Week 3

LEGAL REGIME AND THE REGULATORY BODIES IN CORPORATE PRACTICE IN

NIGERIA

Applicable Laws and the Bodies Established to Regulate them.

Exams: applicable law, statutory body, contribution of the body to corporate
practice in Nigeria, if any accreditation needed

S/N Applicable Law Regulatory Body Administrative

Head
1 Companies and Allied Corporate Affairs Registrar-General
Matters Act 2004 Commission
2 Investments and Securities and Exchange Chairman
Securities Act 2007 Commission
3 Federal High Court Act Federal High court Chief Judge
4 Nigerian Investment The Nigerian Investment Director-General
Promotion Commission Promotion Commission
Act 2004 (NIPC)
5 National Office for National Office for Director-General
Technology Acquisition Technology Acquisition
Promotion Act 2004 Promotion
6 Immigration Act Nigerian Immigration Comptroller-General
Service
7 Banks and other Central Bank of Nigeria Governor of the
Financial Institutions Act Central Bank
8 Asset Management Asset Management Managing Director
Corporation Act, 2010 Corporation of Nigeria (S.10(1)(b) AMCONA
9 Insurance Act 2007 National Insurance
Commission
10 National Industrial Court National Industrial Court President
Act
11 Federal Inland Revenue Federal Inland Revenue Executive Chairman
Service Act, 2007 Service

REGULATORY BODIES ON CORPORATE LAW PRACTICE

There are 3 principal institutions or bodies, which are statutorily vested with
regulatory, supervisory and controlling authority over companies and their
activities in Nigeria. These are the Corporate Affairs Commission (CAC), Securities
and Exchange Commission (SEC), and Nigerian Investment Promotion Commission
(NIPC).

FEATURES AND FUNCTIONS OF THE REGULATORY BODIES AND THEIR

RELEVANCE ON CORPORATE LAW PRACTICE
Corporate Affairs Commission
This is the apex of the regulatory bodies for companies in Nigeria, which was
established under Section 1 of the CAMA as a body with full legal capacity like
incorporated companies. Thus, it has perpetual succession and a common seal,
capable of suing and being sued in its corporate name, of acquiring, holding or
disposing of any property, movable or immovable, for the purpose of carrying out its
functions.
The establishment of the Corporate Affairs Commission as an autonomous body was
as a result of the perceived inefficiency and ineffectiveness of the erstwhile
Company Registry, a department within the Federal Ministry of Commerce and
Tourism, which was then responsible for the registration and administration of the
repealed Companies Act of 1968.
Features of CAC

The features are that the Commission has a membership of 15 persons representing
a wide variety of interests – the business community, labour, the legal profession,
accountancy profession, Manufacturer’s Association of Nigeria, association of Small
Scale Industries, the Institute of Chartered Secretaries and Administrators, the
Securities & Exchange Commission and the Ministries of Trade and Tourism,
Finance and Economic Development, Justice, Industry, and Internal Affairs. The
chairman who is appointed by the President on the recommendation of the Minister
of Trade and Commerce must be a person who is experienced in or has acquired
specialised knowledge of corporate, industrial, commercial, financial or economic
affairs and is thus able to make outstanding contributions to the work of the
commission – Section 2 of the CAMA.

There is a provision for a Registrar-General of the commission who must be a

person who has qualified to practice law in Nigeria for not less than 10 years and he
must have had experience in company law practice or administration for not less
than 8 years. He is entitled to represent the Commission in legal proceedings in
court – Section 8(1) of CAMA.

Members of the Commission other than ex-officio members hold office for 3 years
and are eligible for re-appointment for one further term of 2 years. With the
exception of the Registrar, generally, they are all part-time members – Section 3 of
CAMA.

A member of the commission ceases to hold office, if he becomes of unsound mind

or is incapable of carrying out his duties, if he becomes bankrupt or has made
arrangement with his creditors, if he is convinced of a felony or any offence
involving dishonesty– Section 3(4) of CAMA.

Members, other than the representatives of the Ministries, the Securities and
Exchange Commission, the Institute of Chartered Securities and Administrators and
the Registrar-General are entitled to such remuneration and allowances as the
president may direct – Section 4 of CAMA.
The quorum for meetings of the Commission is 5: Section 5(3).

Functions of CAC

The functions of the Commission as set out in Section 7 of the Companies and
Allied Matters Act, includes the following:

1. To regulate and supervise the formation, incorporation and winding up of

companies.
2. To regulate, register and wind-up business names and partnerships
3. To regulate, incorporate and wind-up incorporated Trustees/Associations.
4. To maintain companies registry and offices in all the States of the Federation
5. To arrange and conduct investigation into the affairs of any company where
the interest of the shareholders and public so demands
6. To perform such other functions as specified in any Act or Law
7. To undertake such other activities as are necessary or expedient for giving
full effect to the provisions of this Act.

Securities Exchange Commission

The Securities and Exchange Commission (SEC) is the apex regulatory body for
Nigeria's capital market. It however, operates under the supervision of the Federal
Ministry of Finance. The Securities and Exchange Commission, Nigeria, like other
exchange commissions elsewhere, regulates the operation of capital market
transactions, ensuring that the relevant rules are complied with. It regulates the
Nigerian Stock Exchange.

The business of capital formation and mobilisation is at the root of economic

development, which is why every economy wants to develop its capital market.
Capital markets drive capital mobilisation and allocation to businesses, in the push
for economic growth. Through the capital market, companies and governments
mobilise capital for investment, while offering opportunity to investors to seek
profitable outlets for their funds. Because complex financial processes are often
involved, and large numbers of investors participate, the need for guarding the
mechanism for those transactions becomes apparent. Investors need to be
protected, just as the process needs to be kept viable.

The Securities and Exchange Commission as it is today, is the outcome of the

Investments and Securities Act (ISA) No 45 of 1999. However, its seed was actually
sown in 1962, when the Capital Issues Committee, an arm of the Central Bank of
Nigeria, was set up to evaluate applications from companies wanting to raise capital
from the market and recommend for approvals. That committee transmuted to the
Capital Market Commission in 1973 and the Securities and Exchange Commission in
1978, by virtue of Decree No. 7 of 1979. The Investment and Securities Act No. 45 of
1999 finally sought to broaden the operation of the Commission and refocus it for
more impact on economic growth. ISA 2007 replaced ISA 1999.

Features of SEC

The features of the Commission are that it consists of a chairman appointed by the
President and 10 other persons including 2 full-time Commissioners who are 10yrs
post call who must be persons with ability, experience and specialised knowledge in
capital market matters – section 3 of the ISA. There is a Director-General for the
Commission. He is appointed by the President and he is the Chief Executive of the
Commission.

Functions of SEC (Section 9 ISA)

1. To regulate investment and securities business in Nigeria

2. To register and regulate Capital Market Operators and their functions
3. To register securities of public companies
4. To maintain a register of foreign investment portfolios in Nigeria.
5. To render assistance to promoters and investors wishing to establish
Securities Exchanges and Capital Trade Points;
6. To register and regulate the venture capital funds and collective investments
schemes
7. To protect the integrity of the securities market
8. To facilitate the establishment of a nationwide system for securities trading
in the Nigerian capital market
9. To facilitate the linking of all markets in securities through modern
communication and data processing facilities
10. To review, approve and regulate mergers, acquisitions and other forms of
business combinations;

The relevance to corporate law is that The Securities and Exchange Commission
is consequently there to see to the orderly and rapid development of the capital
market. Its basic role is to ensure transparent conduct, such that parties that take
decisions, especially on investments, do it on the strength of good information and
sound processes. By that, it is to attract more funds into the market and also attract
more viable companies that could expand their operations by tapping funds from
the capital market.

Nigerian Investment Promotion Commission

This was established in 1995 as a body corporate with perpetual succession under
the NIPC Decree, 1995. The commission shall encourage, promote and coordinate
investment in the Nigerian economy.
Functions of the Nigerian Investment Promotion Commission (S. 4 NIPCA)

The Commission shall encourage, promote and co-ordinate investment in the

Nigerian economy and accordingly, shall—
1. Co-ordinate and monitor all investment promotion activities to which this
Act applies;
2. Initiate and support measures which shall enhance the investment climate in
Nigeria;
3. Promote investments through effective promotional means;
4. Collect, collate, analyse and disseminate information about investment
opportunities and sources of investment capital, and advise on request, the
availability, choice or suitability of partners in joint-venture projects;
5. Register and keep records of all enterprises to which this Act applies;
6. Identify specific projects and invite interested investors for participation in
those projects;
7. Initiate, organise and participate in promotional activities, such as,
exhibitions, conferences and seminars for the stimulation of investments;
8. Maintain liaison between investors and Ministries, Government departments
and agencies, institutional lenders and other authorities concerned with
investments;
9. Provide and disseminate up-to-date information on incentives available to
investors
10. Assist incoming and existing investors by providing support services
11. Evaluate the impact of the Commission in investments in Nigeria and make
appropriate recommendations;
12. Advise the Federal Government on policy matters designed to promote the
industrialisation of Nigeria or the general development of the economy
13. Perform such other functions as are supplementary or incidental to the
attainment of the objectives of this Act.

One Stop Investment Centre

In its continuous effort to encourage Foreign Direct Investment (FDI) in Nigeria, the
Federal Government established the One Stop Investment Centre (OSIC) otherwise
known as One Stop Shop (OSS) on 21st March 2006.

Nigeria like most African nations has set up statutory bodies to regulate foreign
investment in the country. Therefore foreigners interested in carrying on business
in the country are required to obtain investment approvals after incorporating their
companies. The practice has been that company incorporation and foreign
investment approvals are processed in different authorised government agencies.
This process was characterised by delays usually caused by government
bureaucracy, which also stifled the smooth start up of foreign businesses in Nigeria.

In a bid to ensure the timely incorporation of companies and grant of investment

approvals, the government had in the early 1990’s set up the Industrial
Development Commission Committee (IDDC) to serve as a one stop agency for all
pre-investment approvals. The IDDC had the statutory responsibility to grant
Business Permits, Approved Status-in-Principle, Expatriate Quota, approvals on
fiscal concessions, vet licensing and transfer agreements and generally advise the
Federal Government on policy matters designed to promote the industrialisation of
the country.

Although the law establishing the IDDC provided that every valid application
received would be processed within two months, this expectation was rarely ever
met in practice. The IDDC Act was subsequently repealed by the Nigerian
Investment Promotion Commission (NIPC) Act 1995 which established the NIPC to
encourage and promote investment in Nigeria. Companies with foreign participation
are required to apply to NIPC for registration and the statute provides that within
14 days from the receipt of completed registration forms, NIPC shall register such
companies or otherwise advice the applicant accordingly.

Functions of OSIC

This includes simplifying and curtailing the procedures and guidelines for issuing
business approvals, permits and authorisations by eliminating bottlenecks faced by
investors in establishing and running businesses in Nigeria.

In addition, OSIC is expected to achieve the following functions:

 Reduce the high cost of doing business
 Eliminate dealing with multiple agencies
 Eradicate the use of discretion and lack of transparency in granting
approvals, licenses, permits
 Eliminate over bureaucratisation in procedures and processes
 Eradicate poor service delivery
 Ensure Foreign Direct Investment and investor tracking
Features of OSIC
 The participating agencies will maintain their existing mandates and
responsibilities within the structure of OSIC
 Only statutory provisions will be administered at OSIC and not special
applications
 Agencies will establish their presence at OSIC in phases
 Approval time for business entry approvals is 24 hours
 OSIC covers investments into all sectors of the economy
 It is mandatory for all foreign investors to register with OSIC to facilitate
foreign direct investment tracking/investor tracking as provided in the NIPC
Act.
The Functions of National Office for Technology Acquisition Promotion are: (S.
4 of NOTAP Act.)
The principal function of NOTAP is to:
1. Register contracts that are registrable under the Act
2. Issues Certificate of Registration
3. Monitor continuously the execution of contracts and agreements so
registered under it. See S. 4(d) & 6(1) of NOTAP Act.

The Functions of Asset Management Corporation are:

AMCON performs the following functions “in accordance with the provisions of this
Act” i.e. the AMCOM Act)
1. Acquire eligible bank assets from eligible financial institutions
2. Purchase or otherwise invest in eligible equities
3. Hold, manage, realise and dispose of eligible bank assets
4. Pay coupons on, and redeem at maturity, bonds and debt securities issued by
the Corporation as consideration for the acquisition of eligible bank assets
5. Perform such other functions, directly related to the management or the
realisation of eligible bank assets that the Corporation has acquired
6. Protect, enhance, or realise the value of the eligible bank assets that the
Corporation has acquired
7. Perform such other activities and carry out such other functions which in the
opinion of the Board are necessary, incidental or conducive to the attainment
of the objects of the Corporation.
See S. 5 AMCON Act.

PROCEDURE FOR ACCREDITATION WITH CAC

1. Pick up and fill Accreditation Form A or B

2. Pay application fee of N5,000 for individuals N10,000 for firms

3. Return of completed application form accompanied by:

(a) Two passport photographs

(b) Qualifying certificate i.e. qualifying Certificate and his Call to Bar
Certificate.

(c) A copy of his current receipt of payment of practicing fee for at least for
the year of application
(d) A copy of his NYSC discharge or exemption certificate.
(e) A copy of his registration receipt

Registration with the Securities and Exchange Commission as a Capital Market

Expert/ Professional (otherwise called capital Marker Operator (CMO)
The professionals allowed registration are Legal Practitioners, Accountants,
Auditors, Engineers, Estate valuers, Property Manager and others as determined by
SEC. For individual Partners, they must possess 5 years post-call experience to
qualify to be registered while for sponsored individuals it is 2 years post-call that is
needed.
See R.178 SEC Rules 2013
Procedure:
1. Send an application to SEC by filling SEC Form 2 or 3.
2. Pay the application fees of:
Firm - N20, 000
Principal partner- N 5, 000
Sponsored individual- N1, 000
3. Submit the application Form with the following documents:
a. Bank statement of 3-6 months of the applicant with a minimum balance
of:
i. Individual- N500,000
ii. Firm- N 2, 000,000.00
iii. Company Ltd. - N5,000,000.00
b. Curriculum vitae of at least two partners, if a Firm
c. Police clearance certificate
d. 4 copies of the Partnership Deed, if a partnership
e. Profile of the Firm
f. Sworn undertaken to keep proper records as specified by SEC
g. A copy of the receipt of payment of practicing fees
h. Professional indemnity insurance policy
4. SEC will then visit the office of the applicant
5. The applicant is to participate in SEC training school
Revalidate accreditation at SEC every 5yrs
See S. 38 of the Investment and Securities Act, 2007; (ISA), R. 178 SEC Rules
2013.
COMPLETION OF FORMS REQUIRED FOR ACCREDITATION OF COMPANY WITH
CAC
1) Reservation of name Form;

2) The business name;

3) The general nature of the business or proposed activities;

4) The full address of the principal place of business, and every other subsidiary
place of business;

5) Where the registration to be effected is that of a firm; the present forenames

and surnames, nationality, age, sex, occupation and usual residential address
of each of the individuals who are partners, and the corporate name and
registered office of such corporation, which is partner;
6) The date of commencement of the business or activities;

7) Passport photographs duly certified in the case of sole proprietorships or

firms consisting of individual;
 8) Certificates of professional proficiency in cases of sole proprietorships or
partnerships or firms intending to carry on any professional business.

It should be noted that additional information and supporting documents may be

required in the case of a firm or an individual carrying on business on behalf of
another individual, firm or corporation whether as nominee or trustee and in the
case of a firm or individual carrying on business as general agent for another
concern or entity overseas and not having a place of business in Nigeria.

ETHICAL ISSUES INVOLVED

A lawyer shall not engage in incorporation at CAC before accreditation i.e. don’t use
someone else’s accreditation
Engagement in business - Rule 7(1) of the RPC states that unless permitted by the
General Council of the Bar (hereinafter referred to as the “Bar Council”), a lawyer shall
not practice as a legal practitioner at the same time as he practices any other
profession.
Rule 7(2) states that a lawyer shall not practice as a legal practitioner while
personally engaged in –
(a) The business of buying and selling commodities;

(b) The business of a commission agent;

(c) Such other trade or business which the Bar Council may from time to time
declare to be incompatible with practice as a lawyer or as tending to
undermine the high standing of the profession

Rule 7(3) states that for the purpose of this law, “trade or business” includes all forms
of participation in any trade or business but does not include –
(a) Membership of the Board of Directors of a company which does not involve
either executive, administrative or clerical functions;

(b) Being Secretary of a company; or

(c) Being a shareholder in a company.

Lawyers in salaried employment – Rule 8(1) states that a lawyer, whilst a

servant or in a salaried employment of any kind, shall not appear as advocate in a
court or judicial tribunal for his employer except where the lawyer is employed as a
legal officer in a Government department.
Rule 8(2) a lawyer, whilst a servant or in a salaried employment, shall not prepare,
sign, or file pleadings, applications, instruments, agreements, contracts, deeds, letters,
memoranda, reports, legal opinion or similar instruments or processes or file any such
document for his employer.
Rule 8(3) a director of a registered company shall not appear as an advocate in court
or judicial tribunal for his company.
Rule 8(4) a lawyer in a full-time salaried employment may represent his employer as
an officer or agent in cases where the employer is permitted by law to appear by an
officer or agent, and in such cases, the lawyer shall not wear robes.
Rule 8(5) an officer in the Armed Forces who is a lawyer may discharge any duties
devolving on him as such officer and may appear as a Court Martial as long as he does
so in his capacity as an officer and not as a lawyer.
Rule 9 (1): A lawyer shall pay his Annual Practicing fees not later than 31st march in
every year. In the case of lawyers who are enrolled during the year, the fees shall be
paid within one month of the enrolment.

Rule 14: devotion and dedication to the cause of the client

Rule 15: Represent your client within the bounds of the law e.g. if your client instructs
you to incorporate a company whose objects is to manufacture arms and ammunition
or produce police uniform advise him against embarking on such venture
Week 4
TYPES OF BUSINESS ORGANISATIONS THAT CAN BE REGISTERED
Nigeria is essentially a free enterprise country, subject only to such regulations as
are necessary for national interest. As such, any person can participate in the
Nigerian Economy. This participation may be through sole proprietorship,
partnerships, and unincorporated joint ventures, limited and unlimited liability
companies.
The different types of business organisations that can be registered, their features
and suitability are as follows:
1. Sole trader;

2. Partnership; and

3. Companies/Corporations

There are also in addition, NON BUSINESS ORGANISATIONS like

1. Company Limited by Guarantee e.g. Nigerian Stock Exchange

2. Incorporated Trustees

FACTORS AFFECTING CHOICE OF BUSINESS ORGANISATIONS

1. Nature of the business
2. The capital available may affect the choice of business
3. The number of members.
4. Extent of liability of members.
5. Commercial expediency.
6. The extent and sphere of operation.
7. Position of the law/statutory requirements.
8. The cost of registration and expenses
9. Speed of processing and completion of registration.
10. Post registration compliance and regulatory supervision e.g. where persons
intending to set up a business venture do not wish to be publishing their
 accounts and filing reports to CAC, they may be advised not to set up a public
company.
11. The desire of the client himself. The business venture which the client has in
mind is to be considered, then fine tuned to meet up with the provisions of
the law.

PART A- COMPANIES
FACTORS CONSIDERED IN CHOOSING THE TYPE OF COMPANY TO ESTABLISH
1. The number of the membership. For Ltd. it is 50 while in a PLC it is unlimited.
2. The size and nature of the proposed business
3. The cost/ capital intensity of the business. For Ltd it must have a minimum
authorised share capital of N10, 000 while that of a PLC is N500,000.00
4. Proposed date of incorporation
5. Restrictions on the issue and transfer of shares. In Ltd that right is restricted
but this is not so with a Plc. S. 22(2) of CAMA.
6. The formalities to be complied with depending on the type of company
incorporated like holding of statutory meetings, filling full or abridged
statement of finance etc. NOTE-A company’s asset is different from the share
capital of the company. Shares give a member participating right to the affairs
of the company and a right to dividend.

INCORPORATED COMPANIES
Incorporated companies are also referred to as body corporate or registered
companies. They have legal personality, that is, they can sue and be sued because
they are legal entities distinct and separate from the persons of which they consist
upon registration.
FEATURES
1. The liability of members may be limited or unlimited

2. It has a legal personality.

SUITABILITY
1. It is good for making profit.

2. It is capable of acquiring, disposing or holding of all types of property.

The Company and Allied Matters Act (CAMA) CAP C20 LFN 2004 s21(1), provides
for the following types of Incorporated Companies under Part A
1) Company limited by shares

2) Company Limited by Guarantee/ltd/GTE.

3) Unlimited Liability Company/ULTD

Any of the above companies may be a private company or a public company –
Section 21(2) of CAMA.
PRIVATE LIMITED COMPANY
 A private company is one, which is stated in its memorandum to be a private
company –

FEATURES
1. Section 22(2) of CAMA. It must by its articles restrict the transfer of its shares –
2. Section 22(3) of CAMA and its total membership MINIMUM is 2 and must not
exceed fifty (50), not including persons who are bona fide in the employment of the
company –
3. Its minimum share capital is N10,000: s27(2)(a) CAMA
4. Section 22(5) of CAMA. It is prohibited from inviting the members of the public
subscribe for any shares or debentures of the company; or to deposit money for
fixed periods or payable on call, whether or not bearing interest, unless authorised
by any law.
5. Where two or more members hold share jointly, they shall be regarded as one
member: 22(4). A private company is exempted from statutory meetings.
6. A private company can commence business upon incorporation without a
certificate from the CAC registrar

A PUBLIC COMPANY
A public company is defined as any other company other than a private company
and which is stated in its memorandum as a public company – Section 24 of CAMA.
The difference between a private company and public company are:
1) Membership of a private company is limited to fifty while public is unlimited.

2) Minimum share capital of a private company is N10,000 while a public

company minimum is N500,000 – section 27(2)(a) of CAMA.

3) A private company can commence business upon incorporation whilst a

public company will have to wait until it has been issued with a certificate by
the Registrar.

4) Private companies are permitted to allot its shares without external control
unless there is alien participation while a public company cannot do so
without the prior approval of SEC.

5) The name of a private company must include “Ltd” while a public limited
company is “Plc”.

6) A private company cannot invite the public to subscribe for its shares or
debentures or to deposit money with it unless authorised by law, but a public
company can.
 7) A private company must by its articles restrict the transfer of its shares while
a public company is not so restricted

8) Every public company must hold statutory meeting & file a statutory report
under section 211 of CAMA within 6 months of its incorporation but a
private company is not so required.

9) Under section 256 of CAMA, a person above the age of 70 years may, by a
resolution via special notice, be appointed a director of a public company
provided that the fact of his being 70 or above shall be disclosed to members
at the general meeting. Such procedure is not required in a private company.

10) All resolutions of a public company must be passed at a general meeting

otherwise they won’t be effective but a written resolution signed by all the
members entitled to attend & vote is as valid & effective as if passed in a
general meeting in a private company.

11) Company Secretary of public company is qualified and has the requisite
experience required while it is not so for private company.

