an
account of any profits made. In addition, the director
may be dismissed summarily.
PERSONAL LIABILITY OF DIRECTORS

 Section 290 of CAMA is apparently intended

to deal with the rampant complaints about
directors who obtain loans or advance on
behalf of the company for specific projects
and divert them to their personal use. The
section deals with cases –
 (a) where a company receives money by
way of a loan for specific purposes, or
PERSONAL LIABILITY OF DIRECTORS

 (b) where it receives money or other property

by way of advance payment for the execution
of a contract or project.
PERSONAL LIABILITY OF DIRECTORS


 In any of these cases, if the company, with intent to
defraud, fails to apply the money or other property
for the purpose for which it was received, every
director or other officer of the company who is in
default is personally liable to the party from whom
the money or property was so received and not
applied for the purpose for which it was received.
But this provision does not affect the liability of the
company itself, and so, it may be joined in any action
against the directors.
BREACH OF SECTIONS 93 AND 246 OF
CAMA

 A director may also be personally liable where the

company carries on business without having at least
2 members as provided in Section 93 of the Act or
without having 2 directors as provided under Section
246 of the Act. If the company carries on business
for more than 6 months after the membership has
fallen below 2, every director or officer who knows
that it so carries on business is liable jointly and
severally with the company for the debts of the
company contracted during the period.
BREACH OF SECTIONS 93 AND 246 OF
CAMA

 With regard to the number of directors,

Section 246(3) of the Act provides that a
director or member of a company who knows
that the company carries on business after
the number of directors has fallen below 2 for
more than 60 days is liable for all liabilities
and debts incurred by the company during
that period.
PROCEEDINGS OF DIRECTORS

 BOARD MEETINGS – (SECTION 263 OF

CAMA)
 The directors may meet for the despatch
of business, adjourn and otherwise regulate
their meetings, as they think fit. See Section
263 of CAMA.
PROCEEDINGS OF DIRECTORS

 The first meeting of the directors must be

held not later than 6 months after the
incorporation of the company. Questions at
meetings shall be decided by a majority of
votes, and the Chairman has a casting vote
in case of equality of votes.
 A director may and the secretary on the
requisition of a director shall, at any time,
summon a meeting of the directors.
THE CHAIRMAN OF BOARD MEETINGS

 The directors may elect a Chairman of their

meetings. This Chairman will naturally
become the Chairman of the company and
determine the period for which he is to hold
office. If no Chairman is elected or if at any
meeting he is not present within five minutes
after the time appointed for the holding of the
meeting, the directors present may choose
one of their number to be Chairman.
DELEGATION BY THE BOARD

 The maxim delegates non potest delegare

applies to directors in the same way as to all
agents. A person to whom a function has
been delegated may not himself delegate it
further without the consent of his principal.
DELEGATION BY THE BOARD

 Section 64 of CAMA, however, provides

that Directors may delegate any of their
powers to a managing director or to
Committees consisting of such member or
members of their body as they think fit and
such Committees must conform to the
directors’ regulation. Thus, a Committee
may consist of a single director.
DELEGATION BY THE BOARD

 A Committee has power to elect its own

chairman and a substitute in his place where
he is absent. This Chairman also has a
casting vote. The Committee regulates its
own conduct of meeting as it thinks proper.
DELEGATION BY THE BOARD

 There are, however, situations when the

Board can dispense with holding meeting.
Section 263(8) of CAMA provides that:
DELEGATION BY THE BOARD

 “A resolution in writing, signed by all the

directors for the time being entitled to receive
notice of a meeting of the directors, shall be
as valid and effectual as if it had been
passed at a meeting of the directors duly
convened and held.”
 In all the directors meetings, each
director shall be entitled to one vote.
QUORUM AT BOARD MEETINGS –
(SECTION 264 OF CAMA)

 Unless the Articles expresses a contrary

intention, the Quorum necessary for the
transaction of business of directors shall be 2
where they are not more than 6 but where
they are more than 6, the Quorum shall be
one third to the nearest number where the
number of directors is not a multiple of three.
QUORUM AT BOARD MEETINGS –
(SECTION 264 OF CAMA)

 The Board fixes the Quorum of Committee

appointed by it and where it fails to do so, the
whole Committee shall meet and act by a
majority. Where the Board cannot act
because a Quorum cannot be formed, the
general meeting may act in its place and the
Board also acts in place of the Committee
where the Committee cannot form a quorum.
NOTICE OF DIRECTORS’ MEETINGS

 Every director shall be entitled to receive notice of

the directors’ meetings unless he is disqualified by
any reason from acting as director under the Act.
 Unless the Articles otherwise provide –
 (1) 14 days notice in writing to all directors entitled
to receive notice will be sufficient.
 (2) Non-compliance with this will invalidates the
meeting.
 (3) It shall not be necessary to give notice of a
meeting of director to any director who is outside
Nigeria during the period of the meeting.
APPOINTMENT OF COMPANY SECRETARIES –
(SECTION 293(1) OF CAMA)

 Like Section 169 of the Companies Act, 1968,

Section 293 of CAMA makes it mandatory for
companies, whether private or public, to appoint
Company Secretaries but unlike the Companies
Act of 1968, the Companies and Allied Matters
Act, 1990 appears to have raised the status of a
Company’s Secretary to one which is reserved
for qualified professionals only. See Section
295 of CAMA.
APPOINTMENT OF COMPANY SECRETARIES –
(SECTION 293(1) OF CAMA)

 It is the duty of Company Directors to

ensure that a person that is appointed
Company Secretary possesses the relevant
experience and skill.
QUALIFICATION FOR APPOINTMENT AS COMPANY
SECRETARY – (S.295 OF CAMA)

 Section 295 of the Companies and Allied

Matters Act, 1990 provides it shall be the
duty of a director of a company to take all
reasonable steps to ensure that the
Secretary of the company is a person who
appears to him to have the requisite
knowledge and experience to discharge the
functions of a Secretary of a company.
QUALIFICATION FOR APPOINTMENT AS COMPANY
SECRETARY – (S.295 OF CAMA)

