By Amaka Ezeno, MCLArb
A company is a business organization that operates separately from its owners. It is made up of several people who pull their resources together to carry out a business. It is usually managed by the Board of Directors. A company can sue and be sued. It has the capacity to enter into agreement in its own name. See Marina Nominees Ltd V FB.IR. An incorporated company does not die.
It lives in perpetuity except it is wound up and dissolved. A company must be registered with the Registrar of Companies and should be issued the certificate of incorporation before it could operate. The promoters are required to submit to the Registrar of Companies, some documents like the Memorandum of Association and the Article of Association.
Promoters are the first people who come together to carry out all the formalities required and get the company registered. A company could undertake the business of banking, manufacturing, transportation, etc.
The principal law regulating the registration of companies in Nigeria is the Companies and Allied Matters Act (CAMA). It establishes the Corporate Affairs Commission, which is the primary body regulating the registration of companies in Nigeria.
The Commission has an office in each state of the Federation. Consequently, there is an office of the Commission established in Awka, and in all the other states in Nigeria for ease of doing business for both old and new entrants into the business world with the desire to form, incorporate or register a business.
Memorandum of Association is the document that defines the powers of the company and regulates its external affairs. Article of Association contains the internal rules and regulations governing the company and its members. For a public limited liability company, the prospectus is also submitted in addition to the Memorandum of Association and the Article of Association. Prospectus is a document that is used to invite the public to subscribe for shares of a company.
A company could be registered as unlimited company or limited company. Unlimited company is the type of company that has corporate personality, but the liabilities of its members are unlimited. That is, in the event of winding up of the company, members are to sell their personal properties in addition to the capital they contributed to the business, to settle the debts of the company.
On the other hand, the liabilities of members are limited in a limited company. That is, in the event of winding up, members are to lose only what they have contributed to the company. A company could be limited by shares, guarantee or both.
Company Limited by Shares: In this type of company, the liabilities of each member are limited to the value of shares which the individual member has taken up in the company. Company Limited by Shares maybe private or public.
Private Company refers to any company that its memorandum states that it is private company Transfer of shares is restricted, and membership shall not exceed 50. A private company limited by shares ends with the word “Limited” or “Ltd”. The public is not invited to subscribe to shares.
Public Company is any company that is not a private company, and its memorandum also states that it is a public company. A public company’s membership is unlimited. It can invite the public to subscribe for shares. The shares are transferable. A public company limited by shares shall end with the word “Public Limited Company” or “PLC”.
Company limited by guarantee: in this type of company, the liabilities of members are limited to the amount they agreed to contribute to the company. It is usually for non-profit and no sharing of profit is contemplated. The name of a company limited by guarantee shall end with the words “Limited by Guarantee” or “Ltd/Gte. An unlimited company shall end with the word “Unlimited” or “Ultd”.
Capacity to Form a Company
The Act provides that any two or more persons may form and incorporate a company so long as they comply with the requirements. One person can register or form a private company. For a person to qualify to form a company, he must satisfy the following eligibility provided in section 20 (1) of CAMA:
- He or she must not be less than 18 years unless two other persons are more than 18.
- They must be persons of sound mind and must not have been so found wanting by a court in Nigeria or elsewhere.
- He is not bankrupt, and he is not disqualified under Sec.254 of CAMA from being a director of a company
- A corporate body in liquidation is not allowed to join in the formation of a company.