COMPANY LIMITED BY SHARES

A company where the liability of its members is limited by the memorandum, to the
amount if any as to the unpaid shares respectively held by them – section 21(1)(a)
of CAMA. It is the largest type of companies, which is normally employed for
business purposes. The shares create very valuable security and the limitation of
liability enables the shareholder to determine the limit of his liability and
indebtedness. The shares, as the unit of holding, represent the involvement and
commitment of the interest of the holders. Apart from special circumstances
when the liability may be extended, for example, where a company carries on
business with less than the minimum number of members or the authorised
minimum share capital.
Section 93 CAMA: If a company carries on business without having at least two
members and does so for more than 6 months, every director or officer of the
company during the time that it so carries on business with only one or no member
shall be liable jointly and severally with the company for the debts of the company
contracted during that period.

Section 99(1) CAMA: Where, after the commencement of this Act, a memorandum
delivered to the Commission under section 35 of this Act states that the association
to be registered is to be registered with shares, the amount of the share capital
stated in the memorandum to be registered shall not be less than the authorised
minimum share capital and not less than 25 per cent of that capital shall be taken by
the subscribers of the memorandum.

Section 99(2): No company having a share capital shall, after the commencement of
this Act, be registered with an authorised share capital less than the authorised
minimum share capital.
Section 99(3): Where, at the commencement of this Act, the authorised share
capital of an existing company is less than the authorised minimum share capital,
the company shall, not later than 30 days after the appointed day, increase the share
capital to an amount not less than the authorised minimum share capital of which
not less than 25 per cent shall be issued.

Section 99(4): Subject to subsection (3) of this section and to section 103 of this
Act, where a company is registered with shares, its issued capital shall not at any
time be less than 25 per cent of the authorised share capital.

Section 99(5): Where a company to which subsections (3) and (4) of this section
apply fails to comply with the applicable subsection, it shall be liable to a fine of
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.

NB: a person who has paid his shares in full cannot be held liable for any part
of the liability of the company. On the other hand, where a shareholder has
sums outstanding on his shareholding, he can be called upon to pay by a duly
authorised call and this is so whether or not the company is being wound-up.
The memorandum of the company, specifically its capital clause, must provide, inter
alia that the share capital of the company is divided into “shares of a fixed amount
(i.e. N1 or 50 kobo each)”.

FEATURES
1) The liability of members of a company limited by shares may have to be
implemented at any time during the active life of the company as well as
during the winding-up.

2) It is usually incorporated for the purpose of making profits for distribution to

members.

SUITABILITY
1) A person who has paid his shares in full cannot be held liable for any part of
the liability of the company.

2) It is the largest type of companies, which is normally employed for business

purposes.

COMPANY LIMITED BY GUARANTEE

A company without a share capital (most times, it is not for profit organisation).
This is a company whose liability of its respective members are limited by the
memorandum to such amount that members have undertaken to contribute to
the assets of the company in the event of liquidation – section 21(1)(b) of
CAMA. Such companies are incorporated for purposes of promoting commerce, art,
science, religion, etc. and the income and assets are applied for the promotion of the
objects and not available for distributing to members as profits – section 26(1) of
CAMA. A company limited by guarantee shall not be registered with a share capital –
section 26(2). Section 26(6) of CAMA: All officers and members who are
cognisant of the fact that it is so carrying on business shall be jointly and severally
liable for the payment and discharge of all the debts and liabilities of the company
incurred in carrying on such business, and the company and every such officer and
member shall be liable to a fine not exceeding N100 for every day during which it
carries on such business.

The total liability of the members of a company limited by guarantee to contribute

to the assets of the company in the event of its being wound up should not at any
time be less than N10,000 – section 26(7) of CAMA. This is intended to give some
assurance to third parties dealing with the company.
Finally, section 26(5) of CAMA provides that the memorandum of such a company
shall not be registered without the authority of the Attorney-General of the
Federation.
FEATURES
1) The liability will only have to be implemented after the commencement of
winding up of the company.

2) Members’ liability is limited by memorandum to such amount as they may

respectively undertake to contribute to assets of the company in event of it
being wound up.

3) The number of people forming must be clearly stated

4) The consent of the A.G must be obtain to approve the memorandum of

association

5) It can engage in small business but not for making profit for its members

The company has no share capital. Members merely undertakes to contribute to

a sum not less than 10,000 in the event of its being wind up

SUITABILITY
1) It is incorporated for purposes of promoting commerce, art, science, religion,
etc.

2) The income and assets are applied for the promotion of the objects and not
available for distributing to members as profits.

UNLIMITED LIABILITY COMPANY

This company has no limit on the liability of its members
This is a company not having any limit as regards the liability of its members. This
company is not common, being limited in its usefulness. It is like a partnership
because every member is liable in full for the debts of the company while a member
and does not have any limit on liability. This unlimited liability makes it unattractive
for business purposes. It is used mainly by professionals who assume personal
liability for their obligations.
It must be registered with a share capital, and where an existing unlimited company
has no share capital, it must, not later than the appointed day, alter its
memorandum and articles so that it becomes an unlimited company having a share
capital not below the minimum share capital permitted under section 99 - Section
25. Section 567 of CAMA defines the appointed day as a period of one year from
the commencement of the Act.
It is usually useful where the members are able to estimate the kind of liability or
loss they are likely to incur in advance e.g. company working on a patent and its
development in terms of products, oil prospecting companies, etc.
FEATURES
1) It does not have membership liability on its members i.e. unlimited liability.

2) Every member is liable in full for the debts of the company.

3) There must be ultd at the back of its name

4) The memorandum of association must provide for its being unlimited

5) One can not convert a private company to public unlimited

SUITABILITY
1) It is unattractive for business purposes.

2) It is used mainly by professionals who assume personal liability for their

obligations, that is, where the members are able to estimate the kind of
liability or loss they are likely to incur in advance.

REQUIREMENTS AND PROCEDURE FOR REGISTRATION OF BUSINESS

ORGANISATIONS WITH C. A. C
The steps to be taken for incorporation of a company are as follows:
i) Ascertaining the particulars of the proposed company.

ii) The preparation of the incorporation documents.

iii) The filing of incorporation documents.

iv) The registration of the company.

PARTICULARS OF THE PROPOSED COMPANY

A person who wants to form a company will have to decide on the particulars of the
company in the light of the circumstances, need and his instructions, if he is an
agent. In making the decision, he will have to consider the requirements of the Act
and other relevant statutes. He will consider matters of practical importance such as
the type of company, its structure, nature of business proposed, funding,
organisation, and the memorandum and articles of association. His choice of the
type of company will depend on the purpose for which it is being formed. For
example, if the promoter intends to carry on a commercial business, he will
probably decide on a company limited by shares and if he intends to borrow money,
then it will be a public company.
Having decided on the type of company, the promoter or person forming the
company will need to obtain particulars necessary for preparing the memorandum
and articles. These will include the following:
For the memorandum (contains the objectives of the company)
a) The name – the name of the company ending with the words “Public Limited
Company” in the case of a public company limited by shares; “Limited” in the
case of a private company limited by shares; “Limited by Guarantee” in the
case of a company limited by guarantee; and “Unlimited” in the case of an
unlimited company – section 29 of CAMA. Certain names are prohibited –
section 30(1) of CAMA, while others can only be used with the consent of
the Commission – section 30(2) of CAMA. The name chosen must not be one
already registered or misleading – Amasike v. Registrar-General, (CAC)
2006) 3 NWLR (Pt. 968) 462 at 501.

b) The objects – these are the purposes for which a company is formed. The
nature of the business or object(s) is to be stated in the memorandum –
section 27(1)(c) of CAMA.

c) The share capital – this is the sum with which the company is registered.
Although, the capital will depend largely on the type of company, nature of
the business and the availability of other sources of working capital
(minimum of N10,000 for a private company, and N500,000 for a public
company).

d) Registered office – section 27(1)(b) of CAMA requires that the registered

office of the company will be situated in Nigeria.

e) Limitation of liability – this is to decide if the company will be limited or

unlimited, and if limited, whether by shares or guarantee.

f) Subscribers to the memorandum – subscribers must take 25% of the

authorised capital, but they need not be the true owners of the company and
after incorporation, the shares may be transferred to the true owners.

For the articles of association – internal working of the company

a) Shares – detailed particulars should be obtained in respect of shares.

b) Borrowing – although a trading company normally has power to borrow

money for the purpose of its business, care should be taken to regulate the
power as desired.

c) Meetings – special provisions required by the owners of the company should

be considered.
 d) Directors – instructions may be required as to their appointment, tenure,
powers and duties, use of company seal, etc.

e) Secretary – instructions should be given as to their appointment, duties and

powers, etc.

f) Accounts and audit – special details not provided in the act may be added to
the articles.

g) Dividends – instructions should be taken in respect of how dividends are to

be dealt with.

h) Others – such other matters important to the business should be considered

and required.

INCORPORATION DOCUMENTS
Section 35(2) of CAMA provides for the following incorporation documents:
a) The memorandum and articles of association – these two documents
traditionally form the constitution of the company. The memorandum sets
out the structure and conditions of the company while articles contain the
special regulations for the internal management of affairs of the company as
long as they are provided in the Act.

b) The notice of the address of the registered office – the notice must state the
address of the registered office and the head office of the company. P.O Box
or private mail bag is not acceptable as an address – section 35(2)(b) of
CAMA. FORM CAC 3

c) List particulars and consent of the first directors – this is a statement in a

prescribed form containing the list and particulars together with the consent
of the persons who are to be the first directors of the company – section
35(2)(c) of CAMA. FORM CAC 7

d) Statement of the authorised share capital – the statement which is a form

must show the authorised share capital divided into shares of a fixed amount
e.g. N10,000 divided into 10,000 shares of N1 each and must be signed by at
least one director – section 35(2)(d) of CAMA. FORM CAC 2

e) Any other necessary document – e.g. documents like ‘the Commission’s form’
consenting to the use of the proposed name, and ‘business and resident
permit’ in the case of an alien who is proposed as a director, secretary or
subscriber to the memorandum – section 35(2)(e) CAMA

Statutory declaration of compliance – after all the requirements of the law have
been complied with, and these documents are produced to the commission, there
must be made a statutory declaration in a prescribed form by a legal practitioner
that the requirements for registration have been complied with – section 35(3) of
CAMA. FORM CAC 4. The Commission may accept or refuse the declaration, but if it
refuses it, then it must within 30days of receipt of the declaration send to the person
applying (declarant) a notice of its refusal and the ground of such refusal.
N.B: any other person listed for accreditation under Part A can carry out this
function but statutory declaration of compliance must be carried out by a lawyer.

FILING OF INCORPORATION DOCUMENTS

When the above documents have been prepared and duly stamped, they are
presented to the Commission for filing with the appropriate fees. The amount of the
filing fees are altered from time to time by altering the 15th Schedule of the Act.
In addition to the filing fees, registration fees are payable to the Commission for –
a) Registration of public company having share capital;

b) Registration of private company having share capital; and

c) Registration of a company not having share capital.

Fees are also charged for the following –

a) Change of company name.

b) Filing of annual returns.

c) Registration of charges.

d) Certified True Copy (CTC) of Certificate of Incorporation.

e) CTC of memorandum and articles of incorporation.

f) Increase in share capital.

g) Re-instatement of company’s name.

h) Alteration of memorandum and articles of association.

i) Deed of release.

j) Search per document.

k) Changes in Forms CAC 2.1, 2.4, 2.7

l) CTC of Forms CAC 2.1, 2.4, 2.7

m) A set of company incorporation forms.

n) Availability form.

REGISTRATION AND INCORPORATION OF THE COMPANY

Section 35(2) of CAMA provides that the incorporation documents listed above
shall be delivered to the Commission and section 36(1) of CAMA provides that the
Commission shall register the memorandum and articles unless in its opinion –
a) They do not comply with the Act;
 b) The business which the company is to carry on, or the objects for which is
formed, or any of them, are illegal;

c) Any of the subscribers to the memorandum is incompetent or disqualified in

accordance with section 20 of the CAMA;

d) The name conflicts with or is likely to conflict with an existing trademark or

business name registered in Nigeria unless the consent of the owner of the
trademark or name has been obtained.

If the Commission refuses to register a company for any of the reasons stated above,
any person aggrieved by the refusal may give notice to it requiring it to apply to the
Court for directions and the Commission must within 21days of receiving notice so
apply – section 36(2) of CAMA. It is further provided that in order to satisfy itself
as to the exercise of this discretion under section 36(1), the Commission may
require a person subscribing the memorandum to make and lodge with it a
statutory declaration to the effect that he (the subscriber) is not disqualified under
section 20 from joining in forming a company – section 36(3) CAMA
In the case of a company to be limited by guarantee, the memorandum must
not be registered without the authority of the Attorney-General of the
Federation – section 26(5) of CAMA.
Certificate of Incorporation – on registering the memorandum and articles, the
Commission shall certify under its seal –
a) That the company is incorporated;

b) In the case of a limited company, that the liability of the members is limited
by shares or by guarantee as the case may be;

c) In the case of an unlimited company, that the liability of members is

unlimited;

d) That the company is a private or public company as the case may be –

section 36(5).

The certificate of incorporation is prima facie evidence that all the requirements of
the Act in respect of registration and of matters precedent and incidental to it have
been complied with and that the association is a company authorised to be
registered and duly registered under the Act – section 36(6) of CAMA.
Effect of incorporation – the general effect of incorporation is that from the date of
incorporation mentioned, the subscribers of the memorandum with such other
persons as may from time to time become members of the company, shall be a body
corporate by the name contained in the memorandum, capable forthwith of
exercising all the powers and functions of an incorporated company including the
power to hold land, and having perpetual succession and a common seal, but with
such liability on the part of the members to contribute to the assets of the company
in the event of its being wound up – section 37 of CAMA.

DOCUMENTS REQUIRED FOR STAMPING

 a) Two copies of the memorandum and articles of association must be
presented to the Federal Commissioner of Stamp Duties for stamping –
sections 27(6) and 34(4) of CAMA respectively

b) Two copies of statement of authorised share capital (form CAC 2) and return
of allotment must also be presented for stamping.

DOCUMENTS REQUIRED TO BE SUBMITTED FOR REGISTRATION OF BUSINESS

ORGANISATIONS AT C. A. C
a) CAC form 1 for availability check

b) Copies of the memorandum and articles of association duly signed.

c) The notice of the address of the registered office – section 35(2) (b) of
CAMA.

d) List of particulars and consent of the first director –section 35(2) (c) of
CAMA.

e) Statement of the authorised share capital and return of allotment –– section

35(2)(d) of CAMA.

f) For a professional body, you’ll need a certificate of proficiency for at least one
member of the board of directors.

g) Any other necessary document – documents like ‘the Commission’s form’

consenting to the use of the proposed name, and ‘business and resident
permit’ in the case of an alien who is proposed as a director, secretary or
subscriber to the memorandum.

CHECKLIST OF DOCUMENTS REQUIRED FOR REGISTRATION OF BUSINESS

ORGANISATIONS (i.e. where there is a foreign partner)
1) 1 copy of Completed NIPC Form 1 accompanied by payment of N10,000 non-
refundable deposit.

2) 1 copy of Partnership (joint venture) agreement where applicable

3) 2 copies of photocopy of payment receipts for application form.

4) The certificate of incorporation of applicant’s company.

5) Memorandum and Articles of Association of the applicant’s company.

6) Tax clearance certificate of applicant’s company.

7) Receipts for payment of stamp duties on the authorised share capital of the
company as at date of application.
 8) Feasibility report and project implementation programme of the company
for its proposed business.

9) Title deeds of land evidencing firm commitment to acquire requisite business

premises for the company’s operations.

10)Training programme for Nigerian staff or personnel policy of the company,

incorporating management succession for qualified Nigerians.

11)Names, addresses, nationalities and occupations of the proposed Directors of

the company, including non-resident directors which should be marked
“NRD”.

12)Job title designations of expatriate quota positions required and the

academic and working experience required for the occupants of such
positions.

13)Information brochure, if any, on the foreign partner.

CLIENT INTERVIEW AND INSTRUCTIONS

This is very important because it is the instructions received from the client that will
be used in the preparation of the incorporation documents. Therefore, a legal
practitioner who wants to incorporate a company must take instructions from the
client on the following matters:
DATE FOR THE COMPLETION OF REGISTRATION
The date for completion is necessary for the purposes of charging the fees and tax.
It should be noted that previously CAC made provision for the incorporation of a
company on the same day the necessary incorporation documents are delivered to
it. This was done for a fee of N50, 000 outside the normal statutory fees. This is no
longer applicable at CAC.
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 your
client(s) to ask for another name.
It should be noted 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 also be an invented name. It may also be a
geographical or a generic name but you should advice your client on the problems of
choosing a generic name – Lagos Chamber of Commerce v. The Registrar of
Companies, Vol 14 WACA 197, 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 N500 (Five hundred naira). 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 – 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 CAMA 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 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 – Niger Chemists Ltd V. Nigeria Chemists
(1961) All NLR 171, the plaintiff’s contention was upheld and the defendant was
not allowed to register.
An existing company in the course of being dissolved may signify its consent to the
use of its name.
Such prohibited names are:
1. A name that contains the words “Chambers of Commerce” unless it is a
company limited by guarantee;

2. 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; and

3. A name where in the opinion of the Commission, would violate any existing
trademark or business name registered in Nigeria unless the consent of the
owner of the trademark or business has been obtained.
 RESTRICTED NAMES: Section 30(2) CAMA
No company may be formed with the following names except the CAC consents to it.
Names 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(1) of CAMA provides that an individual shall not be eligible to
incorporate a company if:
1. 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.

2. A person who is of unsound mind and has been so found by a Court in Nigeria
or elsewhere.

3. A person who is an un-discharged bankrupt, and

4. A person who is disqualified under Section 254 of the Act from being a
Director of a company – having been convicted.

However, it should be noted that Section 20(3) of CAMA also provides that a
corporate body in liquidation shall not join in the formation of a company under the
Act.
Section 20(4) of CAMA provides that an alien may join in the formation of a
company provided he complies with the provisions of any enactment regulating the
rights of aliens to engage in business in Nigeria. For example, Sections 19 and 20 of
the Nigerian Investments Promotion Commission 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.

CHECKLIST OF ITEMS REQUIRED TAKING INSTRUCTIONS/CLIENT INTERVIEW

TOWARDS PREPARATION OF DOCUMENTS REQUIRED FOR REGISTRATION OF
COMPANIES
1) Clients’ personal details: This entails obtaining the full name, addresses
and occupation of the clients and every other person concerned with the
promotion of the company. Also information of other directorship by the
individuals and whether the subscriber is a natural person or artificial
person
2) Date of completion of the registration: This is very important because it
will affect the legal practitioner’s fees, commencement of business and tax
consideration.

3) Age of each subscribers: s20 CAMA (minors alone are not permitted to
form companies alone under Part A but can join if 2 adults not suffering from
any disability). Also see 80 CAMA (capacity to be a member of a company)

4) Name of the company: This is relevant as well as asking the client for an
alternative name to aid a better placement of option when searching for
availability and reservation.

5) Type of company: The client should be asked what kind of company he is

interested in.

6) Sphere of operation: If the client wishes that his company operates from
Nigeria or outside Nigeria. If Nigeria, he is covered by the provisions of
CAMA, but if outside then by the laws of the foreign country concerned. In
Part B, apart from registered office, if company to do business outside its
registered must specifically indicate such other locations in Nigeria such
branches in the registration form for Business Name. But for Part A, it has a
right to do business in all local governments in Nigeria once incorporated.
However, if company under Part A (s74, 75 CAMA) is going to do business
outside Nigeria, in addition to common seal, need official seal. Official seal
has on the face of it, in addition to the name of the company (as in the
common seal), the name of the country outside Nigeria where the seal is to
be used

7) Object or business of the company: The client should be instructed on the

object and business of different types of companies. Nature of business must
be lawful

8) Share Capital: Instruct the client on the required capital for forming a
company (s27: Ltd minimum is N10,000 and for Plc for N500,000 ).
Authorised share capital, issued share capital (not less than 25%). At least
25% of issued share capital must be paid up and share distribution ratio
among the subscribers. CAMA abolished weighted and non-voting shared
(s116, 117 CAMA). Also need to take instruction about the nominal share
capital and the nominal value of each share. The mode of payment for shares
(cash or consideration other than cash: s125-127 CAMA). What percentage of
shares will be paid in cash, and what portion for consideration other than
cash. For consideration other than cash, need a valuation report by a licensed
value (to know the amount of shares that are fully paid up in consideration
other than cash)

9) Registered office: Obtain an address to be used as the registered office of

the company.
10)Age of Directors: required in Plc to know whether director is over 70 years
because it requires special notice and ordinary resolution to approve this
director (s256 CAMA)

11)First Directors: Take instruction on who would be the company directors.

Directors don’t need to be shareholders except the Articles require share
qualification of directors. For an existing company that decided to include
this clause, secretary to write to directors to state time frame to take up
shares, if not such director deemed to have vacated his office. And this
vacation will be treated as a causal vacancy

12)Alien participation: Take instructions on whether there would be aliens in

the company.

13)Subscribers: Find out who the initial subscribers are.

14)Shares: Take instructions on the type of shares the company would have.

15)Tax clearance: Ask the promoters or clients for their tax clearance.

16)Company secretary: Take instruction on who would be the company

secretary.

17)Restriction on transfer: Find out if there will be restrictions on transfer of

shares or not.

18)Limitation on liability: find out how much liability the client wants
shareholders to bear, this will aid in the determination of the type of
company to be formed.

PROFESSIONAL RESPONSIBILITIES
1) Rule 5(1) RPC: Association for legal practice – a lawyer shall not form a
partnership with a non-lawyer or with a lawyer who is not permitted to
practice law in Nigeria.

2) Rule 7(1): Unless permitted by the General Council of the bar (hereinafter
referred to as the “Bar Council”), a lawyer shall not practice as a legal
practitioner at the same time as his practice any other profession.

3) Rule 7(2): A lawyer shall not practice as a legal practitioner while personally
engaged in (a) the business of buying and selling commodities; (b) the
business of a commission agent; (c) Such other trade or business which the
Bar Council may from time to time declare to be incompatible with practice
as a lawyer or as tending to undermine the high standing of the profession.

4) Rule 7(3): For the purpose of this rule, “trade or business” includes all forms
of participation in any trade or business, but does not include (a)
Membership of the Board of Directors of a company which does not involve
 executive, administrative or clerical functions; (b) being secretary of a
company; or (c) being a shareholder in a company.

5) Lawyers in salaried employment – Rule 8(2)(3)(4) of RPC.

6) Practicing fees – Rule 9(2) of RPC.

7) Dedication and devotion to the cause of the client – Rule 14(1)(2)(3)(4)(5)

of RPC.

8) Representing client within the bounds of the law – Rule 15(1)(2)(3)(4)(5)

of RPC.

9) Representing client competently – Rule 16 of RPC.

10)Conflict of interest – Rule 17 of RPC.

11)Agreement with client – Rule 18(1)(2) of RPC.

12)Privilege and confidence of a client – Rule 19(1)(2)(3)(4)(5)(6) of RPC.

13)Lawyer as witness for client – Rule 20(1)(2)(3)(4)(5)(6) of RPC.

14)Withdrawal from employment – Rule 21(1)(2)(3)(4) of RPC.

15)Calling at client’s house or business or place of business – Rule 22(1)(2)(3)

(4) of RPC.