 In the case of a public company, the

same Section provides that a Secretary must
have one of the specified qualifications:
 A member of the Institute of Chartered
Secretaries and Administrators; or
QUALIFICATION FOR APPOINTMENT AS COMPANY
SECRETARY – (S.295 OF CAMA)

 A Legal Practitioner within the meaning of the

Legal Practitioners Act, 1975; or
 A Member of the Institute of Chartered
Accountants of Nigeria (ICAN); or
QUALIFICATION FOR APPOINTMENT AS COMPANY
SECRETARY – (S.295 OF CAMA)

 Any person who has held the office of a

Secretary of a public company for at least 3
years of the 5 years immediately preceding
his appointment; or
 A body corporate or firm consisting of
qualified persons under paragraphs (a), (b),
(c) or (d).
DUTIES OF COMPANY SECRETARIES –
(SECTION 298(1) OF CAMA)

 The Companies and Allied Matters Act

makes provision for both general and specific
duties for Company Secretaries. Section
298(1) of the Act provides that the duties
include the following:
DUTIES OF COMPANY SECRETARIES –
(SECTION 298(1) OF CAMA)

 Attending the meetings of the Board of

Directors of the company, its general
meeting, whether AGM, statutory general
meeting or extra-ordinary meeting. He is
also charged with rendering all the necessary
secretarial services in respect of the meeting
and advising on compliance by the meeting
with the applicable rules and regulations.
DUTIES OF COMPANY SECRETARIES –
(SECTION 298(1) OF CAMA)

 The Board of Directors have Committees.

When they are meeting, the Company
Secretary is the one statutorily empowered to
service these meetings. The Company
Secretary is the compliance officer, the
liasing officer between the company and the
CAC.
DUTIES OF COMPANY SECRETARIES –
(SECTION 298(1) OF CAMA)

 It is the Company Secretary’s duty to keep all

statutory books, registers of members,
register of debenture holders et cetera. It is
his duty to maintain the registers to ensure
that they are properly kept.
 Carrying out such administrative and other
secretarial duties as directed by the directors
of the company. See Section 298(1) of the
Act.
OMNIBUS DUTIES OF COMPANY
SECRETARIES

 Company Secretaries are to carry out duties

as may be assigned to them by Board of
Directors from time to time.
 In BARNETT HOARES AND COMPANY V.
SOUTH LONDON TRAMWAYS COMPANY
(1887) 18 QBD 818, particularly at 817, the
position of the status of a Company
Secretary was described thus:
OMNIBUS DUTIES OF COMPANY
SECRETARIES

 “A Secretary is a mere servant. His position

is that he is to do what he is told and no one
can assumes that he has any authority to
represent anything at all.”
 Thus, his duties, since this decision, were
seen as clerical and ministerial only.
OMNIBUS DUTIES OF COMPANY
SECRETARIES

 However, in PANORAMA DEVELOPMENT

(GUILDFORD) LTD. V. FIDELIS FURNISHING
FABRICS LTD (1971) 2 QB 711, Lord Denning
stated:
 “Times have changed. A Company Secretary is a
much more important person nowadays than he was
in 1887. He is an officer of the company with
extensive duties and responsibilities…. He is no
longer a mere clerk.”
OMNIBUS DUTIES OF COMPANY
SECRETARIES

 As shown above, the duties of Company

Secretary in Nigeria, as in many other jurisdictions is
now statutory defined. Although appointed by the
Board of Directors, a Company Secretary is no
longer their servant. In the performance of his
statutory duties, the Company Secretary is entitled to
resist any interference from the shareholders, that is,
the members of the company, the Board of Directors
or even the Managing Director. See the following
cases:
 OKEOWO V. MIGLIORE (1979)
OMNIBUS DUTIES OF COMPANY
SECRETARIES

 WIMPEY NIGERIA LTD. V. BALOGUN

(1987) 2 NWLR (PT. 28) 322.
QUESTION

 To what extent can a Company Secretary

bind his company by his acts?
 Support your answer with statutory
provisions or otherwise
 Note that although Section 298 spells out the duties
of a Company Secretary, he cannot suo motu, that
is, on his own volition, exercise any power expressly
vested by statute or the Articles of Association in the
directors. See Section 298(2) of the Act.
 When it comes to providing the administrative and
secretarial services to accomplish those
management decisions, he is at liberty to take
appropriate decisions.
POWER AND AUTHORITY OF
COMPANY SECRETARIES

 Section 298(2) of CAMA provides that the Secretary

cannot, without the authority of the Board exercise
any powers vested in the directors. It is submitted
that since an unauthorised act is expressly prohibited
by Section 298(2) of the Act, such act cannot be
later ratified by the Board since it is void ab initio.
That was the decision in ADEBESIN V. MAY AND
BAKER NIGERIA LTD decided before the
enactment of the Act.
REMOVAL OF COMPANY
SECRETARIES

 It is the duty of the Board of Directors of a

company to appoint and remove Company
Secretaries. See Section 296(1) of CAMA
with respect to the removal of Company
Secretaries of public companies.
 However, the Board of Directors can no
longer arbitrarily remove a Company
Secretary from office unless as provided by
CAMA in Section 296(2).
THE PROCEDURE FOR THE REMOVAL OF
COMPANY SECRETARIES

 The procedure for the removal of a Company

Secretary is as follows:
 The Board of Directors must serve a Notice
on the Secretary stating:
– that it is intended to remove him from office;
– the ground for the proposed removal;
– that he may resign from office within 7 days;
– that he may make a defence in writing which must
be submitted within 7 days;
THE PROCEDURE FOR THE REMOVAL OF
COMPANY SECRETARIES

 If after the notice, the Secretary neither

resigned from office nor made any defence,
the Board of Directors may remove him from
office and report to the General Meeting at
the next meeting.
 Where the Company Secretary makes a
defence, written or oral, which in the opinion
of the Board of Directors is unsatisfactory:
THE PROCEDURE FOR THE REMOVAL OF
COMPANY SECRETARIES