16)Dealing with client’s property – Rule 23(1)(2) of RPC

Incorporation Documents to be filed for companies limited by shares and

unlimited companies upon their incorporation (S. 35 CAMA)
1. 2 printed and signed copies of Memorandum and Articles of Association duly
stamped
2. Form CAC 1- Availability Check and Reservation of Name
3. Form CAC 2- Statement of authorised share capital and return of allotment
dully stamped
4. Form CAC 2.1- Particulars of Secretary
5. Form CAC 3- Notice of Registered Address
6. Form CAC 4- Declaration of Compliance by a legal practitioner
7. Form CAC 7- Particulars of First Directors
8. Original receipt of registration fees, stamp duties (for CAC 2 and CAC 7 and
memorandum and articles of association) and compliance oath
9. Any other document required by any other law/regulation such as qualifying
certificate
NB: for every 1 million nominal shares, pay N8,500 for stamp duties. For each
subsequent 1 million nominal shares, pay N7,500
(ACSALD)
Incorporation Documents for a company limited by guarantee (Ltd/Gte)
 1. 2 copies of the stamped Memorandum and Articles of Association
2. Authority letter from the Attorney-General of the Federation
3. Form CAC 1- Availability Check and reservation of name
4. Form CAC 2.1- Particulars of Secretary
5. Form CAC 3- Notice of Registered Address
6. Form CAC 4- Declaration of Compliance by a legal practitioner
7. Form CAC 7- Particulars of Directors
8. Receipt of prescribed registration fees
9. Any other document required by any other law/ regulation especially
evidence of proficiency of specialised business

Clauses to be included in the Memorandum and Articles of Association to gain

control in a private company are:
1. Appointment of the founder as a life director. Section 255 CAMA: A person
may be appointed a director for life provided that he shall be removable
under section 262 of this Act. This means director is not subject to rotation
but can be removed.
2. Compulsory signatory to accounts
3. Power given to a particular person to appoint/remove the other directors by
inserting this in the articles (even if not a member of the company)
4. Appointment of a person as Chairman of the Board of Directors: adjourn
company meetings, preside over company proceedings, casting vote, alter
ego of the company
5. Substantial/majority shareholding (to entitle such holder to demand for
voting by poll).
6. Creation of class of share with preferential rights (s116 CAMA) i.e.
preferential shareholders have weighted shares Where there is a vote
whether or not to pay arrears of dividend, a vote to vary rights attached to
shares, vote for winding up, removal of auditor before expiration of his
tenure
7. Appointment as chairman, managing director and chief executive officer
8. Custody of the common seal (s77 CAMA)
9. Pre-emptive right upon transfer of shares
10. Pro rata/ proportionate distribution of new shares (unissued shares)
11. Avoid engaging in highly regulated business unless with requisite proficiency
If only interested in only returns
A preferential shareholder as it ensures certainty of return/dividend (whether
company makes profit or not
Give him deferred shareholder – share the surplus after sharing dividends to other
shareholders
Give him majority shareholder
Instances when it is necessary to incorporate a company in order to do
business are:
1. Insurance business
2. Banking business (has to be a public company)
3. Stock brokerage
 4. Partnership with more than 20 members. Exceptions where no company
must be incorporated here is in respect of firms of legal practitioners,
Accountants and cooperative society registered by Law.
5. Pension custodians/Administration
6. Aviation
7. Private Guards company

Incorporated Trustees of Associations (Part C of CAMA).

Usually Clubs, Associations of persons related by custom, tribe etc., churches,
mosques and Non-Governmental Organisations (NGOs) are incorporated here. See S.
590 of CAMA.

 Its name must begin with ‘’The Incorporated Trustees of…………….’’. See S.
591(a) of CAMA.
 It has legal personality upon incorporation, which is vested only on the
incorporated trustees and not on all the members. See S. 596 of CAMA.
 The minimum number of trustees/members is one (1) but in practice two (2)
are needed. See S. 590 of CAMA.

Procedure for the incorporation of Incorporated Trustees

1. Complete Form CAC/IT/01- Application for registration of incorporated
trustees
2. Attach the following documents to the Form in 1:
a. Form CAC 1-Availability Check and reservation of name
b. 2 copies of the Constitution of the Association
c. Signed copies of the minutes of the meeting appointing trustees
d. Minutes of the meeting adopting the Special clauses
e. Drawing of the proposed common seal of the Association
f. 2 Newspaper publications for objections from the public for 28 days
g. Particulars of the Secretary
h. Trustees declaration Form
i. Evidence of land ownership or an undertaken in lieu to own land within 2
years of incorporation
j. Receipt of payment of filing fees (N20,000)
k. Letter of Authority authorising the person effecting the registration of the
Applicant body to do so.
3. Collect the Certificate of Incorporation of the Association

Preparation of Incorporation Documents

To do so effectively, an agent will need to conduct a client interview with the
promoters/founders of the company or business with the aim of getting vital
information that will aid his work.

Particulars of Instruction Needed in the Incorporation of a Company are:

 1. Two proposed names of the company, one most preferred name and an
alternative name
2. Place of the business
3. Particulars of subscribers of the shares of the company
4. Particulars of the proposed Directors
5. Objects/ business of the company
6. Amount of share capital of the company
7. The liability of its members
8. Particulars of information to prepare the Articles of Association of the
company

Particulars of Information Needed to Register a Business name are:

1. 2 proposed names of the business
2. The real names and forenames of the individual proprietors
3. The place and address of the business and its branches if any
4. The date of commencement

Particulars of Instruction Needed in the Incorporation of an Association/NGOs

under Part C of CAMA are:
1. Particulars of the proposed persons as the incorporated trustees of the
Association
2. 2 proposed names of the association
3. The aims and objectives of the association
4. Particulars of the secretary
5. Particulars of the minutes of the meeting appointing the said proposed
trustees and that adopting the special clauses
6. The proposed impression of the common seal of the association

Contents of the Articles of Association of a private company limited by shares

’’Ltd.’’
1. Interpretation
2. Classes of shares in the company
3. Restriction on the transfer of shares of the company
4. Pre-emptive rights of shareholders of the company
5. Alteration of capital
6. Meetings
7. Voting and voting rights
8. The common seal
9. Subscription box
10. Date
11. Attestation

Contents of the Articles of Association of a Public Company Limited by shares

‘’PLC.’’
1. Interpretation
2. Shares of the company
 3. Borrowing powers
4. Meetings and Resolutions, see S. 211-234 of CAMA
5. Voting
6. Directors
7. Secretary
8. Alteration of capital
9. The seal
10. Notices
11. Dividends and shares
12. Indemnity
13. Transfer of shares
14. Winding up and dissolution

See sample drafts below of the following:

a. Memorandum of Association of a company limited by shares

THE FEDERAL REPUBLIC OF NIGERIA

COMPANIES AND ALLIED MATTERS ACT CAP C20 LFN 2004
(A PUBLIC COMPANY LIMITED BY SHARES)

MEMORANDUM OF ASSOCIATION OF
SKY INSURANCE PLC

1. The name of the Company is ‘’Sky Insurance Incorporated Plc.’’

2. The registered office of the company will be situated in Nigeria.
3. The businesses for which the company is established are as follows:
a. To carry and take over the business of Sunset Insurance Limited
including its assets and liabilities in pursuance to an Agreement dated the
10 day of May 2012 with the company.
b. To carry out the business of general insurance
c. To carry out any incidental business to the above objects.
4. The company is a public company
5. The liability of the members is limited by shares.
6. The Authorised share capital of the company is N100, 000, 000.00 divided
into 100,000, 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 in the capital of the company set
against our respective names.

Name of Address Description Number of Sign.

subscriber shares taken
Joseph No 10 creek St. Ikeja Businessman 10,
Gomwalk Lagos 000,000.00
Daniel Hero 20 Ikoviila, Lagos. Businessman 10,
000,000.00
Kehinde Businessman 10,
Kingsway 000,000.00
Total shares N30,
taken - 000,000.00

DATED THIS ……………………..DAY OF ………………………………………….. 2012

WITNESS to the above signatures:

Name: Dauda John

Occupation:
Address:
Date:
Signature:

b. Memorandum of Association of a company limited by guarantee

THE FEDERAL REPUBLIC OF NIGERIA
COMPANIES AND ALLIED MATTERS ACT 2004
(COMPANY LIMITED BY GUARANTEE)
MEMORANDUM OF ASSOCIATION
OF
ADAJI MEMORIAL COLLEGES AND SCHOOL LTD/GTE

1. The name of the company is ‘’the Adaji Memorial Colleges and Schools
Limited by Guarantee’’.
2. The registered office of the company will be situated in Nigeria.
3. The objects for which the company is established are:
a. The promotion of education and research in Benue State, any other State
in Nigeria and abroad.
b. To do all such things incidental to the attainment of the above object.
4. The company is a private company.
5. The liability of the members is limited by guarantee
6. 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
paid or transferred directly or indirectly to the members of the company.
However, nothing herein shall prevent the payment in good faith of
remuneration to any servant of the company or to any other person, for
services actually rendered.
7. Every member of the company undertakes to contribute to the assets of the
company in the event of the company being wound-up where he is a member
 or within one year after he ceases to be a member, and the costs, charges and
expenses of winding-up which shall not be less than N10,000.00
8. If upon the winding-up or dissolution of the company there shall remain after
the satisfaction of all its debts and liabilities any property of the company,
the same shall not be paid or distributed among the members of the company
but shall be given or transferred among some other companies having
similar objects of this company which shall be determined by the members
prior to the dissolution of the company.

We, the several persons whose names and addresses are subscribed, are desirous of
being formed into a company limited by guarantee in pursuance of this
Memorandum of Association.

Name of Address Description Sign.

subscriber
Joseph Terh 5 Adeola St. Lagos School master
Daniel Adeji 10 Ankpa Road, Principal
Akurdi Benue
State.
Cecilia Kuku “ Schoolmaster

DATED THIS …………..DAY OF ………………………………. 2012

WITNESS to the above signatures:

Name:
Occupation:
Address:
Date:
Signature:

c. Articles of Association of a company

THE FEDERAL REPUBLIC OF NIGERIA
COMPANIES AND ALLIED MATTERS ACT 2004
(COMPANY LIMITED BY SHARES)
ARTICLES OF ASSOCIATION OF
APEX VENTURES LIMITED
INTERPRETATION

1. (1) In these Regulations:

"The Act" means the Companies and Allied Maters Act 1990
"These Articles" means these Articles of Association as originally formed or as from
time to time altered by special Resolution.

'The Office" means the Registered Office of the Company.

'The Seal" means the Common Seal of the Company.

''The Director" means the directors present at a duly convened meeting of the
Directors at which a quorum is present.

''Directors'' includes any person occupying the position of director by whatever

name called; and includes any person in accordance with whose directions or
instructions the directors of the Company are accustomed to act.

"The Secretary" means the person appointed to perform the duties of the Secretary
of the Company and may include a corporation.

(2) Unless the context otherwise requires, words or expressions contained in these
regulations bear the same meaning as in the Act.

CLASSES OF SHARES

2. The company may from time to time issue classes of shares. It shall be the
responsibility of the directors to determine the classes of shares to be issued. All the
rights or restrictions attached to each particular class of shares shall be specified in
the terms of issue but such rights may at any time be varied in accordance with the
provisions of section 141 of the Act.

RESTRICTION OF TRANSFER OF SHARES

3. The Directors may, in their absolute discretion and without giving any reason,
refuse to register any transfer of any share, whether or not it is a fully paid share.

PRE-EMPTIVE RIGHT OF SHAREHOLDERS OF THE COMPANY

4. The company shall not allot any new or unissued shares unless the same are
offered in the first instance to all the shareholders of the class or classes being
issued in proportion as nearly as may be to their existing holdings.

5. The offer of existing shareholders shall be by notice specifying the number of

shares to which the shareholder is entitled to subscribe and limiting a time - not
being less than 28 days after the service of the notice, after the expiration of which
the offer, if not accepted, will be deemed to be declined. On the receipt of an
intimation from the shareholder that he declines to accept the shares offered or
after the expiration of the stipulated time as the case may be, the board of directors
may, subject to the terms of any Resolution of the company, dispose of the shares at
a price not less than that - specified in the offer, in such manner as they think most
beneficial to the Company.

6. Regulations 4 and 5 above are not alterable except with unanimous consent of all
the members of the Company.

COMMISSION AND BROKERAGE

7. The company may exercise powers of paying commissions conferred by section
131 of the Act provided that the rate of the amount of the commission paid or
agreed to be paid shall be disclosed in the manner required by the said section. Such
commission may be satisfied by the payment of cash or the allotment of fully or
partly paid share or partly in one way and partly in the other.

8. The company may also on any issue of shares pay such brokerage as -maybe
lawful.

9. The company may from time to time by ordinary Resolution effect an alteration of
its share capital in any of the ways set out in sections 100 and 102 of the Act.

10. Subject to the provision of the Act on reduction of capital, the company may,
whenever it considers it expedient to do so by special Resolution reduce its share
capital, any capital redemption fund or any premium account.

GENERAL MEETINGS

11. The annual general meeting shall be held at such time and place in Nigeria as the
directors shall appoint.

12. The Chairman, if any, of the board of the directors shall preside as Chairman at
every general meeting of the company, or if there is no such Chairman or if he is not
present within one hour after the time appointed for the holding of the meeting or is
unwilling to act, the directors present shall elect one of their members to be
Chairman of the meeting.

13. If at any meeting no director is willing to act as Chairman or if no director is

present within thirty minutes after the time appointed for holding the meeting, the
members present shall choose one of their members to be Chairman of the meeting.

14. No member shall be entitled to vote at any general meeting unless all calls or
other sums payable by him in respect of shares in the company have been paid.

15. No business shall be transacted at any general meeting unless a quorum of

members is present at the time when proceeds to business and for the purpose
thereof, - unless it is otherwise provided, two members present in person or by
proxy shall be a quorum.
16. Subject to the provisions of the Act, a Resolution in writing signed by all
members for the time being entitled to receive notice of and to attend and vote at
general meetings (or being corporations by their duly authorised representatives)
shall be as valid and effective as if the same had been passed at a general meeting of
the company duly convened and held.

DIRECTORS
17. The directors of the company shall be not less than two and not more than five,
unless and until otherwise determined by the Company in general meeting. Subject
to the provisions of these Articles, the first directors and subsequent directors of the
company shall continue to hold office unless any of them is removed by the
company in general meeting.

19. The directors may from time to time appoint one of their body to the office of
Managing Director for such period and on such terms as they think fit and subject to
the terms of any appointment entered into in any particular case, may revoke such
appointment. The appointment of Managing Director shall be automatically
determined if he ceases for any cause to be director.

20. A Resolution in writing, signed by all Directors for the time being entitled to
receive notice of a meeting of directors shall be as valid and effectual as if it had
been passed at a meeting of the directors duly convened and held.

21. SECRETARY

The Secretary shall be appointed by the Directors for such term, at such
remuneration and upon such conditions, as they may think fit, and any Secretary so
appointed may, subject to the Act, be removed by them.

THE SEAL

22. The Directors shall provide for the safe custody of the Seal, which shall only be
used by the authority of the Directors or of a committee of the Directors authorised
by the Directors in that behalf, and every instrument to which the Seal shall be
affixed shall be signed by one Director and shall be counter-signed by the Secretary
or by a second director or by some other person appointed by the Director for the
purpose.

DIVIDENDS AND RESERVES

23. The company in general meeting may declare dividends but no dividends shall
exceed the amount recommended by the Directors.

24. The Directors may from time to time pay to the members such interim dividends
as appears to the Directors to be justified by the profit of the company.
25. No dividend shall be paid otherwise than out of distributable profits and the
declaration of the Directors as to the amount of profits of the company shall be
conclusive.

26. Subject to the rights of persons, if any entitled to shares with special rights as to
dividend, all dividends shall be declared and paid according to the amounts paid or
credited as paid on the shares in respect whereof the dividend is paid, but no
amount paid or credited as paid on the share in advance of calls shall be treated for
the purposes of this Articles as paid on the share.
27. Any general meeting declaring a dividend may direct payment of such dividend
wholly or partly by the distribution of specific assets and in particular of paid up
shares, debentures or debenture stock of the company or of any other company, or
in any one or more of such ways, and the Directors shall give effect to such
Resolutions.

28. All unclaimed dividends may be invested or otherwise made use of by the
Directors until claimed. And no interest shall be paid on dividends.

29. The company may by Ordinary Resolution on the recommendation of the

Directors resolve that it is desirable to capitalise any undivided profits of the
Company.

30. The Directors may, before recommending any dividend, set aside out of the
profits of the company such sums as they think proper as a reserves which shall, at
the discretion of the directors, be applicable for any purpose to which the profits of
the company may be properly applied and pending such application may, at their
discretion, either be employed in the business of the company or be invested in such
investments (other than shares of the company) as the directors may from time to
time think fit. The directors may also without placing the same to reserve, carry
forward any profits, which they may think prudent not to divide.

ACCOUNTS

31. The Directors shall cause proper accounting records of the company to be kept
and the provision of the statutes in this regard shall be complied with.

AUDIT

32. The provisions of the statutes as to the appointments, powers, rights,

remuneration and duties of the Auditors shall be complied with.

WINDING UP

33. If the company shall be wound up, the liquidator may with the sanction of a
Special Resolution of the Company and any other sanction required by law, divide
amongst the members in specie or kind the whole or any of the assets of the
company (whether they shall consist of property of the same kind or not) and may,
for such value as he may deem fair upon any property to be divided as aforesaid and
may determine how such division shall be carried out as between, the members or
different classes of members. The liquidator may, with like sanction; vest the whole
or any part of such assets in trustees upon such trust for the benefit of the
contributories as the liquidator with the sanction shall think fit but so that no
members shall be compelled to accept any share or other securities whereon there
is any liability.

INDEMNITY

34. Every Director, Manager, or Officer of the company or any person (whether an
officer of the company or not) employed by the company as Auditor shall in the
execution of his duties be indemnified out of the funds of the company against any
liability incurred by him in defending any proceedings, whether civil or criminal in
which judgment is given in his favour or in which be is relieved by the Court under
section 558 of the Act.

NOTICE

35. A notice may be given by the Company to any member either personally or by
sending it by post to him or his registered address or (if he has no registered
address within Nigeria) to the address, if any, within Nigeria supplied by him to the
Company for the giving of notice to him. Where a notice is sent by post, service of
the notice shall be deemed to be effected by properly addressing, prepaying and
posting. A letter containing the notice, and to have been effected at the expiration of
7 days after the letter containing the same is posted;

Name of Address Description Signature

subscriber
Joseph Gomwalk 5 Adeola St. Lagos Businessman
State
Daniel Hero 10 baba St. Lagos “
State
kehinde “ Footballer
Kingsway

DATED THE …………..DAY OF ……………………..2012

WTNESS to the above signatures:

Name:
Occupation:
Address:
Date:
Signature:
c. Special Clause in the Constitution of an Incorporated Trustees

In the event of a winding up or dissolution of the incorporated trustees, there

remains, after the satisfaction of all its debts and liabilities, any property, the same
shall not be paid to or distributed among the members of the association, but shall
be given or transferred to some other institutions having objects similar to the
objects of the body, or transferred to some charitable objects.

Class work
Instructions to be taken in forming a company
 What is the name of the client in full, nationality, gender, age, residential
address
 Share holders – who will be owners? How many people to start up the
business and the details of such members and their nationalities, age (law
has a stipulation to age and for a minor, there must be 2 adults before a
minor can join in forming the company)
 Who will be the directors of the company and their details: age (infant is
absolutely prohibited from the management of the company), mental
capacity. CAMA requires not less than 2 directors, their qualifications
 Where the business located: CAMA provides that every business must have
location in Nigeria, must also know whether the business has international
offices to take advantage of rules in ECOWAS etc. Incentives for export
promoting companies in Nigeria e.g. farming exports and incentives for
manufacturing and companies in rural areas
 Note: distinction btw management and ownership. So need to ask client if he
wants to be involved in the control and management of the company and
does he want the upper-hand in management and control
 If the owner wants to have upper-hand (give custody of the common seal of
the company: what the company uses to ratify contracts etc), a life director
who doesn’t retire by rotation, preferential shareholder, majority
shareholder, compulsory signatory to the account, the managing director
 Who will be the company secretary, his qualification especially he is a PLC,
personal details of the secretary
 Types of companies needs to be asked
 The date for completion of registration e.g. some clients want the contract to
be registered urgently to perhaps get a government contract. In the past, CAC
had a fast-track approach with payment of N50,000 and this was done within
a day and the solicitor’s professional fee will be higher since he will have to
spend the whole day at CAC. NB: this no longer applies as the Commission
aims to finish incorporation within 24 hours. Practising lawyers say it takes
at least 3-5 days
 The nature and object of the business: 5 reasons for this – (i) some
businesses are regulated e.g. banking, insurance – share capital, all banks in
Nigeria are public companies; (ii) some businesses require proficiency
 certificate e.g. COREN certificate for engineering, capital markets, medical,
architecture; (iii) some businesses require higher minimum share capital e.g.
security companies require N10 million share capital; banks require high
share capital N25 billion, capital markets, asset management, aviation,
telecommunication is N100million (iv) some businesses need a permit e.g.
banking regulated by CBN, aviation, shipping, media by Nigerian
Broadcasting Corporation;(v) foreign participation and the nature of the
participation is it FPI or FDI and will there be importation of capital;
 Name: 2 names must be collected from the client. The client’s preferred
company name and an alternative in case the preferred is taken. Also the
name is not automatic as some clients have done the work and the money
has been paid to a company not in existence. And there could be restricted
and prohibited names (e.g. deceptive, offensive, insulting names). Names
suggesting government patronage where no such patronage exists. Is the
name reserved (60 days reservation). Name that contain Chamber of
Commerce need approval of Attorney General. Names that contain municipal
or local government (need approval of the Chairman of the local
government)
NB: not more than one page for memorandum. After one page, needs the Registrar
General approval

Share capital is the amount the company seeks to raise. It is not the physical money
the company has with it. The promoters of the company decide how much the share
capital will be. On
Debenture capital: capital raised from debentures i.e. loans

If your share capital is over N10,000; at the point of incorporation, you must have
allotted (not paid up) at least 25% of the share capital of the company. Therefore, if
the share capital is N1,000,000; then the company must have allotted 25% of
N1,000,000. Therefore, a company need not have any actual cash share capital in its
account for incorporation

Salomon v A Salomon & Co Ltd [1897]: UK ruling of the House of Lords upholding
the doctrine of corporate personality so that creditors of an insolvent company
could not sue the company's shareholders to pay up outstanding debts. In that case,
Mr Salomon turned his business into a limited company. The company purchased
the business. Mr Salomon took 20,001 of the company's 20,007 shares and the
company also gave Mr Salomon £10,000 in debentures (S gave the company a loan).
Eventually Salomon’s business failed defaulting on the debentures (half held by
Broderip). Broderip was paid his £5,000. Only £1,055 was left and if Salomon took
this, there would be nothing left for unsecured creditors. HOL stated that the
business belonged to the limited liability company and not to Mr Salomon and thus
as a secured creditor, he had preference over the unsecured creditors. Moreover, Mr
Salomon’s liability was only limited to his shareholding in the business and he could
not be sued to recover the outstanding debts.
Example:
6,000,000 ordinary shares – Mrs Ojukwu
3,000,000 ordinary shares – Mr Ojukwu
200,000 ordinary shares – Ada Ojukwu
She says she hopes it would be a family business
The shareholders only have N10,000. She has heard rumours of members of public
also taking up shares
(a) State the first step to be taken to carry out the instructions and describe in
details how to achieve that step
 Accreditation
 The prescribed form from CAC and fill it out. Pay fee of N5,000 for individual
and 10,000 for company but this is not a constant price
 Submit the photocopies of the receipts and 2 passport photos, NYSC
certificate or exemption.
 Call to Bar certificate
 Evidence of payment of current practising fee
(b) What are the questions you need to ask Mrs Ojukwu in order to decide what type
of company to incorporate?
 The number of members – CAMA – maximum number: 50 for private or
undetermined number for public companies
NB: If the 51st member is also an employee of the company, it could still be a
private company
 Minimum share capital – for 9,200,000 – she can still make a private or
public company
 Whether the object of the company is regulated e.g. banking must be a public
company but this is not a regulated area
 Does she want members of the public to subscribe to shares? If she says yes,
then incorporate a public company limited by shares
 In a public company, likely to have many people subscribing to shares, unlike
private companies where members are limited to 50. Thus, she is more likely
to retain control in a private company and she is likely to have a large chunk
of the shares. Even as a life director, it is more easy to remove her in a large
public company.
 In private company, can transfer shares but directors must approve this
transfer
 Level of privacy she wants – public company has to make public its account
 The level of capital she has – if she doesn’t have a lot of capital and wants to
raise capital on a large scale, she should incorporate a public company
 She wants it to be a family business, so a private company. But if she wants
the public to be able to subscribe to shares, then a public company because
she wants capital. As she has 9,200,000 she can form either a private or
public company. As there are alternative means of raising capital e.g.
borrowing by debentures and then form a private company limited by shares
so it can remain a family business
 See s27(2)(a) CAMA: minimum authorised share capital for private company
is N10,000 and the minimum authorised share capital for public company is
 N500,000. S27(2)(b): must take (allot) amongst themselves 25% of the
authorised share capital
(c) What are the other instructions you need to take from Mrs O in order to
incorporate the company you have decided to incorporate in (b) above
 Name of the company (desired and alternative)
 Location of its registered address
 Object of the company
 Authorised share capital
 The way they are subscribing to it as that you ensure they meet the minimum
of 25% of authorised share capital
 Who are the subscribers; how many shares they are taking among
themselves
 The directors, names; addresses, phone numbers
 Company Secretary
 Whether she wants to be a compulsory signatory to the account. If she wants
to be, then state this in the articles of association
 See section 35 CAMA – all documents required for incorporation
(d) Advise your aunt as to the legality of Ada (minor) becoming one of the first
subscribers
 Section 20(1)(a): person under age of 18 is precluded for joining the
formation of the company. But in section 20(2) as long as two adults are not
disqualified from s20(1)(a), then Ada can be a subscribers
(e) State the incorporating documents to the delivered at Corporate Affairs
Commission – see section 35 CAMA
 Memorandum of association and Articles of association
 Registered address of the company – FORM CAC 3
 List and particulars and consent of the directors – FORM CAC 7
 Statement of authorised share capital signed by a least one director – FORM
CAC 2
 Statutory declaration by a legal professional FORM 4
 Names and particulars of the company secretary - FORM CAC 2.1
 Any other document that may be required
(f) Identify the documents that must be stamped
 Memorandum of association and Articles of association
 Statement of minimum share capital and form of allotment – FORM CAC 2
and list and particulars and consent of the directors – FORM CAC 7
(g) What are the formal requirements in respect of the articles by s34 CAMA
 See the article. For a private company, it has to comply with Part II of Table A
in the First Schedule: the clauses required are: interpretation; class of shares;
restriction of shares; pre-emptive rights of shareholders of the company;
commission and brokerage; alteration of capital; voting, the seal; notices;
name, addresses as and description of subscribers, date
 Week 5
CHOICE OF BUSINESS AND NON-BUSINESS FORMATION
 Incorporated trustees and business names
 Preparation of documents for registration of the business organisation
 Items to be included in a simple partnership agreements – the clauses, why
the clauses are included, the implication of the absence of a particular clause
 List the items to be included in the formal constitution of incorporated
trustees as regulated by CAMA
 Identify registrable and non-registrable names and ethical issues arising

FEATURES OF PARTNERSHIP
 The parties have agreed to undertake a business
 The business should be carried out in common by the partners
 The business must be aimed at making and sharing profit
 Membership is limited to 2-20 except for law and accountancy firms and
cooperative society registered by law
 Each partner is deemed an agent of the co-partners (members carry on the
business in common). NB: Sharing of profit in a venture does not
automatically make it a partnership
 Partnership is different from co-ownership of business
 Less capital outlay
 Less formalities for registration
 It could be registered as a business name under Part B CAMA. Lagos State has
implemented Limited Partnership Law
NB: a partnership need not register his business name in certain circumstances.

Suitability:
i. It cannot invite the public to buy shares

ii. It cannot engage in business of banking, insurance etc

iii. No perpetual succession

iv. Risk sharing

v. Flexibility of operations.

FEATURES OF SOLE PROPRIETORSHIP

 The sole proprietor takes all the profit and bears all the risk
  The death of the sole trader may result to the death of the business if there is
no express agreement to continue the business in the partnership deed
 A sole trader need not register his business if he carried on the business
under his surname, his surname and the initials of his forename or under his
full name
 Where a sole proprietor desires to carry on business with a different name
other than those aforementioned, he will need to register the business name
under Part B CAMA
Suitability:
i. It does not accommodate large scale investments

ii. It cannot sell shares to the public

iii. It may or may not be registered

iv. A sole proprietor cannot engage in the business of banking, insurance,

mortgage, private guards, collective investment trusteeship, collective
investment management and collective investment custodian.

v. It enables quick decision making

BUSINESS NAME
 Refers to the name or style under which the business is carried on whether in
partnership or sole proprietorship or otherwise: section 588(1) CAMA –
registrable with CAC
 FIRM means an incorporated body of 2 or more individuals or one or more
individual and one or more corporations who or which have entered into
partnership with one another with a view to carrying on a business for profit
 Under Part B CAMA, you may commence business provided you register
within 28 Days. If you don’t register within 28 days and someone breaches a
contract you entered into, the business cannot sue. NB: different from Part A
when you must register before you commence business
 Under Part C, you can choose not to register and so not mandatory
NB: it is the style of business that is registered and it does not enjoy
corporate personality

WHEN REGISTRATION OF BUSINESS NAME IS NOT COMPULSORY

 For an individual, if he uses his full name, initial and surname or the surname
without any addition
 Firm/partnership: if he uses the full name, initial and surname of the
partners without any addition
 Company/corporation: when it uses its corporate name without any addition
 Partners having the same surname: if there is an addition of an “S” at the end
of the surname

COMPULSORY REGISTRATION OF BUSINESS NAME

 If true surname of individual is not used
  If mixed surname and forename of the partners is used
 If addition of “& sons”, “& co”, “enterprises” etc is made
 Any addition or subtraction to company’s registered name

CHECKLIST OF INSTRUCTIONS TO TAKE FOR REGISTRATION OF BUSINESS

NAME
 The proposed business name and alternative name to be reserved for 60
days: Form CAC 1 to check availability and reservation of the business name
 The general nature of the business
 Full address of the principal place of business and the branches
 Full particulars and personal details of proprietors
 Whether or not a minor is to be involved as a partner
 Date of commencement of business (28 days rule)
 Residential address of proprietor
NB: must take address of a client that is ascertained e.g. No 1 Law School Road,
Bwari, Abuja, FCT; No 1 Compos Mentis Boulevard, Ekpan, Warri, Delta State

NB: can register business name even if you’re not a lawyer unlike with companies
registered under Part A CAMA.

CHECKLIST OF ITEMS NEEDED TO REGISTER BUSINESS NAME

 Obtain certificate of proficiency from proprietors in the relevant filed if the
business is for professional services
 Obtain 2 passport photos from each of the proprietors/partners
 Obtain evidence of change (married women)
 Result of availability check and reservation of name: Form CAC 1
 Completed application form (CAC/BN/FORM1)

IN THE CASE OF A MINOR IS INVOLVED

 A statement in writing in prescribed form signed by the minor and counter
signed by a magistrate, legal practitioners or police officer of or above the
rank of ASP (Assistant Superintendent of Police): S574(6) CAMA
 In any case, Registrar General has absolute discretion as to whether to
register the business name who has a minor as a partner: s579(3) CAMA
 In all correspondence emanating from the sole proprietorship or
partnership, the word ‘minor’ must be written so that anyone would know
that there is a minor in the business

NB: under Part C: minor cannot be a trustee. Under Part A, minor cannot be in
management but can be in ownership if there are at least 2 adults

COMMENCEMENT OF BUSINESS BEFORE REGISTRATION

 A firm, individual, corporation may commence business before registration
but must register within 28 days: s574(1) CAMA
  Advisable that availability search and reservation of name at the CAC before
commencing business under the business name so that cheques are not
issued in a business name before search is made etc
 Partnership deed or agreement – not part of the document registrable at CAC

Reason for partnership

 Partnership deed or agreement – not part of the document registrable at CAC
 A partnership agreement need not be in writing. But there are reasons why it
should be in writing
 (1) For ease of official transactions
 2) For ease of conflict resolution
 3) Clear terms of obligations, liability and privileges.
 4) Avoid common law presumptions
 The common law presumption on partnership e.g. the presumption that
property belongs to the partners; presumption of dissolution of partnership
by death of a partner, equal sharing of profit/loss

Specific instructions to take in preparation of partnership agreement

 Name of the parties (names in full) and addresses of partners
 Name of partnership - This will determine whether or not the name should
be registered.
 Nature of business – This will determine the extent of liability of the firm.

 Place of business – Where the business will be situated.

 When to commence business – The time or period when the business will
commence.

 The business: to know if there is need for proficiency, for banks they cannot
be business names, must be Plc
 Contribution: if there is no indication of the contribution, the common law
presumption of equal contribution comes in
 Management – How the partnership agreement will be managed.

 Premium – The amount paid by a partner to be admitted into partnership.

 Salary – The mode of salary and what each partner will be entitled to.

 Partnership properties – The mode of acquired properties.

 Bankers – Bankers of the partnership.

 Accounts – Who the signatory to the accounts will be.

 Retirement – Where partnership is not for a fixed period, the retirement of

any partner will dissolve the partnership. However, if it is for a fixed
duration, no partner can retire except by the consent of other members.
  Profit and loss sharing: normally indicated as per the capita contribution. If
no deed, it will be equal sharing
 Remuneration: to show that those managing are entitled to remuneration. If
nothing in the deed, then no remuneration
 Suspension and expulsion: if this not taken, then they are all equal and one
cannot suspend another for indiscipline, extent to which a minor can be
involved
 Admission of new partners:
 Duration/dissolution: partnership at will if no duration date which means it
could come to an end at any day
 Dispute resolution: ADR so that the disputes are not in public
Registrar of Business name in Nigeria: Registrar General of CAC

INCORPORATED TRUSTEES:
 These are non-business and non-profit making organisation
 Formed to facilitate acquisition of corporate person by a community of
person bound together by custom, religion, nationality or any association of
person established for religious, educational, literary, scientific, social
developments, sporting or charitable purpose: s590 CAMA
 Organisation registrable under Part C CAMA can operate without registration
but cannot take advantage of corporate identity of the trustees.

The registered trustees of God’s Kingdom Society v Registrar: the religious

society registered under Part C as a religious society. Another group called
Kingdom of God society applied for registration. When they advertised, the
trustees of GKS raised an objection saying the names were too similar and they
carry out the same objectives and the names would be confusing. The Registrar
rejected this contention of GKS. They went to the Federal High CT to compel the
Registrar not to register Kingdom of God Society. The judge refused the
application as the work of both societies was to propagate the word of God and
get people to go to heaven and he didn’t understand the plaint of the applicant as
the more people that go to heaven, the better the kingdom of God. Thus except
there is evidence of outright fraud, registration will go ahead. Shows the
difference between incorporated trustees and companies working for profit.

Features of incorporated trustees

 Only one person can register as an incorporated trustee “where one or more
persons are appointed by….” (s590(1))
 The trustees are the only persons who obtain legal personality and not all the
members
 Name starts with the words “Incorporated Trustees of….” It has to have
incorporated trustees in the name
 It does not do business and does not distribute profits
 It receives income as grants, levies
 The income must be applied solely towards the promotion of its objects
  Income not distributable but (out of pockets) expenses can be paid to
members e.g. a member going to Lagos to promote the organisation
 Ownership of landed property or undertaking in lieu
 It may be dissolved by the Federal High CT upon petition by the governing
council; or one or more members of the body of trustee; or not less than 50%
of total members of the association; or the CAC.

Specific instructions to take for the formation of incorporated trustees

 Name of the proposed body or organisation
 The aims and objectives of the body
 Name, address, occupation, number and ages of the trustees
 Powers, duties and tenure of office of trustees
 The use and custody of the common seal
 Matters relating to meetings i.e. types of meeting and rules of proceedings
 Procedure for disbursement of funds and accounting policies
Checklist of items needed to register incorporated trustees
 A formal letter of application signed by the Chairman and Secretary or
Applicant’s Solicitor should be submitted to the Corporate Affairs
Commission in Corporate Affairs Commission /IT Form 1 in triplicate which
must contain, among other things:- The full names, residence, occupation and
signature of the Trustees of the Applicant Body.
The name of the proposed corporate body which must contain the words
"Incorporated Trustees of _______________ "
The application for registration of Incorporated Trustees shall be accompanied by
 Form CAC 1: Form for availability of name/search report

 The rules of the Applicant incorporating its objects

 CAC/IT/Constitution: Two copies of the Applicant’s Constitution (copies with

Enclosure A-H). NB: must be an organisation in place before you take steps to
register

 Address and registered office of the body

 Minutes of the meeting where the Trustees were appointed

 Minutes of the meeting where the Special Clause was adopted into the
Constitution, showing the list of members in attendance and signed by the
Chairman and Secretary

 Publication of 28 days notice in two National dailies calling for objections

from members of the public (could be one national and one local but at least
one must be a national newspaper)

 Sworn affidavit by each Trustee in the IT Declaration Form that they are not
disqualified from acting as Trustees CAC/IT/Form 2: Trustee Declaration
form
  Original Receipt from the Court where the Trustee Declaration form was
sworn to

 Payment of the prescribed filing fee of N20,000

 Two passport photographs each of the Trustees- one attached to the

Application form and the other attached to the IT Declaration Form

 Impression or Drawing of the Common Seal of the Association

 Letter authorising the person effecting the registration for the applicant.

 Evidence of availability of landed property or undertaking in lieu

Documents required
 CAC/IT Form I – Application form – to be completed in triplicate with full
residence, occupation and signature of the trustees
 CAC Form 1: Availability check and reservation of name result
 Impression of the common seal of the body
 Minute of meeting where the trustees were elected and special clause
adopted
 Two passport photos of each trustee
 Trustee declaration form – sworn before Commissioner for oath at the High
CT or Notary public
 Original receipt of fees e.g. oaths, form and
 The extract of the 2 newspapers where the advertisement was placed
 Undertaking of the ownership of land

Trustee declaration form

 Trustee declaration form duly sworn at the High Court and before Notary
Public
 Essence of the form: confirming that the trustees were not disqualified from
acting as trustee pursuant to section 592 CAMA

Copy of the extract of the minutes of the meeting must show

 Appointed trustees
 List of member present and absent
 The voting pattern
 Signature of the chairman and Secretary of the association
 Adoption of the special clause

Advertisement so public can object to Registrar General within 28 days

 Two dailies
 One local and the second one national contain
 1) Name of the organisation
 2) Names of all trustees
  3) Aims and objectives of the organisation
 4) Calling for objections
 5) Name of the announcer

ITEMS TO BE INCLUDED IN THE FORMAL CONSTITUTION OF INCORPORATED

TRUSTEES AS REGULATED BY CAMA – Section 593
(a) State the name or title of the association which shall not conflict with that of a
company, or with a business name or trade mark registered in Nigeria;

(b) The aims and objects of the association; and

(c) Make provisions, in respect of the following‐

(i) Appointment, powers, duties, tenure of office and replacement of the trustees;

(ii) The use and custody of the common seal;

(iii) The meetings of the association;

(iv) The number of members of the governing body, if any, the procedure for their
appointment and removal, and their powers; and

(v) Where subscriptions and other contributions are to be collected, the procedure
for disbursement of the funds of the association, the keeping of accounts and the
auditing of such accounts.

1. Name

2. Commencement

3. Supremacy

4. Nature of the association

5. Registered address

6. Aims and objectives

7. Sources of fund

8. Board of Trustees

9. Common seal

10. Auditors

11. Officers of the Association

12. Functions of the officers

 13. Election of officers

14. Tenure of office of officers

15. Vacation of office by officers

16. Remuneration of officers

17. Executive committee

18. Powers and duties of Trustees

19. Bye-election

20. Meetings

21. Amendments

22. Special clause.

The constitution may be dated and signed by the Chairman or Secretary of the
association.

See difference and similarities btw incorporated trustees and limited by guarantee
(latter is for profit making) to know when a particular business model will be better
– limited by guarantee could be better when an organisation set out to do something
for a particular cause though not for profit but in the long run there could be profit
in the running of the organisation. E.g. lecturer sets up organisation for the youths
training them in football and later on Arsenal wants the player. Arsenal will pay the
organisation for the player, which is an income. Unlike in IT, if it is an organisation
where the members will continue to pay towards the organisation with little/no
profit in the long run.
Company forming a company to handle their Corporate Social Responsibility, then
most preferable to have limited by guarantee
Note if an incorporated trustee becomes like an employee, he can be paid salary (out
of pocket expenses).

Differences btw limited by guarantee and Incorporated trustees

(i) While Guarantee Companies may do business but cannot share the profit
among members while Incorporated Trustees may not do business. See
section 26(1) and section 590(1) respectively.
(ii) Registration requirements differ i.e. guarantee company requires
approval of its Memorandum of Association by the Attorney General of
the Federation while Incorporated Trustee do not (section 26 (5).
(iii) Incorporated Trustees must fulfil the advertisement requirement before
registration but Guarantee Company need not advertise - section 594
(iv) Memorandum and Articles of association are required to register a
Company Ltd/Gte but Incorporated Trustees require Constitution
 (v) Company Ltd/Gte is under a board of Directors while Incorporated
Trustees have board of Trustees
(vi) Evidence of payment of stamp duties is required to register Company
Ltd/Gte but not required to register Incorporated Trustees.

Similarities btw limited by guarantee and incorporated trustees

 Both are for charitable causes.
 They have their profits not distributed (objects are non-profit oriented)
 Both bodies enjoy Tax exemptions. See Section 23 Companies Income Tax
Act Cap C.21 L.F.N. 2004.
 Both bodies are administered by the Corporate Affairs Commission.
 Both enjoy benefits of incorporation or winding up of these bodies, and upon
settling all claims against it, all the remaining assets of the body shall be
transferred to a body with similar object as the body dissolved. See (section
26(10) and section 608(4) – adoption of the special clause so that on
winding up assets are not shared by the members

Conclusion and ethical matters

 There is a duty on the part of the solicitor to act in good faith
 Duty to disclose conflicting interest – Rule 17 RPC
 The money collected must be disbursed in accordance with the client’s lawful
instructions
 Duty to preserve confidential information – Rule 19 RPC; s192 Evidence Act
 It is the duty of the lawyer to devote his attention, energy and expertise to
the service of the client in accordance with Rule 14(2) – (5) of the Rules of
Professional Conduct for Legal Practitioners 2007

Identify the various forms/information to register business names and incorporated

trustees
3 categories of forms in CAMA: Companies, Business Names (BN), Incorporated
Trustee (IT)

Business name
 Form application for registration of business name
 Certificate of registration of business name
 Particulars of proprietors
 Covering Letter after registration
 Notice of change in registered business name
 Notice of change in registered business objective
 Notice of change of Proprietors
 Notice of change of registered address
 Annual returns
 Notice of approval of name from register
 Form CTC…..
 Business name search report
Clauses/constitution of partnerships

Scenarios
3 recent graduates reached out to government to get contracts. Governor agrees to
give them the consultancy work they sought? What should they do in relation to the
topic we covered today? They have no money in their bank accounts – business
name because forming company limited by shares requires 25% to be allotted to the
subscribers. Company limited by guarantee and incorporated trustee would not
work as they don’t intend to set it up for charity purposes

Man has a dream stating that he, Joshua should preach word of repentance to my
people. Joshua wants to live that dream. What should he do? He is led to call the
church, The Metropolitan Church of Ja. (Incorporated trustee)

NB: draft a simple partnership agreement and a Constitution for incorporated

trustee

Week 6
Formation of a Company
CAC is responsible for registering a company
Preparation of documents for business organisation and formation (Companies)
 Memorandum of association: sets out the objects of the company. Explaining
to the world how the company operates. Governs the sphere of operation
btw the company and external members of the public
 Articles of association: the constitution of the company. Sets out the rights
and obligations of the members to the company. Regulates the relationship
btw members and the company and also members and members
 Form CAC 1 - Search for the availability of the name to register the company
through filling Form CAC 1 – availability search and reservation. Expected to
submit two names (preferred and alternative). Where name is available, it is
reserved for 60 days. If you are not able to register within 60 days, file a
validation of the reservation of the name and the name will be kept for
another 60 days
 Form CAC 2 – share capital and returns. Minimum nominal share capital is
N10,000 for private companies and minimum is N500,000 for public
companies. Also maximum of 50 members for private companies. The
implication of share capital is that it states the value of business, company
cannot allot more than its share capital. 25% of the allotted shares must be
taken by the subscribers: reason for this is to prevent the company from
being an instrument of fraud (shareholders are liable to the value of their
allotted shares and this has to be paid up on winding up of the company)
o See section 135 CAMA: number of shares allotted for consideration
other than cash – potential shareholder wants to offer car for some
shares. Company will get a valuer (independent of the company and
the company’s officers) to assess the value of the car to see how many
shares can be exchanged for the car. Note in addition to FORM CAC 2,
need to fill the agreement to exchange car for shares and the
resolution of the promoters agreeing to accept the car as
consideration. If it is post-incorporation, resolution of board of
directors to accept car as consideration
o Public company: So if agreement is for 25,000 shares at N1 allotted
than consideration, then number of shares allotted payable in cash
will be 100,000 (share capital of N500,000)
 Form CAC 2.1 – particulars of secretary. Every company must have a
company secretary (this has become mandatory on incorporation. Previously
this was not the case). The secretary’s name, address, occupation. The
rationale for making this a mandatory rule is that there is a duty to make
returns to the CAC and now there is a person that the CAC knows is
responsible for this; also companies used to be incorporated without actually
appointing someone as the secretary – thus to encourage good corporate
governance, to ensure transparency in the dealings on the company
 Form CAC 3 – address of the registered office (s35). Not allowed to use PO
Box as a physical address, which can be verified, is required. CAC may not
necessarily verify the address but in order to open a bank account, the
account officer will ensure that the company exists and write a report to the
 bank certifying that before the bank opens the account. Registered address
where all correspondence can be sent to.
 Form CAC 4: Compliance (s35(3) CAMA): lawyer swears before the Federal
High CT that the compliance required by CAC is in place. The incoming
company must have paid stamp duty tax before the lawyer can do this.
Certain documents have to be stamped at the Federal Inland Revenue (i.e.
stamp duty tax must be paid) before incorporation. Statement of share
capital and returns on allotment, memorandum and articles of association
must be stamped.
 Form CAC 7 – particulars of first directors and the mandatory shares the
directors have taken must be filed (s35(2)).
 NB: under Part A, only lawyers, chartered accountants, chartered
secretary can incorporate a company. But Note only a lawyer can fill Form
CAC 4
 NB: other documents may be required for incorporation depending on the
industry the company falls into e.g. engineering business requires people to
show their accreditation with COREN
 For public companies whose nominal share capital does not exceed
N1,000,000 you pay N20,000 Thereafter, N10,000 for every N1,000,000 or
part thereof. See 15th Schedule. Note this has changed
 Private company whose nominal share capital does not exceed N1,000,000;
you pay N10,000. Thereafter N5,000 for every N1,000,000 or part thereof