 If the ground on which the Secretary is to be

removed from office is fraud or serious
misconduct, the Board of Directors may
remove him from office and report the same
to the company’s general meeting.
THE PROCEDURE FOR THE REMOVAL OF
COMPANY SECRETARIES

 If the ground on which the Company

Secretary is to be removed is other than
fraud or serious misconduct, the Board of
Directors shall not remove him but may
suspend him from office pending the next
General Meeting of the company when the
suspension will be reported and the company
will take a decision.
THE PROCEDURE FOR THE REMOVAL OF
COMPANY SECRETARIES

 If the next general meeting ratifies the

suspension of the Company Secretary from
office, he shall be removed from office and
the effective date of removal shall be the
date the Board of Directors suspended him
from office.
THE PROCEDURE FOR THE REMOVAL OF
COMPANY SECRETARIES

 Note that the procedure for the removal of

Company Secretaries must be strictly
complied with. See the case of ERONINI V.
HABO AND ORS. (1957) 1 NSCC 17.
QUESTION

 Enumerate five ways you think CAMA has

enhanced the status of a Company Secretary
in Nigeria. See Sections 293 to 298 of
CAMA.
ANSWER

 HOW CAMA HAS ENHANCED THE

STATUS OF COMPANY SECRETARIES
ANSWER

 Section 293(1) of CAMA has made it mandatory for

every company in Nigeria to appoint a Company
Secretary. So, the office is made statutorily relevant
by virtue of that Section.
 Section 295 of CAMA has considerably enhanced the
status of Company Secretary by restricting the
eligibility for appointment as Company Secretary of
public companies to only qualified professionals, viz,
lawyers, chartered accountants and ACIS members.
ANSWER

 The duties of a Company Secretary are now

statutorily prescribed in Section 298 of the
Act. Therefore, they are no longer errand
boys to the Board of Directors or mere
clerical officers of the company.
 Job Security
ANSWER

 Although Company Secretaries are

appointed by the Board of Directors and are
removed by them CAMA, under Section
296(2), has prescribed the procedure for the
removal of Company Secretaries.
ANSWER

 Company Secretaries are now statutorily

acknowledged as officers of the company
who, within their administrative sphere or
responsibilities, may initiate acts which will
be binding on the company. To this extent,
one may say that CAMA has enhanced the
status of Company Secretary but you have to
be critical in appraising this point.
CORPORATE LITIGATION OR
MAJORITY RULE

 THE RULE IN FOSS V. HARBOTTLE (1843)

2 HARE 461
 It is a well established principle that a company is a
separate legal person from its members. Once it is
accepted that the company is a legal person, it
follows that if a wrong is done to the company, the
company is the proper person to bring an action.
Therefore, as a rule, when a company is
incorporated and is a going concern, the wish of the
majority must prevail for it is important that the
principle of democracy should prevail. A company
must, therefore, act in accordance with the decisions
taken by the majority of its members willing and able
to vote.
 Also, it is part of the rule that once
powers have been delegated to directors, the
majority cannot derogate from the powers of
the directors for the day-to-day management
of the company.
 However, powers of the majority rule
extends to every facet of the company’s
affairs. The majority of members have power
to:
 Alter the Memorandum and Articles of
Association of the company.
 They appoint and dismiss the directors.
 If they so desire, they can put an end to the
business.
 The rule is that in an action to remedy
any wrong done to the company or where
irregularity has been committed in the course
of a company’s affairs, the proper plaintiff is
the company itself. It is the majority who
determines whether the company should sue
for redress or not. The facts of FOSS V.
HARBOTTLE (SUPRA) are as follows:
 F. and T. were shareholders in a company which
was formed to buy land for use as a pleasure park.
The defendants were the other directors and
shareholders of the company. F. and T. alleged that
certain of the defendants had sold land belonging to
them to the company at an exorbitant price. F. and
T. now asked the court to order that the defendants
make good the losses to the company.

 The Court held that since the company’s
Board of Directors was still in existence, and
since it was still possible to call a general
meeting of the company, there was nothing
stopping the company from obtaining redress
in its corporate character and that the action
of F. and T. could not be sustained.
 The rule has been held to apply not only to
incorporated bodies but also to unincorporated
associations. It was accordingly applied to trade
unions in COTTER V. NATIONAL UNION OF
SEAMEN (1929) 2 CH. 58 and MBENE V. OFILI
(1968) 1 ALR COMM. 235 and to JAMAL-UL-
MUSLIM OF LAGOS on the ground that it was a body
possessing a Constitution or a set of rules and
regulations entitling it to sue and be sued as a legal
entity.
 See also the following cases:
 YALAJU AMAYE V. AREC (SUPRA). The
majority rule
 applied in this case.
 2. EDOKPOLO V. SEM-EDO WIRE
INDUSTRIES LTD (1984) 7 SC. The majority
rule was relaxed in this case.
 3. ABU BAKARE V. SMITH (1973) 6 SC 31.
The majority rule also applied.
 BASIS AND RATIONALE FOR THE RULE
IN FOSS AND HARBOTTLE
 If every individual member of the company
were permitted to sue anyone who had
injured the company through a breach of
duty, there could be as many actions as
there are shareholders, that is, it prevents
multiplicity of suits.
 Legal proceedings would never cease and
there would be enormous wastage of time
and money.
 The rule prevents the company from being
torn into pieces by multiplicity of action. In
the case of LA COMPAIGNIE DE
MAYVILLE V. WHITLEDY (1896) 1 CH.
788, Kay L.J. stated that:
 “The proper course in the case of any matter which
relates to the internal management and trade affair
of the company is to call a meeting and that is
practically the only remedy which this court allows
a director or a shareholder of a company to take;
otherwise we should have companies torn to
pieces by litigation of this kind. The court has
always set itself resolutely against such litigation.”
 If an individual member could sue a person who had caused
loss to the company and the company then ratified that
person’s act at a general meeting, then a legal proceedings
would be quite useless, for a court will naturally hold that the
will of the majority prevails. This is essentially based on
Partnership doctrine that the court will not interfere in matters
of internal management. Courts will generally not act in vain.
This is based on one of the maxims of Equity that “Equity
will not act in vain.” In MACDOUGALL V. GARDINER
(1875) 1 CH D. 13, the court held that the plaintiff must fail as
the action was asking for the interference of the court in the
internal affairs of the company.
 A defendant in a corporate litigation will be
better protected if the company is the main
plaintiff because the defendant’s rights like
counter-claim, set-off, et cetera are
preserved if the company is sued.
EXCEPTIONS TO THE RULE IN FOSS
V. HARBOTTLE

 At Common Law, various devices were

adopted to reduce the harsh effects of the
rule in FOSS V. HARBOTTLE through the
creation of various exceptions by the courts
in the interest of justice. These exceptions
have now been enacted under Section 300
of CAMA.
PROTECTION OF INDIVIDUAL MEMBER’S RIGHT –
(SECTION 300 OF CAMA)

 Entering into any transaction which is illegal

or ultra vires, for example, where the
shareholders at a general meeting resolved
to spend part of the purchase money after
sale of the company in compensating
employees and part as remuneration for past
services of directors, when a company being
wound up has no power to make such a
payment. See Section 300(a) of CAMA.
PROTECTION OF INDIVIDUAL MEMBER’S RIGHT –
(SECTION 300 OF CAMA)

 Purporting to do by ordinary resolution an

act which by its constitution or the Act
requires to be done by special resolution.
This is directed towards preventing the
majority from ratifying by a wrong
procedure an act which is itself wrong. See
Section 300(b) of the Act.
PROTECTION OF INDIVIDUAL MEMBER’S RIGHT –
(SECTION 300 OF CAMA)

 3.Where the individual rights of members

have been infringed by the company or the
directors by an act or omission, of course,
such a member(s) can bring an action
seeking for redress.
PROTECTION OF INDIVIDUAL MEMBER’S RIGHT –
(SECTION 300 OF CAMA)

 There are several individual membership rights. For example, if you

did not receive your notice of meeting and you heard that your
company is holding its Annual General Meeting in a particular place,
you can approach the court and seek to restrain the company from
holding that meeting because it is your individual right. See Section
300(c) of the Act. Section 301 of the Act provides that if the
application is granted, such aggrieved member shall not be entitled
to damages but to declaration or injunction restraining the company
from doing a particular act. In PENDER V. LUSHINGTON (1877) 6
CH. 70, an action was brought by a shareholder whose vote was
rejected on behalf of himself and all others who had voted for him
for an injunction to restrain the directors from acting on the footing
of the votes being bad. The court held that the plaintiffs were
entitled to an injunction.
PROTECTION OF INDIVIDUAL MEMBER’S RIGHT –
(SECTION 300 OF CAMA)

 4.Where fraud is committed on the

company or on minority shareholders and
the directors fail to take appropriate steps
to redress the wrong done, a member is
entitled to bring members personal or
private action in Court; this is relative. See
Section 300(d) of the Act.
PROTECTION OF INDIVIDUAL MEMBER’S RIGHT –
(SECTION 300 OF CAMA)

 5.Where a company meeting cannot be

called in time to be of practical use in
redressing a wrong done to the company or
to minority shareholders. This may arise
because the machinery for convening the
meeting is not readily in place or where
urgent action is needed and it will be too
late to wait for a formal meeting requiring
notice. See Section 300(e) of the Act.
PROTECTION OF INDIVIDUAL MEMBER’S RIGHT –
(SECTION 300 OF CAMA)

 6. Where the directors are likely to derive a profit or

benefit or have profited or benefited from their
negligence or from their breach of duty, individual
members can bring an action seeking redress. In
this case, it is either you obtain an injunction or an
order praying the court that the directors are in
breach of their fiduciary duties. See Section 300(f)
of the Act.

FORMS OF ACTION

 An aggrieved shareholder can bring either:

 a personal action;
 a representative action or
 a derivative action, depending on whose right
he is protecting. See Sections 301 to 303 of
CAMA.
 Section 301
FORMS OF ACTION

 (1) Where a member institutes a personal

action to enforce a right due to him
personally, he shall not be entitled to any
damages but to declaration or injunction to
restrain the company and/or the directors
from doing a particular act.
FORMS OF ACTION

 (2) Where a member institutes a

representative action on behalf of himself
and other affected members to enforce any
rights due to them, he shall not be entitled to
any damages but to a declaration or
injunction to restrain the company and/or
directors from doing a particular act.
FORMS OF ACTION

 (3) Where any member institutes an action

under this section, the court may award costs
to him personally whether or not his action
succeeds.
 (4) In any proceedings by a member under
Section 300 of this Act, the court may, if it
thinks fit, order that the member shall give
security for costs.
 Section 302:
FORMS OF ACTION

 For the purpose of Section 300 and 301 of

this Act, “member” includes –
 the personal representative of a deceased
member; and
FORMS OF ACTION

 any person to whom shares have been transferred

or transmitted by operation of law.
 Section 303:
 (1) Subject to the provisions of subsection (2) of this
section, an applicant may apply to the court for leave
to bring an action in the name or on behalf of a
company or to intervene in an action to which the
company is a party for the purpose of prosecuting,
defending or discontinuing the action on behalf of the
company.
FORMS OF ACTION

 (2) No action may be brought and no

intervention may be made under subsection
(1) of this section, unless the court is
satisfied that -
 the wrongdoers are the directors who are in
control and will not take necessary action;
FORMS OF ACTION

 the applicant has given reasonable notice to

the directors of the company of his intention
to apply to the court under subsection (1) of
this section if the directors of the company do
not bring, diligently prosecute or defend or
discontinue the action;
FORMS OF ACTION

 the applicant is acting in good faith; and

 it appears to be in the interest of the
company that the action be brought,
prosecuted, defended or discontinued.
1. PERSONAL ACTION