The memorandum of association (s27)

 The name
 Registered office which shall be situated in Nigeria
 The nature of the business
 The Restrictions on the business if any
 Type of company (private of public)
 Liability of members (limited by shares, guarantee, unlimited)
 The authorised share capital
 25% allotment shares to be taken by the subscribers to the memo
 Shares to be taken by each subscriber
 Disclosure of any shares taken on trust
 If limited by guarantee it shall state: (a) applying income and property to
promote objects; (b) each member to undertake to contribute during wind
up and such amount must not be less than N10,000, (c) what happens to
income on winding up
 The memo shall be signed
 The memo shall be stamped as a deed
 Standard memo prepared by the CAC and adopt the one in CAMA: First
Schedule Table B, C and D depending on the company
o Table B: Form of Memorandum of Association of a Company Limited
by Shares
 o Table C: Form of Memorandum of Association of a Company Limited
by Guarantee
o Table D: Form of Memorandum of Association of an Unlimited
Company
Articles have to be printed and divided in paragraphs
 Must be signed by each subscriber of the memorandum of association in the
presence of at least one witness who shall attest the signature and shall be
stamped as a deed: s34(3) and s34(4) respectively

 s34(2): for companies limited by guarantee - In the case of a company

limited by guarantee, the articles of association shall state the number of
members with which the company proposes to be registered for the purpose
of enabling the Commission to determine the fees payable on registration.
 See Part I - IV in Table A in the First Schedule depending on the one you want
to adopt
 Part I (Regulations for the Management of a Public Company Limited by
Shares)– Interpretation; Classes of Shares; Commission and Brokerage;
Alteration of Capital; Meetings; Voting; The Seal; Notices; Name, Addresses
and Descriptions of Subscribers; Date; Witness
 Part II (Regulations for the Management of a Private Company Limited by
Shares) – Interpretation; Classes of Shares; Restriction on transfer of shares;
Pre-emptive rights of shareholders of the company; Commission and
Brokerage; Alteration of Capital; Voting; The Seal; Notices; Name, Addresses
and Descriptions of Subscribers; Date; Witness
 Part III (Regulations for the Management of a Company Limited by
Guarantee) – Interpretation; Membership of the Company; Meetings; The
Seal; Notice; Name, Address and Descriptions of Subscribers; Date; Witness
 Part IV (Regulations for the Management of an Unlimited Company):
Interpretation; Membership of the Company; Classes of Shares; Commission
and Brokerage; Alteration of Capital; Meetings; Voting; The Seal; Notices;
Names, Addresses and Descriptions of Subscribers; Date; Witness

Effect of memorandum and articles of association

 Memo and article have the effect of a contract under seal
 All money payable to the company under memo or article shall be a speciality
debt
 Power under memo or article is enforceable
 Any member or officer can bring action to enforce obligation under the
memo or articles

Regulation of choice of corporate name (Prohibited and Restricted names: s30)

 Where the name is identical or resembles the name of an existing company
 Name contains the word “Chamber of Commerce” except when it is limited
by guarantee
 The name is misleading
 Where the name is offensive
  Contrary to public policy
 It violates a trade mark or a business name registered in Nigeria

Prohibited and Restricted names (s30) – cannot be used without the consent of CAC
 Municipal, chartered
 Federal, national, regional, state, government
 Cooperative or building society
 Group or holding

Challenges for registration

1) Refusal to register a company by CAC
2) Procedure for challenging it

The CAC can refuse to register a company in accordance with s36….

 Section 36(1): The Commission shall register the memorandum and articles
unless in its opinion

 (a) they do not comply with the provisions of this Act; or

 (b) the business which the company is to carry on, or the objects for which it
is formed, or any of them, are illegal; or

 (c) any of the subscribers to the memorandum is incompetent or disqualified

in accordance with section 20 of this Act; or

 (d) there is non‐compliance with the requirement of any other law as to

registration and incorporation of a company; or

 (e) the proposed name conflicts with or is likely to conflict with an existing
trade mark or business name registered in Nigeria.

Procedure for challenging CAC’s refusal

 Section 36(2): Notice to the Commission requiring it to apply to CT for
direction and the Commission shall within 21 days of the receipt of such
notice apply for the direction
 If after 21 days CAC fails to do so, the promoter can apply to Federal High CT
for propriety of CAC’s refusal to register
 Where it is one that reverses the Commission’s decision, then annex the CT
order to incorporation

E-registration
 Power failure
 Internet stability

Professional responsibility requirements under the RPC

  See above for such rules

SAMPLE DRAFTS OF INCORPORATION DOCUMENTS

a. Memorandum of Association of a company limited by shares
THE FEDERAL REPUBLIC OF NIGERIA
COMPANIES AND ALLIED MATTERS ACT 1990 CAP C20 2004
PUBLIC COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF
GOLD PALMS NIG PLC
1. The name of the Company is ‘GOLD PALMS NIG Plc.’’.
2. The registered office of the company will be situate in Abuja, Federal Capital
Territory, Nigeria.
3. The businesses for which the company is established are as follows:
(a)To carry and take over the business of Sunset Insurance Limited including its
assets and liabilities in pursuance to an Agreement dated the 10 th day of May
2013 with the company.
(b)To carry out the business of manufacturing and distribution of palm produce
(c)To carry out any incidental business to the above objects.
(Restriction clause, if any should follow before the type of the company)
4. The company is a public company
5. The liability of the members is limited by shares.
6. The authorised share capital of the company is N100, 000, 000.00 divided
into 100, 000, 000 ordinary shares of N1.00 each (state if part of the shares are
preferential shares)
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
against our respective names.
Name of Address Description Number of Signature.
subscriber shares taken
Gabriella No 10 creek Businessman 10, 000, 000.00
Ndu St. Ikeja Lagos.
Prudence 20 Iko viila, Businessman 10, 000, 000.00
Worlu Lagos.
Onyititos 6 yeti close, Businessman 10,000.0 000,
vi, lagos
Total shares N30,000 000,
taken

DATED THIS ……………………..DAY OF ………………………………………….. 2014

WITNESS to the above signatures:
Name:
Occupation:
Address:
Date:
Signature:

NOTE- MEMO for unlimited company takes same format but its clause 5 will
indicate it is unlimited.
A restriction clause may be added in the MEMO and would be in Clause 4.see S.27
CAMA.

b. Memorandum of Association of a company limited by guarantee: see above

During the medical tourism fair which held btw 1st Apr-5th Apr 2011 in New Delhi
India, Dr Indiran Jahad and Dr Rala Umar of the famous New Delhi Cardiovascular
centre of excellence, India incorporated signed a memorandum of understanding
with the Chairman/CEO of the Abuja based Primus Specialist Hospital Nigeria Ltd,
Professor Likita Igwe towards setting up a medical centre of excellence in Abuja to
be known as Abuja Cardiovascular centre of excellence. They intend to register a
public company. The details of the proposed company are:
 Alternative name: International Cardiovascular Specialist Hospital
 Proposed share capital: N1 billion
 Class of share: (a) ordinary shares –600million at N1 each (b) non-
cumulative preference shares 100million at N4 each
 First shareholders/directors: (i) Dr Indiran Jahad, 55yrs, No 1 Candid Road,
New Delhi, India) is taking 60% of the total ordinary shares; (ii) Dr (Mrs)
Cuma Ralia, 30yrs, No 100 Neru Crescent, New Delhi, India; taking 100%
non-cumulative preference shares; (iii) Professor Likita Igwe, 50yrs, No 20
Peace Road, Maitama, Abuja is taking 40% of the total ordinary shares
 Object: prevention, cure and management of cardiovascular ailments
including heart transplant and cardiovascular consultancy services in all its
ramifications
 You have been briefed by the promoters to facilitate the incorporation of the
proposed firm and also serve as the company secretary of the company

Answer the following questions

(1) Complete CAC 1, 2, 2.1, 3, 4 and 7
(2) Draft the following clauses in the memorandum of association: (i) the share
capital; (ii) the object; (iii) name; (iv) the type of company
Boulevard Form

(i) The share capital: the authorised share capital of the company is N 1,000,000,000
divided into 600,000,000 ordinary shares of N1 each and 100,000,000 non-
cumulative preference shares of N4 each
(ii) The object:
(a) Prevention, cure and management of cardiovascular ailments
(b) Treatment to include including heart transplant and cardiovascular
consultancy services in all its ramifications
(c) The omnibus clause
(iii) The name of the company is Abuja Cardiovascular Centre of Excellence Plc
(iv) The company is a public company

When a preference share is cumulative, when dividend is not declared in certain

years and dividend is eventually declared, the dividend will accumulate from the
time when dividend was not paid. Non-cumulative preference shares is when you
just get dividend in the year it is declared and not for back-years when dividend is
not declared.
Week 7: Promotion of Companies and Pre-incorporation contracts
Pre-Incorporation Matters
Relevant promoter activities required for pre-incorporation
 Formation of companies e.g. looking for first director, company secretary,
shareholders,
 Raising capital for the newly formed companies
 Obtaining local registration
 Advertising and employing staff/workers of the company especially where
highly skilled employees are involved (such as pilots, engineers)
 Deciding on the most suitable type of company to be formed
 Designating the directors of the company
 Inspection of business premises (such as procurement of land) and making it
suitable for operations
 Engaging the services of relevant professionals e.g. solicitors, accountant,
licenses, estate valuers and surveyors
 The promoter has to anticipate relevant permits/approvals to form the
company bearing in mind foreign partners in the business
 Gathering relevant information from the subscribers and first directors. A
professional promoter would usually prepare a questionnaire for the
relevant particulars to be used by the professionals in registering the
company.
 The promoter enters in written contracts with the professionals to dispense
their services to the company to be formed. The essence is to agree on the
fee, give clear instructions etc
 The promoter takes care of all logistics e.g. purchase of office equipment,
machine, assessing internet services for the company etc
 Outsource for market for the products to be sold e.g. cars
 Sourcing for Raw material
 The technology to be used in the company where one is required e.g.
entering into a transfer of technology contract

NB: promoters can be natural or artificial persons

Promotion activities are vital aspects of company formation. Certainly, all

companies are brought to life through the activities of a set of persons who arrange
for their formation. 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 regards such persons as promoters of the company. This can be
found under Section 61 of CAMA.
The provisions of Section 61 of CAMA provides thus:
“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 this proviso means is that a solicitor or valuer does not become a promoter
merely by acting in a professional capacity to a promoter.
In Twycross v. Grant (1877) 2 CPD 469 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 also
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….”
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.”
It should be noted that a promoter is also someone who instructs a solicitor to
prepare a Memorandum and Articles of Association and register a company for him.
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.
It should be noted also that an existing company may be a promoter for another new
company.
However, 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.
If a professional is interested in the new company personally, he is deemed to be a
promoter, even if he rendered professional services

Difficult to differentiate btw a promoter and a professional as a professional is not a

promoter.

A promoter cannot be regarded as an agent or trustee of a company but he occupies

a fiduciary relationship with the company – Garba v. Sheba International
(Nigeria) Ltd. [2002] 1NWLR (Pt.748) 372 at 401: any person who takes part in
forming a company
It should be noted that a person becomes a promoter from the very moment he
begins to take part in forming a company or in setting it going.
Promoters are important for Foreign Direct Investment: Activities of person going
btw the government of Nigeria and the foreign company is the work of a promoter.
Also bringing in directors, showing company how to raise capital encompasses the
work of a promoter.

CONTRACTS OF PROMOTERS
In contrast to the Common law rule, Section 72(1) of CAMA provides that 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 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.
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

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 at 1236 that:
“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”.
1) Duty of fiduciary relationship – The promoter stands in a fiduciary
relationship to the company and must observe utmost good faith in
transaction entered on behalf of the company. 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.

2) Duty of accountability – 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. 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. In Jubilee Cotton Mills v. Lewis
(1924) AC 958, it was held that a promoter who received, by way of a secret
reward for his part in promoting a company, an allotment of shares which
had been allotted before a statement in lieu of prospectus, which was then
required by law, has been filed was liable to account for the profit made on
the resale of the shares.

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 or by all members of the company – Section 62(3) of CAMA. In
Erlanger’s case (supra), 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 OF A PROMOTER
1. Duty to account for money/properties received in the course of the promotion
activities-GARBAV.SHEBA INTL LTD
2. Duty not to make secret profit; where made, it must be returned to the
company.
3. He must disclose any property or information which he acquired on behalf of
the company especially where he has used the information or property to gain
a benefit.-S . 62(2)
4. Duty to disclose conflicting interests in transactions with the company.
5. Duty not to expose the company to loss.

LIABILITIES OF PROMOTERS-S.62 CAMA – duty to rescind the transaction except

ratified by the company. Claim damages when rescission is not impossible
Where there is a breach of the duties imposed on a promoter, the company can take
any of the following actions for redress:
a. Action to render account of money or property received in the course of
promotion activities.
b. Action to account for secret profits made which was discovered by company.
c. Action for damages for wrongful exploitation of confidential information
(fraudulent misrepresentation)
d. Refusal to ratify pre-incorporation contract tainted with conflict of interest.
e. Action to rescind contracts perfected not by the Promoter.

LIMITATION PERIOD
There is no limitation period for company to sue promoter under this section but
the court may give relief from liability to the promoter in whole or in part and on
such terms as it thinks fit from liability here‐under if in all the circumstances,
including lapse of time, the court thinks it equitable to do so.– Section 62(4) of
CAMA.

REMEDIES FOR BREACH OF DUTIES

Basically, there are three major remedies:
1. The company may sue the promoter for damages for breach of his fiduciary
obligation to the company – Re: Leeds And Hanley Theatre Of Varieties Ltd
(1902) 2 CH 809.

2. 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:

(a) The Board of Directors who must be independent of the control of the
promoters; or

(b) 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.

3. The promoter may be compelled by the company to account for any profit he
made – Gluckstein v. Barnes (supra).

REMUNERATION OF PROMOTERS
The services of promoters are very peculiar, and a great skill, energy and ingenuity
may be required and employed in the promotion exercise. Though, a promoter has
no right against the company to payment for his promotion services and expenses
unless there is a valid contract for him to do so – Re English and Colonial Produce
Company (1906) 2 CH. 435 CA. And, since pre-incorporation contracts are not
binding on, or enforceable by, or against the company, it may be difficult for
promoters to have an enforceable contractual right to remuneration for their
services and indemnify for their expenses. In Re National Motor Mail Coach Co.
Ltd., Clinton’s Claim (1906) 2 Ch 515 CA , it was held that the promoters were not
entitled to prove or recover the expenses they incurred in incorporating the
company. This difficulty is more real in theory than in practice because recovery of
preliminary expenses and remuneration does not present much difficulty. Usually,
the Articles of Association will contain a provision authorising the directors to pay
them though it does not go to the extent of constituting a contract between the
company and the promoter(s).
The reward of a promoter may take many forms. He may purchase an undertaking
and promote a company to repurchase it at an enhanced price, thus, making profit.
Alternatively, he may receive commission on a sale to the company from a vendor (it
should be noted that all this is subjected to the rule of full disclosure as a duty of the
promoter). Also, he may be given an option to subscribe for shares at a particular
price within a specified limit. Where this happens, it is very significant that there is
full disclosure of same by the promoters to the company and also by the company in
the prospectus.
Unlike the common law position, a promoter can now recover remuneration by
action against the company if the contract is ratified or adopted by the company after
incorporation since by Section 72 of CAMA, such a contract or transaction may now
be ratified. In Garba v. Sheba (supra) at 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 nor enforceable against the company because the
consideration is a past consideration.
A promoter could also enter into personal contracts with persons who ask him to form
the company.

PRE-INCORPORATION CONTRACTS
Pre-incorporation contracts are contracts purported to be made usually by
promoters on behalf of a company before it is incorporated – Sparka Electrics Nig.
Ranor v. Ponmile (1986) 2 NWLR (Pt. 23) 519 at 525. That is, before a company is
formally registered, a promoter may have entered into some contracts on behalf of
the company before incorporation.
In 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. This was also the decision in Trans Bridge Co Ltd. V. Survey Int’l
Co. Ltd (1986) 17 NSCC 1084; Edokpolor and Co. Ltd v. Sem-Edo Wire Industry
Ltd (1984) 7 SC 119; Re English Colonial Produce Co. Ltd (supra); Kelner v.
Baxter (1886) LR 2 CP; Enahoro v. Bank of WA Ltd (1971) 1 NCLR 180.
The only way in which the company could be party to the contract was to enter into
a new contract in terms of the one purportedly entered into on his behalf. 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 Santore 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.
Where the promoter signed the contract for and on behalf of the company, he is
personally liable – 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
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 thus:
“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…”
The Supreme Court upheld this position when it held in Societe Generale Bank
(Nig) Ltd v Societe Generale Favouriser etc (1997) 4 NWLR (pt 497) 8 after
reviewing the common law position that,
all that has now changed in this country for Section 72 (1) CAMA
makes it possible for pre-incorporation contracts to be ratified
by a company after its incorporation and thereby becoming
bound by it and entitled to the benefit thereof.
In other words, the company can ratify after formation as if it were in existence
when the contract was entered into. The company then becomes bound and entitled
to the benefits therein.
Although, it is significant to treat the word “ratified”, as used in this section could
have been used in its strict legal connotation. This observation accords with legal
principles since there cannot be ratification of a contract or transaction by a
principal who was not in existence at the material time of contract. The law in this
context, merely treats the company as if “it has been in existence at the date of such
contract or other transaction and had been a party thereto”. The theoretical basis of
the power of ratification which companies are given under this section, is, obviously,
predicated on agency principle by which a principal has the legal competence to
ratify unauthorised acts of his agent. The power of ratification endowed upon
incorporated companies in this section, it must be pointed out, is co-existence with
that exercisable under normal agency relationship. Therefore, ratification may be
express or implied.
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. Seme-Edo Wire
Industries (supra). The apex court per Nnamani, JSC stated the position in the
following way:
“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.
On when can pre-incorporation contract be binding, the court stated in the case of
Garba v. KIC Ltd. (2005) 5 NWLR (PT. 917) 160 at 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 –
ET and EC Nigeria Ltd. v. Nevico (Nigeria) Ltd. (2004) 3 NWLR (PT. 860) 327 at
347.
Other jurisdictions use novation i.e. the company can enter into the same contract
on the same terms as the promoter entered into before the formation of the
company.

TYPES OF PRE-INCORPORATION CONTRACT

The following are types of pre-incorporation contract:
1. Joint Venture Agreement especially between Nigerians and aliens.

2. Shareholders’ Agreements.

3. Contract for Payment of Promoters’ expenses.

4. Directors’ service contract (appointment of the Managing Director).

5. Contract Agreement for the acquisition of business or property (Takeover

agreement).

6. Contract for Conversion of partnership to incorporated companies.

7. Confidentiality/non disclosure agreements

8. Employment contracts

9. Procurement contract

10. Technology transfer agreement

11. Loan agreement

12. Deed of assignment

13. Commercial Memorandum of understanding

14. Formation Agreement

15. Partnership Agreement

FEATURES OF A PRE-INCORPORATION CONTRACT

1) Such contracts (pre-incorporation contracts) are said not to be binding on
the company until it has been ratified or adopted by the company.
 2) Such contracts are made prior to the existence and incorporation of the
company

3) Such contracts are binding on the promoter and not the company except in
cases where a company has ratified the contract.

4) It is usually made by a promoter with a third party on behalf of the company

before incorporation.

5) Promoters are personally answerable under pre-incorporation contracts.

RELATIONSHIP BETWEEN MEMORANDUM AND ARTICLES OF ASSOCIATION

AND PRE-INCORPORATION CONTRACTS
The Memorandum of Association is the dominant instrument and the Articles of
Association are subordinate to and controlled by the memorandum – Liquidator of
Humbold Redwood Co. Ltd. v. Coasts (1908) SC 751 at 753. A company’s power to
alter its articles is subject to the conditions in the memorandum – Section 48(1) of
CAMA. Consequently, an alteration of articles must not conflict with the
memorandum.

Where parties have a joint venture agreement, it is important that the terms of the
joint venture agreement are incorporated into the memorandum of association of
the company. This is done by providing in the first object clause of the
memorandum of association as follows:
“To give effect to the Joint Venture Agreement, dated this ………….. day of ………..
between …………………. And ………………………..”
However, where there is a conflict between the joint venture agreement and the
memorandum and articles of association, the joint venture agreement will prevail if
there is a supremacy clause in the joint venture agreement – Edokpolor’s case
(supra). Although it has been argued that the efficacy of this practice is doubtful and
usually disapproved in view of the superintendent position of the Memo and
Articles of Articles under the Sections 41 (1) and 35 (2) CAMA. See also NIB
Investment West Africa Ltd v Omisore (2006) 4 NWLR (pt 969) 17
The main objectives of a Joint Venture Agreement (JVA) would be:
a) To record how the company and its business are to be run with the least
possible friction;

b) To make sure the rights of each shareholder are secured and that so far as
possible, each shareholder gets what he expects from the venture; and

c) To determine what happens if something goes wrong.

EFFECT OF INCORPORATING THE JOINT VENTURE AGREEMENT INTO THE

MEMORANDUM OF ASSOCIATION
This is to the effect that the members of the company have a strong desire to
perform the terms of the joint venture agreement. However, the terms are not
binding on the company because the object clause in the memorandum of
association of a company is no more than an object that the company may lawfully
carry out. This does not mean that the company must carry out the object – as the
Supreme Court per Nnamani, JSC stated in Edokpolor and Company Ltd. v. Seme-
Edo Wire Industries (supra): a key case
“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.
Incorporation of pre-incorporation contracts into memorandum of association
 They do not form part of the approved documents to be submitted for filing
at CAC
 Because of this, a method of including them into the objects clause of the
company was devised
 The essence is to enforce the agreements entered
EFFECT OF MEMORANDUM AND ARTICLES OF ASSOCIATION
Subject to the provisions of CAMA, the memorandum and articles when registered,
shall have the effect of a contract under seal between the company and its members
and officers and 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, members or officers as
such – Section 41(1) of CAMA; Longe v. FBN (2006) 3 NWLR (Pt. 967) 228 at 269.
The effect of the above provision is that the articles of association (and
memorandum) constitute a contract not merely between the shareholders and the
company, but between each individual shareholders – Per Stirling J. in Wood v.
Odessa Waterworks 42 Ch. D. 636 at 642.
This means that:
1. A shareholder may bring an action to enforce any personal right contained in
the articles. In Burdett v. Standard and Exploration Co. (1889) 16 TLR 112,
Conzens Hardy J held that a member was entitled to enforce compliance by
the company with a clause in articles giving him a right to a share certificate.

2. The company is entitled to sue its members for the enforcement and to
restrain the breach by them of its articles, and to treat as irregularly anything
which is done in contravention thereof – Blackpool v. Hampson (1882) 23
Ch D. 1.

3. A member can sue a member for the enforcement of his right in the articles –
Hudges, King (Nig.) Ltd. v. Ronald George Harris (1972) 2 UILR 63.