 A personal action is a situation where a

member sues for wrong done to him in his
capacity as a member. In other words, the
individual member is bringing his own action.
This can occur under Section 300(c) of the
Act.
2. DERIVATIVE ACTION
 Derivative action is in reality an action by the
company for the wrong done to it but since it will not
sue as plaintiff, provisions are made for a minority to
sue on its behalf and not on behalf of the
shareholders. Although the action is framed as a
representative one on behalf of the aggrieved
minority and other shareholders, it is, in fact, an
action which should be properly brought by the
company if it had not refused to do so and the action
is, therefore, derived from the right of the company
to sue, hence, it is described as a derivative action.
CONDITIONS FOR THE APPLICATION OF
DERIVATIVE ACTION

 Section 303(1) of CAMA, which is the

applicable law, provides that an applicant
may apply to the court for leave to bring an
action in the name or on behalf of a company
or to intervene in an action to which the
company is a party for the purpose of
prosecuting, defending or discontinuing the
action on behalf of the company.
CONDITIONS FOR THE APPLICATION OF
DERIVATIVE ACTION

 Section 303(2) of the Act provides that no

such action may be brought and no such
intervention may be made unless the court is
satisfied as to the following:
 that the wrongdoers are the directors who
are in control and will not take necessary
action;
CONDITIONS FOR THE APPLICATION OF
DERIVATIVE ACTION

 that the applicant has given reasonable

notice to the directors of the company of his
intention to apply to the court if the directors
do not bring or diligently prosecute or defend
or discontinue the action;
CONDITIONS FOR THE APPLICATION OF
DERIVATIVE ACTION

 that the applicant is acting in good faith; and

 that it appears to be in the best interest of the
company that the action be brought,
prosecuted, defended or discontinued. See
Section 303(2) of the Act.
WHO MAY APPLY?

 The following may apply to court under a

derivative action as an applicant:
 a registered holder or a beneficial owner and
a former registered holder or beneficial
owner of a security of a company;
 a director or an officer or a former director or
officer of a company;
 the Corporate Affairs Commission; or
WHO MAY APPLY?

 any other person who, in the discretion of the

court, is a proper person to make an
application for that purpose.
 See Section 309 of the Act, the Definition
Section. See also the following cases:
 TIKA-TORE PRESS V. ABINA (1973) 4 SC
63.
 LADEJOBI V. ODUTOLA HOLDINGS LTD
(2002) 3 NWLR (PT. 753).
WHO MAY APPLY?

 UNIPETROL NIGERIA PLC V. AGIP

NIGERIA PLC (2002) 14 NWLR (PT. ) 312.
 WILLIAMS V. EDU (2002) 3 NWLR (PT.
754) 400.
WHO MAY APPLY?

 With respect to the commencement of the derivative

action as provided in Section 303 of the Act, the
court may, at any time, make any such order as it
thinks fit. See Section 304(1) of the Act. The court
may also make one or more of the following orders:
 an order authorising the applicant or any other
person to control the conduct of the action;
WHO MAY APPLY?

 an order giving direction for the conduct of

the action;
 an order directing that any amount adjudged
payable by a defendant in the action be paid
in whole or in part, directly to former and
present security holders of the company
instead of to the company;
WHO MAY APPLY?

 an order requiring the company to pay

reasonable legal fees incurred by the
applicant in connection with the proceedings.
 These orders are provided in Section 304(2)
of the Act.
EVIDENCE OF SHAREHOLDERS
APPROVAL NOT DECISIVE

 Section 305 of CAMA states that an action brought

under Section 303 of this Act shall not be stayed or
dismissed by reason only that it is shown that an
alleged breach of a right or a duty owed to the
company has been or may be approved by the
shareholders of such company but evidence of
approval by the shareholders may be taken into
account by the court in making an order under
Section 304 of this Act. Under Section 306, the
court’s approval is required before a derivative action
is continued.
COSTS OF THE ACTION

 Under Section 304(2)(d) of CAMA, the court

is empowered to order the payment of
reasonable legal fees incurred by the
applicant in connection with the proceedings.
COSTS OF THE ACTION

 An applicant is not required to give

security for costs in any action brought in
respect of a derivative action. See Section
307 of the Act. But the court may at any time
order the company to pay to the applicant
interim costs before the final disposition of
action. See Section 308 of the Act.
 3. RELIEF OR REMEDY ON GROUND OF
OPPRESIVE OR UNFAIRLY PREJUDICIAL
CONDUCT – (SECTIONS 310 - 311 OF
CAMA)
 Where a member of a company alleges that
the affairs of the company are being
conducted in an unfairly prejudicial or
oppressive manner, such a member may
apply to the court for relief by petition. This
is provided in Section 311 of the Act.
WHO MAY APPLY FOR RELIEF?

 Under Section 310 of CAMA, an application

to the court by petition for an order pursuant
to Section 311 of this Act dealing with relief
on ground of oppressive conduct may be
made by any of the following persons:
 a member of the company;
WHO MAY APPLY FOR RELIEF?

 a director or officer or a former director or

officer of the company;
 a creditor;
 the Corporate Affairs Commission;
WHO MAY APPLY FOR RELIEF?

 any other person who, in the discretion of the

court, is the proper person to make the
application.
 See IJALE PROPERTIES LTD. V.
OMOLOLU-MUILELE (2000) FWLR (PT. 5)
709.
WHO MAY APPLY FOR RELIEF?

 Note that the personal representatives of

a deceased shareholder and any person to
whom shares have been transferred or
transmitted by operation of law may also
apply for this relief.
WHO MAY APPLY FOR RELIEF?

 See the following cases:

– OGUNADE V. MOBILE FILM (WEST AFRICA)
LTD (1976) 2 FRCR for the definition of
“oppressive conduct”. In this case, Karibi-Whyte,
J. (as he then was) adopted the dictionary
meaning of the word “oppressive” to mean “an act
which is burdensome, harsh and wrongful”.
– WILLIAMS V. WILLIAMS (1995) SCNJ 26.
WHO MAY APPLY FOR RELIEF?

 Where the court is satisfied that there is need

to intervene, the court may make any of the
following orders as the court thinks fit for
giving relief in respect of the matter
complained of:
WHO MAY APPLY FOR RELIEF?

 an order that the company be wound up;

 an order for regulating the conduct of the
affairs of the company in future;
WHO MAY APPLY FOR RELIEF?

 an order for the purchase of the shares of

any member by other members of the
company;
WHO MAY APPLY FOR RELIEF?

 an order for the purchase of the shares of any

member of the company and for the reduction
accordingly of the company’s capital;
 an order directing the company to institute,
prosecute, defend or discontinue specific
proceedings so authorising a member or members or
the company to institute, prosecute, defend or
discontinue specific proceedings in the name or on
behalf of the company;
WHO MAY APPLY FOR RELIEF?

 an order varying or setting aside a transaction or

contract to which the company is a party and
compensating the company or any party to the
transaction or contract;
 an order directing an investigation to be made by the
Corporate Affairs Commission;
 an order appointing a receiver or a receiver and
manager of property of the company;
WHO MAY APPLY FOR RELIEF?

 an order restraining a person from engaging

in specific conduct or from doing a specific
act or thing;
WHO MAY APPLY FOR RELIEF?

 an order requiring a person to do a specific

act or thing.
WHO MAY APPLY FOR RELIEF?

 Section 312(3) of the Act provides that where

an order that a company be wound up is
made under this Section, the provisions of
this Act relating to winding up of companies
shall apply, with such adaptations as are
necessary, as if the order had been made
upon an application duly filed in court by the
company.
INVESTIGATION OF COMPANY’S AFFAIRS BY
THE CORPORATE AFFAIRS COMMISSION (SECTION 315 OF
CAMA)

 As part of the scheme to ensure proper

administration and management of the
company, provisions are made for the CAC
to appoint inspectors for the purpose of
investigating the affairs of a company.
APPOINTMENT OF INSPECTORS

 Sections 314 to 320 of CAMA provide for the

circumstances under which inspectors may
be appointed, their powers, the procedure for
such appointment and report. The
investigation also includes the membership
of companies.
APPOINTMENT OF INSPECTORS

 There are three situations where inspectors can

be appointed to investigate the affairs of a company.
Section 314(1) of the Act provides that the CAC may
appoint one or more competent inspectors to
investigate the affairs of a company and to report on
them in such manner as it may direct.
 on the application of the company or its members;
APPOINTMENT OF INSPECTORS

 on the declaration of the court that a

company be investigated; and
 on CAC’s own motion.
 No specific qualification is required for
appointment provided the appointee is
generally competent
1. ON APPLICATION OF THE
COMPANY OR ITS MEMBERS

 In the case of a company having a share

capital, Section 314(2)(a) of the Act provides
that the application may be made by
members holding not less than ¼ of the class
of shares issued.
1. ON APPLICATION OF THE
COMPANY OR ITS MEMBERS

 With respect to a company not having a

share capital, Section 314(2)(b) of the Act
provides that the application may be made
by not less than ¼ in number of the persons
on the company’s Register of Members.
1. ON APPLICATION OF THE
COMPANY OR ITS MEMBERS

 Section 314(2)(c) of the Act provides that in

any other case, the application may be made
by the company where, for example, there
has been a lot of concealment, under-
declaration of profit and other illegality. See
SPECTRA NIGERIA LIMITED V. STABILINI
VISIONINI NIGERIA LTD (1996) 6 NWLR
(PT. 44) 239.
2. DECLARATION OF THE COURT THAT A
COMPANY BE INVESTIGATED

 The Commission must appoint an inspector to

investigate the affairs of the company if the court
order declares that its affairs ought to be
investigated. The order for investigation is one of
those for which the court may make if it is satisfied
that an application for relief on the ground that the
affairs of the company are being conducted in an
illegal or oppressive manner is well founded. See
Section 312(2)(g) of the Act.
2. DECLARATION OF THE COURT THAT A
COMPANY BE INVESTIGATED

 In OTONG V. MOGAL NIGERIA LTD (1978)

FRCR 80, where it was alleged that the
company had not filed any annual returns,
had not had annual general meetings and
kept no minutes of any meetings and no
books of account, the court had no hesitation
in directing the Registrar to appoint
inspectors for a thorough investigation of the
affairs of the company.
3. ON THE COMMISSION’S OWN
MOTION

 Section 315(2) of CAMA provides that the

CAC may appoint an inspector to investigate
the affairs of a company if it appears to it that
there are circumstances suggesting any of
the following:
3. ON THE COMMISSION’S OWN
MOTION

 that the company’s affairs are being or have

been conducted with intent to defraud its
creditors in such a manner which is unfairly
prejudicial to some of its members; or
 that the company was formed for any
fraudulent or unlawful purpose; or
3. ON THE COMMISSION’S OWN
MOTION

 that persons concerned with the company’s

formation or management of its affairs have
been guilty of fraud, misfeasance or other
misconduct towards the company or its
members; or
 that the company’s members have not been
given all the information with respect to its
affairs which they might reasonably expect.
3. ON THE COMMISSION’S OWN
MOTION

 Note that members include the personal

representative of a deceased member and
any person to whom shares have been
transferred or transmitted by operation of
law. See Section 315(4) of the Act.
3. ON THE COMMISSION’S OWN
MOTION

 An inspector may be appointed to

investigate the affairs of a company
notwithstanding that the company is in the
course of being voluntarily wound up. See
Section 315(3) of the Act.
 WINDING UP OF THE COMPANY ON JUST
AND EQUITABLE GROUND –
 (SECTION 408(E) OF CAMA)
 Section 408(e) of CAMA, which is the same as the
former Section 209(f) of the repealed 1968
Companies Act, provides that the court may wind up
a company if the court is of the opinion that it is just
and equitable that the company should be wound up.
This provision is to protect the minority further in
cases of oppression by the majority. It should be
noted that the court’s power under this paragraph is
discretionary.
 The application may be brought by
members of the company, the creditors of the
company and the CAC. See the following
cases:
 IDUGBOE V. OIL FIELD SUPPLY LTD
(1979) ALR COMM. 1
 RE: GERMAN DATE COFFEE COMPANY
(1882) 20 CH. D. 169. In this case, the court
held that the substratum of the company had
failed and it was impossible to carry out the
objects for which it was formed.
MEMBERSHIP OF A COMPANY –
(SECTION 79 OF CAMA)

 WHO IS A MEMBER OF A COMPANY?