4. The company, directors and officers will be treated as having made a

contract in terms of the clause in the articles and are bound accordingly. In
Swabey v. Port Darwin Gold Mining Co. (1889) I Meg. 385, the court held
 that he was entitled to recover on the footing of an implied contract in the
terms of the clause.

5. The directors/officers of a company are bound by the articles and if they act
otherwise than in accordance with the provisions of the articles, they may
render themselves liable to an action at the instance of the members and if as
a result of the breach of duty any loss is suffered by the company, the
directors are liable to refund of the company any damage so suffered.

6. Where the memorandum or articles empower any person to appoint or

remove any director or other officer, he cannot be prevented from doing so
and such power shall be enforceable by that person notwithstanding that he
is not a member or officer of the company – Section 41(3) of CAMA; Longe
v. FBN Plc (supra) at 272.

7. Any alteration to the articles is, for the purpose of Section 41(1) treated as if
it were part of the original articles and will bind the company members and
directors and officers of the company accordingly.

8. The contractual relations created by the articles have statutory operation –

Evans v. Chapman (1902) 86 LT 381; and the court cannot rectify them
under its equitable jurisdiction even if it is proved that they do not reflect the
intention of the parties – Scott v. Frank F. Scott (London) Ltd. (1940) Ch.
794.

9. All money payable by any member to the company under memorandum or

articles shall be a debt due from him to the company and shall be of the
nature of a specialty debt.

CONTENTS OF SHAREHOLDER AGREEMENT

1. Parties.

2. Date.

3. Recitals.

4. Definition and Interpretation.

5. Consideration.

6. Warranties.

7. Completion.

8. Auditors and Bankers.

9. Registered Office.

10. Accounting Reference Date.

11. Secretary.

12. Directors.

13. Dividend Policies.

14. Further Financing.

15. Guaranties and Indemnities.

16. Company’s Business.

17. Directors and Chairman.

18. Important Management Decisions.

19. Deadlock.

20. Transfer of Shares.

21. Material Breach.

22. Winding up.

23. Restrictive Covenants.

24. Confidentiality.

25. Shareholders Consent.

CONTENTS OF JOINT VENTURE AGREEMENT

1. Parties.

2. Date.

3. Capital Contribution.

4. Management Composition of the Board.

5. Place of the Business.

6. Nature of the Business.

7. Supremacy Clause.

8. Joint Venture Sharing Ratio.

9. Dissolution Clause.

10. Duration.

11. Governing Law.

12. Settlement of disputes/dispute resolution (that is, how should a matter be
solved in the event of dispute).

CONTENTS OF MEMORANDUM OF UNDERSTANDING – look at in details

1. Commencement

2. Dis

3. Responsibility of partners

4. Responsibility of members

5. Date

6. Parties

7. Background

8. Mutual agreement clause

9. Confidentiality clause

10. Execution clause

11. Attestation clause

CONTENTS OF TECHONOLOGY TRANSFER

1. Commencement

2. Recital: technology will be discussed/described and how it will be

transferred e.g. E.O. Olowo, a Nigerian and expert in neurology…..

3. Salary

4. Royalty (payment for expertise)

5. Settlement of dispute/options in settlement of dispute

6. Confidentiality – can never be shared (follows you to the grave)

7. Restrain of trade: restrain the expert from telling people the secret of the
trade (e.g. if there are any issues, cannot work with any other company in
Nigeria for 10 years)

8. Obtaining relevant permit (responsibility of the company to get the relevant

permits)
 9. Training and manpower (arrange with expert to train Nigerians: expatriate
quota is given for 5 years in Nigeria within which a Nigerian must take over

10. Liabilities exemption warranty (so expert can do his job without fear i.e. a
waiver)

11. Termination

12. Duration

13. Trade secret: the content of the trade only (not to be exposed to other
people) – there could be an agreement to share this secret in future

14. Testimonium

15. Attestation

4 essential parts in every agreement: commencement (names, addresses and their

capacities), recitals (descriptions such as tracing good route of title i.e. person has
power to give something such as the technology); testimonium (justify the
capacities of the parties in the commencement part); attestation (signed and
delivered by….; in the presence of….

ETHICAL ISSUES
Distinction to be made whether lawyer is a promoter or professional.
1. Rule 1 of Rules of Professional Conduct (RPC), 2007 – A lawyer shall
uphold and observe the rule of law, promote and foster the cause of justice,
maintain a high standard of professional conduct, and shall not engage in any
conduct which is unbecoming of a legal practitioner.

2. Rule 7(2)(b) of RPC – A lawyer shall not practice as a legal practitioner

while personally engaged in the business of a commission agent.

3. Rule 7(3)(a) of RPC – For the purpose of this rule, “trade or business”
includes all forms of participation in any trade or business, but does not
include membership of the Board of Directors of a company which does not
involve executive, administrative or clerical functions;

4. Rule 23 of RPC – A lawyer shall deal with his client’s property diligently and
shall not use his client’s property for personal gain. He must also be
accountable to his client as regards to client’s money. Lawyer must have a
separate client account (i.e. a solicitor’s account)

5. Rule 52 of RPC - The professional fee charged by a lawyer for his services
shall be reasonable and commensurate with the service rendered.

6. Rule 14 of RPC – A lawyer shall devote his attention, energy and expertise to
the service of client.
 7. Rule 15(2)(a) RPC: In his representation of his client, a lawyer shall keep
strictly within the law notwithstanding any contrary instruction by his client
and, if the client insists on a breach of the law, the lawyer shall withdraw his
service. A solicitor should advise parties as to businesses which are
prohibited because it is illegal or offensive

8. Rule 17(1) RPC: A lawyer shall, at the time of the retainer, disclose to the
client all the circumstances of his relations with parties, and any interest in
or connection with the controversy which might influence the client in the
selection of the lawyer. Rule 17(2): Except with the consent of his client
after full disclosure, a lawyer shall not accept a retainer if the exercise of his
professional judgment on behalf of his client will be or may reasonably be
affected by his own financial, business, property, or personal interest. E.g.
when employed by the promoter to register the company, he should make it
known that he wants to acquire shares in the company

9. Rule 16(1)(a) –(c) RPC: A lawyer shall not (a) handle a legal matter which
he knows or ought to know that he is not competent to handle, without
associating with him a lawyer who is competent to handle it, unless the client
objects; (b) handle a legal matter without adequate preparation; (c) neglect a
legal matter entrusted to him

A DRAFT OF PRE-INCORPORATION DOCUMENT

AGREEMENT BETWEEN PARTNERS FOR FORMATION OF A COMPANY TO
ACQUIRE THEIR BUSINESS
This agreement is made this ………….. day of ………… 20…….
BETWEEN …………………. (name), first partner of ……………………… (address) and
…………………. (name), second partner of ……………………. (address).
WHEREAS, the parties have agreed to form a company for the purpose of acquiring
as a going concern, the business of the parties …………………. (state the kind of
business) now carried on by them in partnership under the name ……………………..
(name of the business).
NOW IT IS AGREED as follows:
Formation and capital of the company
The parties shall procure the incorporation of a company having an authorised
share capital of ………………… (amount) divided into ordinary shares of …………….
(amount) each.
Name
The company shall be called “………………….. (name of the company) Limited” if such
name is available for registration or by other available names as may be agreed
between the parties (or in default of such agreement (name of one of the parties)
shall sect).
Memorandum and Articles of Association
The Memorandum and Articles of Association of the company shall be in the form of
draft and attached and marked as “A” with such modifications as the parties may
agree in writing.
The Memorandum and Articles of Association shall be subscribed by the parties or
their respective nominees each of whom shall agree in the memorandum to take up
ordinary shares of ………………… (amount) each in the capital of the company.
Directors
The parties will procure their appointment as the sole first directors of the
company. Each of the parties will exercise his voting right for the time being in the
company and take other such steps as lie within his power to procure that the other
parties retain their appointment to the office of director.
That each of the parties shall remain a director of the company until the ……… day of
……... (date) and so long after that as he holds beneficially (ordinary) shares of stock
in the capital of the Company having an aggregate nominal value of not less than
…………………. (amount) (or not less than ………….. per cent in nominal value of the
issued share capital of the Company).
That ………………. (name) shall be the Chairman of the Company until ………… day of
……….. (date) and so long after that as he remains a director of the Company.
That so long as any of the parties is entitled to remain a director of the Company in
accordance with the provisions of this clause, the maximum number of directors of
the Company shall not exceed ……………. (number).
Sale of the business and cost and expenses
The parties and the company will enter into an agreement for the sale of their
business to be in the form of the attached draft marked “B” and the company will
bear the costs, fees and expenses of solicitors and accountants to the preparation of
this agreement the formation of the Company and the sale of the business to the
company.
Directors’ Powers
Nothing contained in this agreement shall in any way affect the free exercise by any
person of his powers as a director of the company.
IN WITNESS of which the partners have executed this agreement in the manner the
day and year first above written.
Signed by
………………………. (name) First partner
……………………….. (name) Second partner
In the presence of
Name: ……………………….
Address: …………………….
Occupation: ………………..

Sample draft of memorandum of understanding

Commencement
This Memorandum of Understanding is made this…. Day of….2015

BETWEEN Abdullahi Ibn Seikh of No… Malaysia which expression shall where the
context admits include his personal/legal representatives and assigns of the First
Part;
Abubakri Amin of No….Malaysia which expression shall where the context admits
include his personal/legal representatives of the Second Part
AND Chief Nasakhire Iayer of Nosak Palm Produce of No….Nigeria of the Third Part

Recital
1. Abdullahi Ibn Seikh and Abubakri Amin are Malaysian Businessmen who intend
to do business in Nigeria
2.

Joint Venture agreement: agreement to do a business together (NNPC and Shell JV

and there is a clear share division of profits). MOU is e.g. an agreement to supply
raw materials to your business as at when due. It is a not a joint affair but an
outright agreement requiring one party to preform the contract of supply. No party
is a beneficiary under a single agreement and neither party is involved in profit
sharing.

Sample Draft of Pre-Incorporation contracts

To acquire and take over as going concern the undertaking and all or any of the
property and all or any of the debts, liabilities and engagements of …..Company
Limited

Draft a Memorandum of Understanding using Case Study 1

THIS MEMORANDUM OF UNDERSTANDING is made the 10th day of November
2013.
Between CHIEF NOSAKHIRE IYARE of No. 1 Ikpoba Road, Benin city, Edo State,
Nigeria (1st member) of the first part;
ABDULLAH IBN SEIKH of 4th Street Lumpurg, Malaysia (2nd members) of the second
part; and
ABUBAKRI AMIN of 10 Kanchan Way, Malaysia (3rd members) of the third part;
All of whom are businessmen.

RECITAL
1. The 1st member is the Sole Proprietor of Nosak Palm Produce (Nig)
Enterprises.
2. The 2nd and 3rd Members are Malaysian businessmen who also engage in palm
produce business.

THE PARTIES MUTUALLY UNDERSTAND AND AGREE TO THE FOLLOWING:

1. To form a limited liability company whose object is to extract and export palm
oil.
2. The proposed names of the company are Gold Palms Nig. Ltd or West Coast
Palms (Nig) Ltd.
3. The company would carry on business at No. 1 Ikpoba Road Benin City, Edo
State which shall be registered as its corporate office.
4. The office accommodation of the 1 st member’s sole proprietorship is to be
bought over and used as business premises by the company.
5. The business premises is to be in exchange for payment of shares to be
subscribed by the 1st member in the company.
6. The company is to be incorporated at the CAC with a minimum share capital of
10,000,000 ordinary shares of N1.00 each.
7. The parties are to contribute towards the funding of the company.

CONFIDENTIALITY
The 1st, 2nd and 3rd members agree to maintain confidentiality with respect to details
of this MOU. Each party further agrees to maintain in confidence all proprietary
information received from the other including but not limited to reports and any
financial or fiscal information.

IN WITNESS OF WHICH the parties have cause this Memorandum of Understanding

to be executed in the manner below the day and year first above written.
SIGNED AND DELIVERED BY THE 1ST MEMBER
___________________
Chief NosakhireIyare
IN THE PRESENCE OF:
NAME
ADDRESS
OCCUPATION
SIGNATURE
SIGNED AND DELIVERED BY THE 2ND MEMBER
___________________
Abdullah Ibn Seikh
IN THE PRESENCE OF:
NAME
ADDRESS
OCCUPATION
SIGNATURE
SIGNED AND DELIVERED BY THE 3RD MEMBER
___________________
Abubakri Amin
IN THE PRESENCE OF:
NAME
ADDRESS
OCCUPATION
SIGNATURE

Sample Joint Venture Agreement

THIS JOINT VENTURE AGREEMENT is made this…. Day of….2015

BETWEEN
1. John Otto of No 30 Bada Street, Kebbi State Nigeria of the first part
AND

2. Mary Otto of No 30 Bada Street, Kebbi State, Nigeria of the second part

WHEREAS:
1. The parties desire to conduct a business operation together, and to contribute
money to finance its conduct
2. It is agreed that the most desirable form of business to carry out the business is a
joint venture

THE PARTIES AGREE AS FOLLOWS:

SCOPE AND DESCRIPTION OF BUSINESS

1. The parties create a joint-venture to run a restaurant for profit which shall be
conducted under the name of CHOP-CHOP RESTAURANT from a place of business at
12 Mary Plaza and No. 12 Kank Street, Kebbi Local Government Area, Kebbi State

CONTRIBUTION OF CAPITAL

2. John Otto is to contribute ten million naira (N10,000,000) and his services valued
at one million naira (N1,000,000) to the business while Mary Otto is to contribute
cooking equipment valued at one million (N1,000,000), a place of business at Mary
Otto Plaza at No. 12 Kank Street, Kebbi State valued at twenty million naira
(N20,000,000) and her time as a professional cook for the duration of the business
to ensure its success.

3. Contributions of money and property shall be made on or before the 10th day of
July 2015. Failure of either party to complete the contributions on a timely basis
shall result in the termination of this agreement

CONDUCT OF THE JOINT-VENTURE BUSINESS

4. John Otto shall be the managing director of the joint venture
5. Mary Otto shall have authority to arrange

TITLE TO PROPERTY
6. All legal title to the property shall be vested in the hands of the parties depending
on their contributions thereof

DISPUTE RESOLUTION

CONFIDENTIALITY

WINDING UP/DISSOLUTION
IN WITNESS OF WHICH the parties have executed this agreement in the manner
below the day and year first above written

SIGNED by John Otto….

IN THE PRESENCE OF:

NAME
ADDRESS
OCCUPATION
SIGNATURE

SIGNED by Mary Otto

IN THE PRESENCE OF:

NAME
ADDRESS
OCCUPATION
SIGNATURE

Sample draft of Technology Transfer

THIS TECHNOLOGY TRANSFER AGREEMENT is made this…. Day of….2015

BETWEEN

1. AJ Technologies Ltd, a company duly incorporated with registration number

CA134 under the Company and Allied Matters Act CAP C20 LFN 2004 of Plot 13
Yakari Way, Abuja, FCT, Nigeria of the first part

AND

2. Alibaba Technologies Plc, a foreign based company and registered under UK

Company Law of No 30 Golders Green, England, UK of the second part

WHEREAS:

1. Alibaba Technologies Plc agrees to allow AJ Technologies Ltd the use of its data
protection software on licence for a period of 25 years with an extension subject to a
further agreement.
2. It is agreed that AJ Technologies Ltd will pay Alibaba Technologies Plc, a sum of
five hundred thousand naira (N500,000) per year for use of this software, including
an initial non-refundable deposit of N1,000,000
3. Alibaba Technologies Plc will allow AJ Technologies Ltd to use any updated
version of the software as released by the former during the 25 year period.

THE PARTIES AGREE AS FOLLOWS:

4. The data protection software will installed by Alibaba Technologies Plc’s
technicians unto AJ Technologies Ltd’s server within 30 days of payment of the
initial deposit of N500,000.

CONFIDENTIALITY
5. Neither AJ Technologies Ltd nor its agents, servants, assignees and any one acting
on its behalf can transfer the technology therein to a third party without the written
consent of Alibaba Technologies Plc
6. If an unauthorised transfer of the technology is effectuated by AJ Technologies
Ltd, it will be liable to Alibaba Technologies Plc for a sum of N20,000,000 in
damages valued at 2015 prices for every breach of this confidentiality agreement.

PAYMENT SCHEDULE
7. Payment shall be due 365 days after the payment of the initial deposit and every
365 days thereafter.

GOVERNING LAW
The law of Nigeria will govern this agreement and any disputes arising therein.

ABRITRATION CLAUSE
The parties agree that any disputes that arise must be resolved in arbitration in
accordance with the Arbitration and Conciliation Act A18 LFN 2004

IN WITNESS OF WHICH the parties have executed this agreement in the manner the
day and year first above written

THE COMMON SEAL OF ALIBABA TECHNOLOGIES PLC WAS DULY AFFIXED

IN THE PRESENCE OF:
COMPANY SECRETARY:
NAME: William Applebottom
ADDRESS: No 10 Portland Street, W1B 3BL, UK
OCCUPATION: Company Secretary
SIGNATURE

DIRECTOR

THE COMMON SEAL OF AJ TECHNOLOGIES PLC WAS DULY AFFIXED

IN THE PRESENCE OF:
COMPANY SECRETARY
NAME: Ijeoma Nwosu
ADDRESS: No 13 Bwari Road, Abuja, FCT, Nigeria
OCCUPATION: Company Secretary
SIGNATURE

DIRECTOR
Sample draft of Shareholder’s agreement

WEEK 8: FOREIGN PARTICIPATION IN NIGERIAN BUSINESS SECTOR

FOREIGN PARTICIPATION

This relates to the question of whether and to what extent a foreign national, or
alien can participate in business in Nigeria. Section 567 of CAMA defines an alien as
a person or association, whether corporate or incorporated, other than a Nigerian
citizen or association.
Even before slavery, there was inter-tribal trade (btw Igbos and Oyo empire etc).
The abolition of slave trade led to the scrambling and partitioning of Africa to
exploit raw materials. Companies Ordinance of 1912 allowed companies
operating in the UK to obtain charters from the King (Royal Charter) to enter the
British colonies to do business (incorporation) e.g. Royal Niger Charter Company,
UAC, John Holds, Barclays. Foreign companies had to be registered under the
Ordinance to operate in Nigeria. Land and Perpetual Succession Ordinance of
1959 made provision for non-profit organisations to be registered and the
procedure for such registration. This continued until the Companies Decree 1968
(modelled on England’s law). No restriction on foreign participation at the point. All
they had to do was to be registered.

In 1971, military government (Gowon) made some effort to economically empower

Nigerian and thus the Nigerian Enterprises Promotion 1972 which required that
a percentage of the equities must be given to Nigerians (btw 10-15% depending on
the type of the business). But it was possible to have non-voting shares and foreign
companies gave Nigerians non-voting shares. In 1977 (Obasanjo), the government
dispossessed foreigners of their companies (Nigerianisation Decree 1977: Nigerian
Enterprises Promotion Decree 1977): all foreign companies must be registered
with majority Nigerian equity participation leading to a state regulated economy.
However, this led to capital flight as investors left the country and started investing
in neighbouring countries with a more relaxed law for foreign investments.

In 1989 (Babangida) Nigerian Enterprises Promotion Decree, the law partially

deregulated the economy permitting foreign participation and having controlling
shares but no foreign company can be registered in Nigeria without Nigerian
participation. This didn’t achieve much. In 1995, Nigerian Investment Promotion
Commission Decree (Deregulation Decree) was profound as it reversed the
decree of 1977. It permitted (s17) foreigners to wholly form and incorporate
companies in Nigeria with or without Nigerian equities subject to s21 prohibiting
Nigerians and foreigners from doing things that will undermine peace in Nigeria
(negative list matters). A statutory assurance that there would be no future
indigenisation of foreign companies in Nigeria. Even the 1999 Constitution
impliedly prohibits compulsory revoking of property without compensation

Section 20(4) of CAMA provides:

“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 forming of a company”.

Section 17 of Nigerian Investment Promotion Commission (NIPC) provides that

a non-Nigerian whether company or individual may invest and participate in the
operation of any enterprise in Nigeria except those in the negative list.

It is clear from the above provisions that a foreigner is allowed to participate in

business in Nigeria but subject to some enactments.

An alien (foreigner) may choose to register a business name as a sole proprietor (or
partnership), he may wish to incorporate a company with other aliens or Nigerians,
he may wish to buy shares into an existing company. Where he is incorporating a
company, he may do business in any area except the negative list. The negative list
include (s31/33 NIPC Act): arms and ammunition; narcotic drugs and psychotropic
substance; para-military and military wears and accoutre.
LEGAL FRAMEWORK & REGULATORY AUTHORITIES ON FOREIGN PARTICIPATION
IN NIGERIA
ENABLING LAW REGULATORY PERMIT/APPROVAL/FUNCTIONS
AGENCY
1 Companies and Corporate Affairs Incorporation of Nigerian
Allied Matters Act Commission (CAC) (formation and registration of
(CAMA), Cap C20 companies) Companies for FDI
LFN 2004 S. 54 and companies without
exemption
2 Nigerian Investment Nigerian Regulates & Promotes
Promotion Investments investment activities. Showcases
Commission Act, Promotion investment opportunities in
CAP NII7,LFN 2004 Commission Nigeria and how to invest in all
(NIPC), One-stop sectors of the country. Registers a
Investment centre foreign company after
is housed at NIPC incorporation in Nigeria and
before start of business-s.17NIPC
act
3 Investment Securities & Regulates the registration of
Securities Act (ISA) Exchange securities, records of FPI and FDI-
2007 Commission (SEC) s.8, regulation of capital market
4 Immigration Act Nigerian Regulates the entry of aliens into
2010 Immigration the country. Supervises and
Service (NIS) grants visa, Business Permits,
Residence permits, expatriate
quota and work permit-s.8
5 National Agency for National Agency Registration of technology
Technology for Technology transfer from foreigners to their
Acquisition Acquisition & partners in Nigeria. Gives
Promotion Act 1994 Promotion Certificate of Approval
(NOTAP)
6 Customs & Excise Board of Customs Regulates importation and
Management Act exportation of goods. Imposes
import & export duties
7 Federal High Court Federal High Resolution of disputes arising
Act Court from company matters
8 Foreign Exchange Central Bank of Regulates capital importation
(Monitoring & Nigeria (CBN) through an authorised Dealer to
Miscellaneous do business legitimately without
Provisions) Act flouting the Money Laundering
laws. Licenses authorised capital
dealer, minimum share capital
and how regularly to renew your
licence. Issues Certificate of
Capital Importation
9 Industrial Ministry of Trade Provides incentives and reliefs
Inspectorate Act & Investment for those investing in the
NB: important and manufacturing sector. If the total
promulgated in investment is up to N20,000 then
1972 as a Decree qualify to be referred as having
incurred capital expenditure
(modifications as to the amount
for investment but the National
Assembly is yet to ratify these
modifications). Now in the region
of N500 million. Capital
expenditure is the total capital
outlay invested by a Nigerian or
non-Nigerian in manufacturing
business anywhere in Nigeria.
Supervises activities of
manufacturing industries in
Nigeria that wishes to incur
capital expenditure – issues
Certificate of Acceptance
10 Companies Income Federal Inland Regulates the taxation of
Tax Act (CITA) Revenue Board - company operating in Nigeria.
This is the main
body set up by the
law. Located in the ministry of
Federal Inland Finance.
Revenue Service
(FIRS) is the
operative arm
which collects the
taxes from
companies
11 Stamp Duties Act Federal Inland Prescribes the quantum of duties
Revenue Service or taxes to be paid before
registering certain document for
incorporation =memo & Art
12 Constitution of Administered by Regulates every activity. S44(1):
Federal Republic of all the court in Prohibition of compulsory
Nigeria 1999 (as Nigeria acquisition without prompt
amended) compensation. And the
protection of the right to own
property (whether a Nigerian or
alien). Companies incorporated
in Nigeria are Nigerian corporate
citizens (Shell: a dual corporate
 citizen)
13 Land Use Act (1978) Regulates the allocation of lands
for commercial purposes in
Nigeria to let you know that there
is no absolute ownership of land
and land can be taken over for
overriding public purposes
14 National Insurance National Guides the insurance activities of
Commission Act Insurance companies
Commission
(NICOM)
15 Banks and other Central Bank of Regulates Banking activities of
Financial Nigeria companies
Institutions Act
1991 (as amended)
16 Economic and
Financial Crimes
Commission
(Establishment) Act
2004
17 Money Laundering
(Prohibition) Act
2011
18 Arbitration and
Conciliation Act
19 CBN Act
20 Federal High Court
Act (1976) has
jurisdiction to
entertain
investment disputes.
21 Civil Aviation
Authority Act
23. Nigerian Port
Authority Act

VARIOUS LAWS REGULATING FOREIGN PARTICIPATION IN BUSINESS IN

NIGERIA

1. Companies and Allied Matters Act (CAMA), Cap. C.20 LFN 2004 – 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
 2. Nigerian Investment Promotion Commission (NIPC) Act, Cap N 117 LFN
2004 – Section 17 of the Nigerian Investment Promotion Commission Act
which requires aliens to register with the Commission before commencing
business in Nigeria.