 A member of a company is a person having
constituent proprietary interest in the company and
whose name has been entered in the Register of
Members. A person who undertakes to make a
contribution, in the event of the winding up of a
company limited by guarantee, becomes a member
of the company when his name is entered in the
Register of Members.
MEMBERSHIP OF A COMPANY –
(SECTION 79 OF CAMA)

 Section 79(2) of the Act provides that

every other person who agrees in writing to
become a member of a company and whose
name is entered in its Register of Members
shall be a member of the company.
MEMBERSHIP OF A COMPANY –
(SECTION 79 OF CAMA)

 With respect to a company having a

share capital, each member shall be a
shareholder of the company and shall hold at
least one share. In such a company, the
term “members” and “shareholders” may be
synonymous but it is not necessarily so.
MEMBERSHIP OF A COMPANY –
(SECTION 79 OF CAMA)

 In PONMILE V. SPARKS ELECTRICS (NIG.)

LTD. (1986) 2 NWLR 519, the court
distinguished between a shareholder and a
member of a company limited by shares and
observed that entry in the Register of the
company is another method of proof of being a
shareholder but it is not the only method, nor
can the absence of that method of proof
invalidate other methods.
MEMBERSHIP OF A COMPANY –
(SECTION 79 OF CAMA)

 In OILFIELDS SUPPLY CENTRE LTD.

V. JOHNSON (1987) 2 NWLR 625, it was
held that the share certificate is not the only
means of establishing shareholding and that
even oral evidence, if cogent, may suffice.
MEMBERSHIP OF A COMPANY –
(SECTION 79 OF CAMA)

 This is not so in the case of membership as

entry in the register is an indispensable
condition. While a member of a company
registered with shares must be a shareholder of
the company, the converse is not necessarily
true for a shareholder will not become a
member until his name is entered in the
Register of members. See Section 79(2) of the
Act.
MEMBERSHIP OF A COMPANY –
(SECTION 79 OF CAMA)

 Section 83 of the Act provides that a

shareholder must be registered within 28 days
of the conclusion of the agreement to become
a member. In the case of a subscriber to the
memorandum, at the registration of the
company, and if default is made in entering the
name, the court may compel the company to
do so. See Sections 83 and 90 of the Act.
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 As a general rule, any legal person may

become a member of a company but infants,
personal representatives of deceased
persons, companies and aliens are subject to
special rules.
 1. INFANTS
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 Section 20(1)(a) of the Act provides that a

person under the age of 18 years of age
shall not join in the formation of a company
or be a subscriber to the Memorandum of
Association unless there are two other
subscribers of full age and capacity, that is,
persons not disqualified under Section 20(1)
of the Act.
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 Section 80(2) of the Act provides that where

an infant becomes a member of a company,
he will not be counted in determining the
legal minimum number of members.
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 Note, however, that any person under the age of 18

years may still subscribe to the memorandum or
otherwise become a member, subject to the general
disability of an infant to contract under the general
law. Thus, his contract to take shares in a company
is voidable at his instance any time before he attains
the age of 18 or within a reasonable time
thereafter. Unless he repudiates his liability within
this period, an infant will be liable to pay any calls
made on his shares and if he decides to repudiate,
his liability on future calls will cease.
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 In general, he will be unable to recover

money paid in respect of his shares unless
there has been a total failure of consideration
for which the money was paid. See
STEINBERG V. SCALA (LEEDS) LTD.
(1973) 2 CH. 452.
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 2. MARRIED WOMEN
 Under the Married Women’s Property Laws
of the States, a woman has the same
contractual rights and is liable to the same
obligations as any one else as regards the
holding of shares.
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 3. PERSONAL REPRESENTATIVES
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 On the death of a shareholder, the shares

are transmitted to his personal
representatives, that is, his executors or
administrators and the production of the
probate of the Will or Letters of
Administration of the estate of the deceased
person is sufficient evidence of the grant.
This is provided in Section 148 of the Act.
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 The personal representatives of deceased

persons are the only persons recognised as
having any title to the deceased interest in
the shares. They can sell and transfer the
shares without being first registered as
members. See Section 155(4) of the Act.
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 However, until the personal representative of

a deceased shareholder complies with the
provision of Section 155(3) of the Act, he
cannot, unless otherwise provided in the
Articles, be entitled to exercise any right
conferred by membership in relation to
meetings of the company. Section 155(3) of
the Act provides that:
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 “If the person so becoming entitled elects to

be registered himself, he shall deliver or
send to the company a notice in writing
signed by him stating that he so elects and if
he elects to have another person registered,
he shall testify his election by executing to
that person a transfer of the shares.”
 4. COMPANIES
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 A company is regarded in law as a person and,

therefore, by virtue of Section 18 of the Act which
requires two or more persons to form and incorporate
a company, it may be one of the subscribers of the
memorandum of another company. Just as an
individual that subscribes the memorandum is to sign
it, a company that subscribes the memorandum is to
sign by the Secretary or Director of the company.
See Section 71(1)(b) of the Act.
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 However, Section 20(3) of the Act provides

that a company in liquidation shall not be
capable of becoming a member of a
company.
 5. ALIENS
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 An alien may acquire shares in a company

and become a member by complying with the
various requirements of the law regulating
the rights and capacity of aliens to engage in
trade or business in Nigeria. This is provided
in Section 20(4) of CAMA. Some of the other
laws, which have to be complied with, are:
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 Section 17 of the Nigerian Investment

Promotion Commission Act which requires
alien to register with the Commission before
commencing business in Nigeria;
 Obtaining business permit under Section 8 of
the Immigration Act, 1963;
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 Section 7 of the Securities and Exchange

Commission Act, 1988;
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 Section 8 of the Investments and Securities

Act (ISA), 1999 which empowers the
Securities and Exchange Commission (SEC)
to keep and maintain Foreign Direct
Investments (FDI) and Foreign Portfolio
Investments (FPI) in Nigeria;
CAPACITY TO BE A MEMBER –
(SECTION 80 OF CAMA)

 Sections 148 and 155 of CAMA. Section 148

of the Act requires the production of a
document which is by law sufficient evidence
of probate of a Will or letters of
administration of an estate. Section 155, on
the other hand, deals with transmission of
shares.
HOW TO BECOME A MEMBER

 In a company having a share capital, whether

limited or unlimited, membership can be
acquired:
 by subscribing the memorandum as provided
in Section 79 of CAMA.
 By Allotment and Registration (Section 125);
and
 by transfer (Section 151) or
HOW TO BECOME A MEMBER

 by transmission (Section 155); followed by

registration of the transferee in the Register
of Members.
 Where a company is limited by guarantee,
membership may be acquired by subscription
and by an undertaking as in Section 27(4)(b)
of the Act followed by registration by the
company.
HOW TO BECOME A MEMBER

 BY SUBSCRIPTION – (SECTION 79(1) OF

CAMA)
HOW TO BECOME A MEMBER

 The subscribers are persons who sign the

Memorandum of Association and Articles of
Association of a company. The first members
acquire their membership by subscription. They
must together subscribe to shares amounting in
value to at least 25 per cent of the authorised share
capital. See Sections 79(1) and 27(2)(b) of the Act.
 On the registration of the company, the subscribers
are deemed to have agreed to become members
and their names must be entered in the Register of
Members.
HOW TO BECOME A MEMBER

 Section 27(3) of the Act now enables a

subscriber of the memorandum to hold
shares as a trustee for another person but he
shall disclose in the memorandum that fact
and the name of the beneficiary.
 2) BY ALLOTMENT AND REGISTRATION
HOW TO BECOME A MEMBER

 One of the ways a person can subsequently become

a member of a company is by applying for allotment
of shares. On an application for shares by an
individual, the company may allot shares to him by
notifying him of the acceptance of the offer made in
his application. He then becomes a member and is
entitled to have his name entered in the Register of
Members.
 3) BY TRANSFER – (SECTION 115 OF CAMA)
HOW TO BECOME A MEMBER

 The shares or other interest of a member in a

company are properly transferable in the manner
provided in the Articles of the company. See Section
115 of the Act. A person may become a member of
a company by having the shares of that company
transferred to him by the holder of those shares.
The transfer from an existing member to another
may be by sale, gift or some other transaction which
to all intents and purposes, must be lawful.
HOW TO BECOME A MEMBER

 4) BY TRANSMISSION – (SECTION 155(1)

OF CAMA)
HOW TO BECOME A MEMBER

 The vesting of shares in the personal representatives

on the death of a shareholder is known as
transmission of shares rather than transfer. On the
death of a member, the survivor(s), where the
deceased was a joint holder or the personal
representative of the deceased, where he was the
sole holder, shall be the only persons recognised by
the company as having any title to his interest in the
shares. See Section 155(1) of the Act.
HOW TO BECOME A MEMBER

 5) BY ESTOPPEL
 Where a person’s name is inadvertently
placed on the Register of Members, and he
knows and assent to it, he will then be
estopped from denying that he is a member.
CONDITIONS FOR MEMBERSHIP

 There are two conditions a person has to

comply with before becoming a member of a
company as indicated above:
 The agreement to become a member either
by subscribing the memorandum or
allotment, transfer, transmission or by
estoppel.
CONDITIONS FOR MEMBERSHIP

 By the entry on the Register of Members of

the shareholder’s name.
CONDITIONS FOR MEMBERSHIP

 An exception to this general rule is in the case of

death or bankruptcy, that is, by operation of law
where the shares are vested in the personal
representatives of the deceased or in trustee in
bankruptcy, in the case of a bankrupt member.
 Note that although the personal representative or
trustee has the right to transfer the shares and
collect dividends, they cannot exercise the rights of
membership until registration takes place.
TERMINATION OF MEMBERSHIP

 A person ceases to be a member when his

name is removed from the Register of
Members. This may occur in the following
ways:
TERMINATION OF MEMBERSHIP

 1. TRANSFER OF THE SHARES

 The transfer, which is a voluntary process on
the part of the shareholder, shall be by
instrument of transfer and shall be without
restrictions. The transferor ceases to be a
member when the transferee’s name is
entered in the Register of Members.
TERMINATION OF MEMBERSHIP

 2. FORFEITURE OF THE SHARES

 This occurs where a member fails to pay on
calls of shares by the company (non-payment
of calls). See Section 140 of the Act.
 3. SURRENDER OF THE SHARES
 This is a short cut to forfeiture in order to avoid
the formalities required in a situation where
shares are to be forfeited.
TERMINATION OF MEMBERSHIP

 4. TRANSMISSION TO PERSONAL
REPRESENTATIVES ON DEATH OF MEMBER
 This occurs by operation of law. In essence, it is
an involuntary transfer since death can be regarded
as the end of all. Transmission requires no
instrument of transfer. The dead person only ceases
to be a member of the company when some other
person is registered in his place.
TERMINATION OF MEMBERSHIP

 5. Transmission to trustee in bankruptcy.

 6. Disclaimer by trustee in bankruptcy of
members.
TERMINATION OF MEMBERSHIP

 7. Redemption of redeemable preference

shares.
 8. Purchase by the company of its own
shares. This may be under a court order or
satisfying the claim of a dissenting
shareholder.
TERMINATION OF MEMBERSHIP

 9. Rescission of the contract to take the

shares arising out of fraud or
misrepresentation in the prospectus or
reason of irregular allotment. This is
provided in Section 571 of the Act.
 10. Repudiation by infant. See the case of
STEINBERG V. SCALA LEEDS LTD.
(Supra)
REGISTER OF MEMBERS

 Every company must keep a Register of

Members in which are entered their names,
addresses and descriptions. See Sections
83, 84 to 90 of the Act.
 Register of Members is one of the
statutory books that must be kept by a
company.
 _____________________