3. Immigration Act Cap I 1 LFN 2004 – Obtaining business permit under

Section 8 of the Immigration Act, 1963.

4. Investments and Securities Act (ISA) 2007 – Section 8 of the Investments

and Securities Act which empowers the Securities and Exchange Commission
(SEC) to keep and maintain Foreign Direct Investments (FDI) and Foreign
Portfolio Investments (FPI) in Nigeria.

5. Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, Cap

F.34 LFN 2004.

6. Industrial Inspectorate Act Cap. I 8 LFN 2004.

7. National Office for Technology Acquisition and Promotion Act, Cap N. 62

LFN 2004.

8. Central Bank of Nigeria: Certificate of importation of capital.

GOVERNMENT AGENCIES REGULATING FOREIGN PARTICIPATION IN NIGERIA

AND THEIR FEATURES

There are basically three government agencies regulating foreign participation in

Nigeria and these are:

1. Nigerian Investment Promotion Commission (NIPC);

2. National Office of Technology Acquisition and Promotion (NOTAP); and

3. Nigeria Immigration Service.

NIGERIAN INVESTMENT PROMOTION COMMISSION

This was established in 1995 as a body corporate with perpetual succession under
the Nigerian Investment Promotion Commission (NIPC) Decree, 1995. It is now
Nigerian Investment Promotion Commission (NIPC) Act, Cap NI 17 LFN 2004. The
commission shall encourage, promote and coordinate investment in the Nigerian
economy.

An enterprise in which foreign participation is permitted must apply for registration

with the Nigerian Investment Promotion Commission (NIPC) before commencing
business in Nigeria – Section 20 of NIPC Act.
FUNCTIONS OF NIPC (Section 4 NIPC Act)

1. To be the agency of the Federal Government to coordinate and monitor all

investment promotion activities to which this Act applies;
2. Initiate and support measures which shall enhance the investment climate in
Nigeria for both Nigerian and non-Nigerian investors;
3. Promote investments in and outside Nigeria through effective promotional
means;
4. Provide and disseminate up-to-date information on incentives available to
investors;
5. Assist incoming and existing investors by providing support services;
6. Evaluate the impact of the Commission in investments in Nigeria and
recommend appropriate recommendations; and
7. Maintain liaison between investors and ministries, government departments
and agencies, institutional lenders and other authorities concerned with
investments.

Under the NIPC Act, there are certain investment promotion assurances and guides
to foreign investments in Nigeria to the effect that.

 No enterprise shall be nationalised or expropriated by any Government of

the Federation. Section 25(1) (b) NIPC Act.

 No person who owns, wholly or in part, the capital of any enterprise shall be
compelled by law to surrender his interest in the capital to any other
persons. Section 25(1) (b) NIPC Act.

 There would be no acquisition of an enterprise by the Federal Government

unless the acquisition is in National interest or for a public purpose. And in
such a situation, there shall be payment of fair and adequate compensation
without undue delay. And the person shall have the right of access to court
for the determination of his interest and the amount of compensation to
which he is entitled. Section 25(2) NIPC Act.

 There shall also be an effective dispute resolution system in accordance with

international standards. Section 25(7).

NATIONAL OFFICE FOR TECHNOLOGY ACQUISITION AND PROMOTION

(NOTAP)

Every contract or agreement entered into by any person in Nigeria with another
person outside Nigeria (foreigner) involving the transfer of foreign technology to
Nigerian partners shall be registered with the National Office for Technology
Acquisition and Promotion (NOTAP) in the prescribed manner, that is, not later than
60 days from the execution of the agreement – Section 5(2) of the National
Office of Technology Acquisition and Promotion (NOTAP) Act.

FEATURES OF NOTAP

1. Promote investments of foreign technology in and outside Nigeria;

2. Assist incoming and existing investors by providing support services; and

3. Promote investments in and outside Nigeria through effective promotional

means.

TYPES OF COMPANIES AND ENTITIES EXEMPTED FROM REGISTRATION

Section 54(1) of CAMA generally provides that a foreign company incorporated

outside Nigeria and having the intention of carrying on business in Nigeria shall
obtain incorporation as a separate entity in Nigeria for that purpose. However,
Section 56(1) of CAMA provides that a foreign company or entity may be exempted
from registration if it belongs to any of the following categories or types of
companies – MUST KNOW THESE EXCEPTIONS
a) Foreign companies (other than those specified in paragraph (d)) invited to
Nigeria by or with the approval of the Federal Government to execute any
specified individual project.
b) Foreign companies, which are in Nigeria for the execution of a specific
individual loan project on behalf of the donor country or international
organisation (UNICEF, WHO, IMF, World Bank).
c) Foreign government-owned companies engaged solely in export promotion
activities.
d) Engineering consultants and technical experts engaged on any individual
specialist project under contract with any of the governments in the
Federation or any of their agencies or with any other body or person where
the Federal Government has approved such contract.

PROCEDURE FOR INCORPORATION

i. Engage the services of a corporate lawyer; give him all relevant
instructions/information e.g. name of the company, business of company,
particulars of the foreign investor, share capital; 1st Directors, Proposed
Registered office, subscribers to Memo and Articles etc.
ii. Obtain incorporation forms.
iii. Availability and Reservation of name to be carried out online or at any CAC
office.
iv. Prepare Incorporation documents.
v. Submit 2 copies each for memo and Articles with two copies of the statement
of share capital at the Federal Board of Inland Revenue Service for stamping.
vi. File incorporation documents (stamped) at the CAC.
vii. The Certificate of Incorporation is issued by CAC.
== This is a prima facie evidence of incorporation.

EFFECT OF CARRYING ON BUSINESS WITHOUT REGISTRATION

Any foreign company which fails to comply with the requirements of S. 54 CAMA
a. shall be guilty of an offence and liable on conviction to a fine of not less than
N2,500.00
b. Every officer or agent of the company who knowingly and wilfully authorises or
permits the default or failure to comply shall, whether or not the company is also
convicted of any offence be liable on conviction to a fine of not less than N250.00
c. Where the offence is a continuing one to a further fine of N25 for every day
during which the default continues-

STEPS INVOLVED IN APPLYING TO RELEVANT GOVERNMENT AGENCIES

Section 56(2) of CAMA further provides that application for exemption is to be

made to the Secretary to the Federal Government setting out eight (8) specified
particulars.

The application, which must be in writing must set out the following particulars –

a) The name and place of business of the foreign company outside Nigeria;

b) The name and place of business or the proposed name and place of business
of the foreign company in Nigeria;

c) The name and address of each director, partner, or other principal officer of
the foreign company;

d) A certified copy of the charter, statutes or memorandum and articles of

association of the company or other instrument constituting or defining the
constitution of the company, and if the instrument is not written in English
language, a certified translation thereof;

e) The names and addresses of some one or persons resident in Nigeria

authorised to accept on behalf of the foreign company service of process and
any notices required to be served on the company;

f) The business or proposed business in Nigeria, of the foreign company and

the duration of such business.

g) The particulars of any project previously carried out by the company as an

exempt company; and

h) Such other particulars as may be required by the Secretary to the Federal

Government.
Section 56(3) CAMA: Where the President upon the receipt of an application for
exemption is of the opinion that the circumstances are such as to render it expedient
that such an exemption should be granted, the President may, subject to such
conditions as it may prescribe, exempt the foreign company from the obligations
imposed by or under this Act.

Section 56(5) CAMA: The President may at any time revoke any exemption granted
to any company if it is of the opinion that the company has contravened any
provision of this Act or has failed to fulfil any condition contained in the exemption
order or for any other good or sufficient reason.

Both the grant of exemption and any revocation are required to be published in the
Gazette – section 56(6) of CAMA.

STATUS OF AN EXEMPTED COMPANY

 An Exempted Foreign Company has the status of an UNREGISTERED
COMPANY.S. 58 CAMA. The effect is that the company is exempted from
payment of all company taxes.
 An exemption is not a license to disregard any enactment or rule of law except
as stated in Ss. 55, 56, 57 & 58.
 Thus, an exempted company must deliver/file Annual Reports with the CAC in
the prescribed form- S.57

LEGAL PERSONALITY OF FOREIGN COMPANIES

An unregistered foreign company can sue and be sued in Nigeria where liable
(either in its corporate name or that of its agent.-RITZ PUMEM FABRIK & CO KG
V.TECHNO CONTINENTAL ENGINEERING NIG. LTD where the plaintiff was a
German company which supplied machinery to the Nigeria company which refused
to pay.
WATANMAL (SINGAPORE PTE) V.LIZ OLOFIN CO. LTD ;
SECTION 60(b) CAMA

DIFFERENCE BETWEEN FOREIGN DIRECT INVESTMENTS AND FOREIGN

PORTFOLIO INVESTMENT (Modes of participation)

Foreign Direct Investment (FDI) is a measure of foreign ownership of productive

assets, such as factories, mines and land. Increasing foreign investment can be used
as one measure of growing economic globalisation. Foreigners take part in business
either by takeover of existing Nigerian companies, merger (Stanbic IBTC - Stanbic
was incorporated in South Africa and IBTC was a Nigerian Bank or
forming/incorporating companies in Nigeria).

While Foreign Portfolio Investment (FPI), is the entry of funds into a country
where foreigners make purchases in the country’s stock and bond markets. Thus, if
an alien wants to invest in the shares of a company, whether public or private, he
can do so through Foreign Portfolio Investment.
Any acquisition that is not equal to a takeover is an FPI. The SEC is mandated to
maintain register (s8 ISA) of FDI and FPI.

CONDITIONS FOR FOREIGN COMPANIES TO OPERATE IN NIGERIA

 Aliens are competent: section 20 CAMA
 Foreign companies must be registered in Nigeria: s54 CAMA. No company
can do business in Nigeria unless registered (there must be a Nigerian
address to accept correspondence)
 Conditions for exemption from registration: s56 CAMA
 Situating your application under one of the heads of exemption
 Drafting exemption letter and annexures prescribed in s56(2)

Relevant approvals
 Certificate of incorporation from CAC
 Business permit
 Expatriate quota: authorisation of foreigners to come and work in the
country particularly in management position.
 Residence permit
 CERPAC: A foreigner who is granted cable visa to visit Nigeria WITHIN
THREE MONTHS on Subject to Regularisation (STR) is to regularise the
visa by changing his status from that of a visitor to that of a Resident.
Application is by letters (2 copies) accompanied by a valid passport of the
alien. This gives the alien a CERPAC- Combined Expatriate Residence
Permit and Alien Card. CERPAC is compulsory for expatriates staying in
Nigeria for more than 56 days. Advantage of CERPAC is that everything is
together (residence, expatriate quota,
 Visa

PERSONS EXEMPTED FROM HOLDING CERPAC

a. Accredited diplomats
b. Children below 15 years of age who live with their parents unless the
parents specifically request the card.
c. ECOWAS citizens: NB: if staying for business beyond 90 days in any ECOWAS
state, you need some authorisation

NB: Registration of foreign share holding with SEC for record purposes. No need to
get a permit to allow foreigners to hold shares in the company

STEPS TOWARDS ESTABLISHING A NIGERIAN COMPANY WITH FOREIGN

DIRECT PARTICIPATION
1. Obtain from the Nigerian embassy, a cable visa subject to regularisation for
owners and officers of the company.
2. Securing an address in Nigeria for service of documents and other pre-
formation of the company.-
3. Prepare and execute Joint Venture agreement and other pre-incorporation
contracts if in partnership with Nigerians.
4. Incorporate the company with CAC and obtain original certificate in
Incorporation and other documents.
5. Importation of capital through an Authorised Dealer (i.e. Approved Bank and
obtain certificate of capital importation issued by CBN-S.12&13
6. Register the company with Nigerian Investment Promotion Commission-S.19
NIPC ACT
7. Apply to the Securities and Exchange Commission (SEC) for registration of
interest of foreigner in the shares of the company
8. Obtain relevant permits from the relevant Regulatory Agencies.
9. Apply to obtain relevant incentives and reliefs available for foreign investors
in Nigeria.

STEPS TOWARDS ACQUISITION OF SHARES OF A NIGERIAN COMPANY BY

FOREIGN INVESTOR (FPI)
1. Application for allotment of shares by the Foreign Investor or a capital
market operator to the Nigeria Company directly at primary market (during
public offer) or through the stock broker for shares quoted at the Stock
Exchange (Secondary market) or private placements- Rule 406&410 SEC
rules 2013
2. Approval of Allotment of the shares to the foreign investor by the Board of
Directors, subject to requisite approvals.
3. Importation of the capital through an authorised dealer (Approved Bank)
and obtain certificate of capital importation issued by CBN, and pay for the
shares - RULE 408 SEC RULES 2013
4. Obtain share certificates from the company’s Registrar, enlist the shares in
the electronic stock holding at the Central Securities Clearing Systems Ltd
(CSCS) and obtain Statements of Stock holding from the CSCS.
5. Apply to the Securities and Exchange Commission (SEC) for registration of
security IN FORM SEC 6F accompanied by prescribed fee-RULE 415 SEC
RULES 2013.
FOREIGN PARTICIPATION UNDER INVESTMENTS AND SECURITIES ACT
The Securities and Exchange Commission (SEC) keeps and maintains separate
register for:
i. Foreign Direct Investment
ii. Foreign Portfolio Investments
All securities except those of private companies shall be registered with SEC-rule
406 sec rules 2013.
NOTE-RULE 416 SEC RULES 2013-EXEMPTION in event of reciprocal
agreements with international organisation of securities commission
(I.O.S.C.O)members – for exemption of registration of securities

IMPORTATION OF CAPITAL BY FOREIGN INVESTORS.

MODES OF IMPORTATION OF FOREIGN CAPITAL
 After a foreign company /investor have obtained registration with the NIPC, its
capital can be imported by any of the following:
1. Importation of equipment/ raw materials
2. Importation of cash
3. Importation of cash indirectly through the Debt-Equity conversion programme
(DMO)

IMPORTATION OF CAPITAL THROUGH FOREIGN EXCHANGE (MONITORING &

MISCELLANEOUS PROVISIONS) ACT
A foreign investor wishing to buy shares or import foreign capital/loan for doing
business in Nigeria should freely import the capital through an Authorised Dealer,
which currency is convertible into the Naira at the official foreign exchange market.-
S. 12, 13, 15 Foreign exchange (monitoring &miscellaneous provisions Act)

PROCEDURE
 This can be done by buying Nigeria Debt instrument abroad from any Stock
Exchange at a discount rate.
 A Certificate of Capital Importation will be issued to the Foreigner.
 The foreign company/investor will then present the CCI-Certificate of Capital
Importation to the Central Bank of Nigeria through authorised dealers usually
Banks.
 The CBN will pay the face value of the Certificate of Capital Importation in naira.

ADVANTAGES OF USING THE CERTIFICATE OF CAPITAL IMPORTATION (CCI)

1. It enables the opening of foreign currency domiciliary accounts with Banks in
Nigeria
2. Open a special non – resident Naira Account.
3. Buy shares in Nigerian companies out of the naira account.
4. It aids repatriation of capital, dividends and incomes without restrictions at
autonomous market rates minus taxes.; Rule 408(2)a-d SEC Rules 2013.
5. Unconditional transferability of funds through an authorised dealer in freely
convertible currency S. 24 of the NIPC Act
6. The company will be exempted from money laundering investigations.
7. If the purpose is to finance foreign loan; the company will be allowed to
purchase foreign currency at the official rate for servicing of the foreign loan.

DOCUMENTS TO BE SUBMITTED TO THE RELEVANT GOVERNMENT AGENCIES

SEEKING RELIEFS AND APPROVAL ON BEHALF OF COMPANIES

PERMITS/APPROVALS

1. BUSINESS PERMITS – Section 8(1)(b) Immigration Act provides that no

person other than a Nigerian citizen shall on his own account or in
partnership with any other person practice a profession or establish or take
 over any trade or business whatsoever or register or take over any company
with limited liability for any such purpose without the written consent of the
Minister of Internal Affairs. This is the operational licence granted to an
expatriate to enable him carry on business activities in Nigeria. The consent
of the Minister of Internal Affairs is issued in the form of Business Permit.
This applies only to wholly owned company and not one mixed with
Nigerians and non-Nigerians. Note that the permit is now issued through
the NIPC.
2. EXPATRIATE QUOTA – 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
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”. Usually businesses with
capitalisation of N15million and above have automatic quota for two
positions while businesses with capitalisation of N30million and above have
automatic quota for four positions, and all others are considered on merit. A
work permit is granted on the application of the company, in favour of the
expatriate employees to fill the expatriate quota. Section 34(1) Immigration
Act. The application is made through NIPC to the Ministry of Interior

There are two types of expatriate quotas viz:

(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 number of years granted in
the first instance is five (5) years renewable for a further period of
two years.

It should be noted 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 – Oil Fields
Supply Centre Ltd v. Johnson (1987) 18 NSCC 725.see also Oliver v
Dangote Industries Ltd (2009) 10 NWLR (pt 1150) 467.
Application for expatriate quota
S. 34 IMMIGRATION ACT
Made on immigration form T/2 accompanied with
i. CTC of memorandum and articles of association
ii. Form CAC 2 and 7 (share capital and directors)
iii. Evidence of non availability of expertise in the country
iv. A copy of training programme or personnel policy of the company
(incorporating succession schedule)
v. Particulars of proposed director
 vi. Job title designations of expatriate quota positions and required work and
academic experience.

3. RESIDENCE PERMIT – Every alien may enter Nigeria and stay therein for
three months without a residence visa (Tourist Visa). However, any person
who is not a citizen of Nigeria who desires to enter Nigeria for purpose of
residence (that is, beyond three months) must 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 (two copies) 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.

RELIEFS AND INCENTIVES

TAX REBATE AND CONCESSION
A wide range of incentives and reliefs have been designed by the Federal
government to boost industrial and agricultural production for export. These are:
1. PIONEER STATUS – Tax exemption is granted for a period of between 5-7
years: the Industrial Development (Income Tax Relief) Act Cap. 17 LFN 2004.
To qualify,
a) The investment must be in respect of industry or products designated as
pioneer, for example, agro-allied or export goods and solid minerals i.e.
sectors where Nigeria is lacking – pioneer products as outlined by the
NIPC
b) Investment of N500 million
c) The application for pioneer status must be submitted within one year the
applicant starts commercial production.
d) Purchase and complete the NIPC Form I. The completed form should be
returned with original purchase receipt, accompanied with evidence of
 Acquisition of landed property and installation of requisite
equipment
 Development carried out at factory site, and that
 The industry is not being carried out in Nigeria on a scale suitable
to the economic development and requirements of Nigeria or at all
or that there are favourable prospects for further developments in
Nigeria of such industry
Start with desk officer in OSIC (NIPC) to make enquiries. Inspectorate Division of the
Ministry of Trade and Investment (look at where the acquisitions are, the land
acquired, what equipment were acquired: manufacturing and otherwise such as
generators, borehole etc.). If it is up to the threshold, you are given a provisional
certificate based on your proposal. Also you need to make an inspection on how long
it will take to recoup your capital investment (Pioneer status is to help to defray
your capital expenditure and while trying to recoup capital expenditure, company is
exempted from company tax). Then they will come for actual inspection. If after the
time you stated for capital recoup, you can apply for extension but the whole time
cannot be more than 5 years under the law. In extreme circumstances, a further
2years will be granted.
2. TAX RELIEF ON DOUBLE TAXATION TREATY: This relief is available where
a Nigerian company is liable to Tax in a Commonwealth or other country
having double taxation agreement with Nigeria. Section 33 of the
Companies Income Tax (CITA)(Amendment) Act No. 11 2007. Also there
is relief from payment of double taxation if there are bilateral agreements
with other countries – Sections 34 and 35 of the CIT Act. For example the
Double Taxation Relief Treaties between Nigeria and the Governments of
United Kingdom, Northern Ireland, Canada, France, Pakistan, Romania and
Belgium.
3. TAX RELIEF ON FOREIGN LOAN: S. 11(1) CITA provides for tax
exemption/relief on foreign loan
 The loan must not be less than N150,000
 The loan must be granted by a foreign company to any person
carrying on trade, business, profession in Nigeria.
 If the loan is to be repaid after 10 years, the interest is exempted
from tax.
 If the loan is to be repaid between 5 – 10 years, then the tax the
interest accruing should be half of the chargeable tax must be
made within A MAXIMUM OF TWO years from the date of
exportation
4. INVESTMENT TAX CREDIT: this is for Research and Development carried
out in Nigeria. Sections 20 and 22(3) of the CIT Act: companies engaged in
Research and Development activities for commercialisation are allowed 20%
investment tax credit on their qualifying expenditure –Section 22(3) of
Companies Income Tax Act (as amended by Finance (Miscellaneous
Taxation Provisions) (No.3) Decree No. 32, 1966). Section 38(1) CITA
states that a company which engages wholly in the fabrication of spare parts
for local consumption and export shall be allowed 25% investment tax credit
on its qualifying capital expenditure. A company which purchases a locally
manufactured plant, machinery or equipment for use in its business shall be
allowed 15% investment tax credit: s38(2) CITA
Expenses incurred on research and development including the amount paid
to the national Science and Technology Fund are allowed as deductible
expenses – Section 20 of Companies Income Tax Act (as amended by
Finance (Miscellaneous Taxation (Amendment) Decree No.3, 1993)
5. RURAL INVESTMENT ALLOWANCE – Section 28(b) of the Companies
Income Tax Act, (as amended by Finance (Miscellaneous) Taxation
(Amendment) Decree No.3 of 1993). section 34(1) CITA which provides
graduated allowances for capital expenditure on such facilities as electricity,
water, tarred road and telephone located at least 20 kilometres away from
such facilities provided by the government. The rural investment allowance
 is tied to the profits of the year in which the date of completion of the
investment falls and should not be carried over to the next year
6. TAX EXEMPTION ON PROFIT UNDER THE COMPANIES INCOME TAX
(CIT) ACT, CAP 60 LFN, 1990 – Profit exempted from taxation- section 19
of the CIT Act section 23(1) CITA list corporate bodies exempt from taxation
e.g. co-operative societies, religious/charitable, etc. organisation, sporting
activities. Similarly the profits of any Nigerian company in respect of goods
exported from Nigeria are exempted from taxation, provided that the
proceeds from such export are repatriated to Nigeria and are used
exclusively for the purchase of' raw materials, plants, equipment and spare
parts – Finance (Miscellaneous Taxation Provisions) (No.3) Decree No.
32, 1996.
Also to enjoy exemption from taxation is the profit of a company for the first
six thousand naira (N6,000.00) – Section 29 of the CIT Act.
It should be noted that there is also tax exemption for foreign loans not less
than One hundred and fifty thousand naira (N150,000) granted to a Nigerian
company when it is not repayable within 10 years – 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 through the CBN or any other authorised bank.
Bank loans granted for manufacture of goods for export are also tax-free. It
should however be noted that stocks and shares of any description have been
removed from the list of assets liable to Capital Gains Tax (CGT).
7. DUTY DRAWBACK AND SUSPENSION SCHEME – NB this is to encourage
importation of raw materials in Nigeria to be used in manufacturing goods
for export. 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 by companies in manufacturing on:
a) Raw materials including packaging materials used in manufacturing
goods that are exported - 100% of import duty.
b) Paper used for the manufacture of goods supplied for educational
purposes to educational establishments recognised by the Federal
Adviser on Education 100% of import duty.
c) Goods exported in the same state as that in which they were imported
– Customs and Excise Management Act Cap. C. 45 LFN 2004 and
Drawback (Customs) Regulations 1959.
8. EXPORT INCENTIVES under the Export (Incentives and Miscellaneous
Provisions) Act Cap. E. 19, LFN 2004.
a. Incentives to a company engaged in the utilisation of associated gas
under the Petroleum Profits Tax Act Cap. P. 13 LFN 2004 (as amended
by Finance (Miscellaneous Taxation Provisions) Decree No. 18, 1998).
 b. Investment in the Export Processing Zone. Section 28(3) of the
Companies Income Tax Act, (as amended by Finance
(Miscellaneous Taxation Provisions) (No.3) Decree No. 32, 1996)
the profits or gain of a 100% export oriented undertaking established
within and outside an Export Free Zone shall be exempted from tax
for the first three consecutive assessment years provided, among
other conditions, it manufactures, produces and exports articles
during the relevant year and the export proceeds from 75% of its
turnover – Epe EPZ, Kano EPZ, Calabar EPZ
c. Investment in economically disadvantaged areas - 100% tax relief for
seven years.
d. Intensive local raw materials utilisation.
e. Investment in solid minerals - A new company going into mining of
solid minerals shall be exempted from tax for the first three years of
its operation, which maybe extended for another further period of
two years – section 22(2) of Minerals and Mining Act Cap. M. 12
LFN 2004. Section 18 has to do with capital allowances, while section
19 for exemption from customs duties and other benefits.
9. ECOWAS TRADE LIBERALIZATION SCHEME: this is designed for trade
liberalization aimed towards the integration among member countries of the
ECOWAS.
10. Investment in Agriculture, Education, Research and Development
11. Statutory undertaking on non-indigenisation: s25 NIPC Act
12. Fiscal Incentives – servicing foreign loan/repatriation of profit and
capital/procuring foreign exchange from the CBN/capital importation
without limit. Foreign Exchange (Monitoring & Miscellaneous Provisions) Act
to bring in such money through authorised dealer and a certificate of capital
importation (no limit on how much he can bring in to the country). Servicing
the foreign loan – can obtain foreign currency from the CBN at official rate.
Can repatriate the profit from such investment to the foreign country. Can
repatriate your capital without any restriction
13. Incentives under the LOCAL CONTENT ACT 2011 in the Oil and gas sector
(Nigerian artisans and technicians to be used). Also the Petroleum
Industry Bill
14. LABOUR INTENSIVE MODE OF PRODUCTION
 Tax concession is granted to industries with high labour/capital ratio.
 These are industries with plants, equipment and machinery, which essentially
are operated with minimal automation.
 The rate of tax concession here is graduated, in that a company employing 1000
persons or more enjoy 15% tax concession, an industry employing 200 persons
will enjoy 7%, 100 persons enjoy 6% etc.-
15. CAMA: Bonus for filing of Annual Returns on time: 1% bonus is allowed
for companies complying with early payment of tax by FIRS.

CHECKLIST OF DOCUMENTS TO BE ATTACHED IN SUPPORT OF APPLICATION

TO RELEVANT REGULATORY AGENCIES
DOCUMENTS REQUIRED FOR APPLICATION WITH NIGERIAN INVESTMENT
PROMOTION COMMISSION (NIPC)

1. NIPC Form 1

2. Receipt of purchase of NIPC Form 1

3. Payment of a fee of five thousand naira (N5,000).

4. Joint venture agreement (if any)

5. Certified True Copy of the memorandum of association and article of

association of the company.

6. Certificate of Incorporation

7. Tax clearance certificate

8. Certificate of capital importation

9. Evidence of acquisition of business premises

10. Feasibility study report (if any)

11. Profile of expatriate personnel showing their qualifications, experience,

positions to be held in the company and duration of each quota position.

PROCEDURE FOR REGISTRATION WITH NIPC

1. The company seeking registration with NIPC must first obtain the NIPC Form
1. A non refundable deposit of ten thousand naira (N10,000) must be paid
and receipt obtained.

2. The form will be completed by the company and submitted at NIPC

Headquarters in Abuja or State Ministries of Trade with the following:

a) Two copies of receipt of payment of N10,000

b) Certificate of Incorporation

c) The memorandum and articles of association of the company.

d) Receipt of payment of stamp duties on the authorised share capital of the

company as at the date of the application. NB -N10 million is the
minimum share capital

e) Tax clearance certificate of the applicant company.

f) Partnership (Joint Venture) Agreement unless 100% foreign ownership

 g) Feasibility Report and Project Implementation Program of the company
for its proposed business.

h) Title deeds of land evidencing firm commitment to acquire requisite

business premises for the company’s operations.

i) Training program for Nigerian Staff or personnel policy of the company,

incorporating management succession schedule for qualified Nigerians.

j) CTC of FORM CAC 2 & 7 i.e. statement of share capital and return of
allotment and particulars of Directors including non – resident directors
“NRD” i.e. Names, addresses, nationalities and occupations of the
proposed Directors of the Company including non-resident directors
which should be marked “NRD”.

k) Job title designations of expatriate quota positions required, and the

academic and working experience required for the occupants of such
positions.

l) Copies of Information Brochure on the foreign partner as testimony of

Int’l expertise and credibility in the line of business.

m) A copy of certificate of capital importation for wholly foreign companies.

n) After the submission of the NIPC Form 1, the Commission will register
the applicant company WITHIN 14 DAYS OF the receipt of the
application.

DOCUMENTS REQUIRED FOR APPLICATION WITH IMMIGRATION (MINISTRY

OF INTERNAL AFFAIRS)

1. Completed Immigration Form T/1.

2. Certificate of incorporation.

3. Certified True Copies of particulars of directors, share allotment, and

memorandum and articles of association of the company.

4. Current Tax Certificate.

5. Rent, Lease or Certificate of Occupancy for operating premises.

6. Evidence of imported machineries with proforma invoices, Form M, etc., or

evidence of work on hand with value attached to the contract.

7. Functional feasibility report.

8. Notary public confirmatory letter of office or site location.

 9. Proposed salaries of expatriates to be received, designation and qualification.

10. Training programme for Nigerians under studies.

11. Audit account.

HOW TO APPLY FOR NOTAP REGISTRATION

1. Completing a NOTAP Prescribed Form NOIP 1-84 with CTC of the contract,
company documents and related information. The application form must be
accompanied with the following documents:
i. Application fee
ii. Memorandum and articles of association of the company (certified true
copies) and certificate of incorporation
iii. Two certified true copies of the agreement to be registered
iv. Two copies of duly completed questionnaire (revised NOIP 2-84)
v. A copy of the relevant feasibility study
vi. Annual audited accounts (if not a new company) and if it is a new company, a
copy of the statement of affairs of the company accompanied with the
certificate of incorporation
Upon submission, NOTAP vets the agreement to determine its conformity with its
evaluation criteria. If the agreement is approved, NOTAP computes and advises the
applicant on the fees payable as registration fees for the use of the technology and
the duration approved for the agreement. The NOTAP Certificate of Approval is
usually issued within a period of 2 weeks (max – 6months) of the application and
valid for a period of btw 1-10 years.

It is the obligation of both the transferor and transferee of such technology to

register the agreement. The registration is expected to be done within 60 days of
execution or conclusion of the agreement. Non-registration with NOTAP does not
render the contract void, only that repatriation of fees, profits, royalties through
CBN is disallowed unless a certificate of approval of the registration with NOTAP
accompanies the application to repatriate in respect of such contract: s7 NOTAP Act.
Registrable contracts/agreements are listed in s4(d) NOTAP Act:
i. Use of trade – marks
ii. Right to use patented inventions
iii. The supply of technical expertise.
iv. The supply of basic or detailed engineering drawing
v. The supply of machinery and plant.
vi. The provision of operating staff or managerial assistance and training of
personnel.
vii. Contract involving transfer of technology to Nigerian partners

Refusal to register by NOTAP

The Director of NOTAP may refuse registration (s6(2) NOTAP Act) on several
grounds. The key grounds are:
  If the technology is available in Nigeria
 Where the contract involves the transfer of obsolete technology
 Where the price is not commensurate with the technology to be acquired
 Where the transferee is obliged to submit to foreign jurisdiction in any
controversy arising for decision concerning the interpretation or
enforcement in Nigeria of any such contract.

DRAFT APPLICATION FOR EXEMPTION

RT BRAZIL LIMITED
NO 5 DECAPRIO ROAD,RIO DE JAINEIRO,BRAZIL
rtbrazil@yahoo.com.+234-666-556-9990
OUR REF:………….
DATE:

The President
Federal Republic of Nigeria

Through:
The Secretary to the Federal Government of Nigeria,
Office of the Federal Government
Abuja

Dear Sir,
APPLICATION FOR EXEMPTION FROM REGISTRATION AS A
NIGERIAN COMPANY PURSUANT TO SECTION 56(1) AND 56(2) OF THE
COMPANIES AND ALLIED MATTERS ACT CAP C20 LAWS OF THE FEDERATION OF
NIGERIA 2004
We the above named foreign company having been invited to Nigeria by the Federal
Government of Nigeria to execute a solar energy project hereby apply for exemption
from incorporation as a Nigerian company.

Please find attached the necessary documents as stipulated by section 56 (2) of the
Companies and Allied Matters Act for your kind consideration.
Thank you

Yours faithfully,

Ndu Gabriella
Company Secretary.
FOR:RT BRAZIL ENERGY INC
ENCL
1. Particulars of RT BRAZIL as the Parent company outside Nigeria.
2. Proposed name and place of business of our company in Nigeria
3. Particulars of the name and address of each Director, Partner or Principal
officers of RT BRAZIL
 4. Particulars of persons resident in Nigeria authorised to accept services of any
process/ Notice on the foreign company
5. Duration and proposed business of RT BRAZIL in Nigeria
6. A certified copy of the charter/Memorandum and Articles of Association of
XLING Refinery, or a certified translation of them if not written in English.
7. Particulars of any project previously carried out by RT BRAZIL as an exempted
foreign company.

B-APPLICATION LETTER FOR RELIEFS/APPROVALS TO NIPC (USE CASE STUDY

1)

NDU CHAMBERS
675 JAMB ROAD, BWARI ABUJA
ndug@yahoo.com,0989-9009-098
OUR REF
DAT
E:
The Director General
Nigerian Investment and Promotion Commission
Maitaima,
Abuja

Dear Sir,
APPLICATION FOR RELIEFS/APPROVALS FOR GOLD PALMS LTD
We write as solicitors of Gold palms Ltd (“our client”) on whose instructions we
make this application. Our client is a private company limited by shares with RC
NO:34435 with registered office at No 5 XYZ lane, Benin city, Edo state incorporated
under Companies and allied matters act, cap C20 LFN 2004

Two aliens, Mr Abdullah IbnSeikh and Mr Abubakri Amin are undertaking different
values of share capital in the company. Mr Abdullah ibnseikh seeks to bring in
100,000 Euros as a loan from a Malaysian bank to expand the company’s capital
base.

We therefore apply for the following reliefs;

1. Rural investment allowance under CITA, CAP C21,LFN 2004.
2. Repatriation of capital through an authorised dealer
3. Tax relief of interest on foreign loans

Yours faithfully,
Ndu Gabriella
FOR: NDU CHAMBERS
NOTE-we may be asked to draft a letter seeking approvals from any of the
organisation
1) List 10 laws and their relevance and
  a) Companies and Allied Matters Act (CAMA), Cap C20 LFN 2004 –
incorporation of Nigerian companies
 b) Nigerian Investment Promotion Commission Act, CAP NII7,LFN
2004: showcases investment opportunities in Nigeria and how to
invest in all sectors of the country. Registers a foreign company after
incorporation in Nigeria and before start of business
 c) Investment Securities Act (ISA) 2007: Regulates the registration of
securities, records of FPI and FDI-s.8, regulation of capital market
 d) Immigration Act: Regulates the entry of aliens into the country.
Supervises and grants visa, Business Permits, Residence perm,
expatriate quota and work permit
 e) National Agency for Technology Acquisition Promotion Act:
Registration of technology transfer from foreigners to their partners
in Nigeria.
 f) Foreign Exchange (Monitoring & Miscellaneous Provisions) Act:
Regulates capital importation through an authorised Dealer to do
business legitimately without flouting the Money Laundering laws.
Licenses authorised capital dealer, minimum share capital and how
regularly to renew your licence. Issues Certificate of Capital
Importation
 g) Companies Income Tax Act (CITA): Regulates the taxation of
company operating in Nigeria.
 h) Customs & Excise Management Act: Regulates importation and
exportation of goods. Imposes import & export duties
 i) Industrial Inspectorate Act: Provides incentives and reliefs for those
investing in the manufacturing sector.
 j) Constitution of Federal Republic of Nigeria: Regulates every activity.
Prohibition of compulsory acquisition without prompt compensation:
s44(1) CFRN
And the protection of the right to own property (whether a Nigerian
or alien)
 k) Central Bank Act
2) 10 regulatory bodies on foreign participation in Nigerian business
a) Corporate Affairs Commission
b) Nigerian Investments Promotion Commission (NIPC), One-stop
Investment centre
c) Securities & Exchange Commission
d) Nigerian Immigration Service
e) Ministry of Internal Affairs
f) Central Bank of Nigeria
g) Federal Inland Revenue Service
h) Ministry of Trade & Investment
i) Board of Customs
j) National Agency for Technology Acquisition & Promotion
k) Civil Aviation Authority
3) Highlight the procedure for foreign direct investment in Nigeria
  Obtain from the Nigerian embassy, a cable visa subject to
regularisation for owners and officers of the company.
 Securing an address in Nigeria for service of documents and other
pre-formation of the company.-
 Prepare and execute Joint Venture agreement and other pre-
incorporation contracts if in partnership with Nigerians.
 Incorporate the company with CAC and obtain original certificate in
Incorporation and other documents.
 Importation of capital through an Authorised Dealer (i.e. Approved
Bank and obtain certificate of capital importation issued by CBN.-
S.12&13
 Register the company with Nigerian Investment Promotion
Commission-S.19 NIPC ACT
 Apply to the Securities and Exchange Commission (SEC) for
registration of interest of foreigner in the shares of the company
 Obtain relevant permits from the relevant Regulatory Agencies e.g.
business permit, expatriate quota, work permits
 Apply to obtain relevant incentives and reliefs available for foreign
investors in Nigeria – pioneer status, duty drawbacks, incentives for
employing fresh graduates without experience
Note there are laws attracting foreigners to the country even before they commence
business (s17, 18 NIPC Act: guarantees to foreigners – no expropriation
(Nationalisation of business and if there is, then adequate compensation and this
can be questioned in CT and dispute resolved by arbitration which are not subject to
national laws, can repatriate profits and capital
4) Highlight the procedure for foreign portfolio investment in Nigeria
 Application for allotment of shares by the Foreign Investor or a capital
market operator to the Nigeria Company directly at primary market
(during public offer) or through the stock broker for shares quoted
at the Stock Exchange (Secondary market) or private placements-
Rule 406&410 SEC rules 2013
 Approval of Allotment of the shares to the foreign investor by the
Board of Directors of the Nigerian company, subject to requisite
approvals.
 Importation of the capital through an authorised dealer (Approved
Bank) and obtain certificate of capital importation issued by CBN, and
pay for the shares.- RULE 408 SEC RULES 2013
 Obtain share certificates from the company’s Registrar, enlist the
shares in the electronic stock holding at the Central Securities
Clearing Systems Ltd (CSCS) and obtain Statements of Stock
holding from the CSCS.
 Apply to the Securities and Exchange Commission (SEC) for
registration of security IN FORM SEC 6F accompanied by prescribed
fee-RULE 415 SEC RULES 2013.
5) Explain the relevant approvals/permits that foreigners intending to do
business in Nigeria should obtain
  Business permit: licence to do business in Nigeria
 Expatriate quota: given to the company to allow it to employ foreign
personnel especially to positions of management
 Residence Permit: permit for a foreigner to be employed in Nigeria
 CERPAC called the Combined Expatriate Residence Permit and Alien
Card (combing expatriate and residence permit)
 Work permit
6) Highlight the fiscal incentives available for foreign companies intending to
bring in foreign loan capital for business
 Foreign Exchange (Monitoring & miscellaneous Provisions) Act to
bring in such money through authorised dealer and a certificate of
capital importation (no limit on how much he can bring in to the
country).
 Servicing the foreign loan – can obtain foreign currency from the CBN
at official rate.
 Can repatriate the profit from such investment to the foreign country.
Can repatriate your capital totally less tax without any restriction
 Certain tax exemptions and tax reliefs
7) Supposing that a foreign company has been invited by Bwari Area Council
with the consent of the Federal government to partner with the Council in
the sale of computers and laptops to Bwari residents of Abuja, what will be
your advice to the company? They are not exempt from registration. Thus my
go to CAC to incorporate the company.
NB: even where a company has been granted exemption in respect of one project.
The exemption does not extend to any other project.
8) Honda Japan Incorporated, a leading hydroelectricity facilitation company
based in Tokyo, Japan has been invited with the consent of the Federal
government of Nigeria by the Kogi State government to help in the
construction of an ultra-modern hydroelectric dam on River Kogi in Lokoja,
Kogi State. You have been consulted by the representatives of the company in
Nigeria to explore the possibility of executing the project without
incorporation in Nigeria. Advise the company and prepare the relevant
application if considered necessary.

Advice:
Section 20(4) CAMA (aliens can do business sin Nigeria when they have complied
with the necessary law). Under s54 Companies and Allied Matters Act every foreign
business must be registered (incorporated) in Nigeria to do business in Nigeria.
However, under s56(1) CAMA there are exceptions to do this rule. Honda Japan
Incorporated will fall under the exceptions as it is a foreign company that has been
invited into Nigeria with the approval of the Federal government to execute a
specified individual project i.e. the construction of an ultra-modern hydroelectric
dam on River Kogi in Lokoja. However, an application for this exemption will have
to be made to the Secretary of the Federal Republic of Nigeria which will include the
particulars listed in s56(2) CAMA
 COMPOS MENTIS CHAMBERS
NO 1 COMPOS MENTIS BOULEVARD, AREA 11, ABUJA
e.dafeakpos@hotmail.com
+234-666-556-9990
DATE: 15TH JANUARY 2015

The President
Federal Republic of Nigeria
Through:
The Secretary
Government of the Federation of
Nigeria

Dear Sir,
APPLICATION FOR EXEMPTION FROM REGISTRATION AS A
NIGERIAN COMPANY PURSUANT TO SECTION 56(1) COMPANIES AND ALLIED
MATTERS ACT CAP C20 LAWS OF THE FEDERATION OF NIGERIA, 2004
We, the solicitors are writing on behalf of Honda Japan Incorporated. We are
applying for an exemption for Honda Japan Inc, from incorporation as a Nigerian
company, a company duly registered under the Japanese law and carrying on the
business of building hydroelectric dams. This exemption is brought pursuant to
s56(1) CAMA, the company having been invited to Nigeria with the approval of the
Federal Government of Nigeria to build an ultra-modern hydroelectric dam on River
Kogi, Lokoja, Kogi State.

Honda Japan Incorporated is the parent company registered under the laws of Japan
with registration number HA/201/456 and its registered address as No 5 Carpo
Road, Tokyo, Japan. In Nigeria, Honda Japan will operate as Honda Nigeria for the
purposes of carrying out this project aforementioned The managing director of the
company will be Mr Ying Yang of No 10 Bakoe Close, Tokyo Japan, the company
secretary is Ms Yanyka Blair of No 23 Classical Drive, Tokyo Japan. Mr Jide Kosoko
of No 53 Yinka Close, Lokoja, Kogi State is the other director of the company and he
is authorised to accept services of any notice on the company.

Honda Nigeria intends to complete the hydroelectric dam within a year of

commencement of the project. The estimated start date of the project is 1 st June
2015 and therefore the company should have finished the project by 1 st June 2016.
A certified copy of the memorandum of association and articles of association of
HONDA JAPAN INCORPORATED including a certified translation of these documents
are attached to this letter. In addition, the particulars of similar hydroelectric dams
built in Hong Kong, China and Taiwan are attached to document as well as Two
Japanese National awards won by Honda Japan International for its impressive
work in hydroelectricity

Thank you for your consideration.

Yours faithfully,
signature
Sandra Bullock
FOR: Bullock & Co Chambers

ENCLS:
1. A certified copy of the Memorandum of association and Articles of Association of
HONDA JAPAN INCORPORATED including a certified translation of these documents
2. Particulars of the hydroelectric dams built in Hong Kong, China and Taiwan
3.Certified True Copies of the National awards won for the leading work done by
HONDA JAPAN INCORPORATED in hydroelectricity

NNDMRBPP – NEVER NEVER DOES MAMA REPLY BOSE PREMATURELY

WEEK 9
POST-INCORPORATION MATTERS
This refers to the transactions that are subsequent to incorporation. There include
preliminary matters before commencement of business and corporate searches.
PRELIMINARY MATTERS BEFORE COMMENCEMENT OF BUSINESS
A company upon incorporation has to package itself before commencement of
business by certain actions some of which are required by law and hence must be
complied with as of necessity. Two of such basic requirements are publication of
name and statutory books.
PUBLICATION OF NAME
This can be found under Section 548(1) of the Companies and Allied Matters Act
(CAMA) Cap. C20, LFN 2004.
Section 548 provides thus:
(1) Every company, after incorporation shall

(a) paint or affix, and keep painted or affixed its name and registration
number on the outside of every office or place in which its business is
carried on, in a conspicuous position, in letters easily legible;

(b) have its name engraved in legible characters on its seals; and

(c) have its name and registration number mentioned in legible characters in
all business letters of the company and in all notices, advertisements, and
other official publications of the company, and in all bills of exchange,
promissory notes, endorsements, cheques, and orders for money or
goods purporting to be signed by or on behalf of the company, and in all
bills or parcels, invoices, receipts, and letters of credit of the company.

Non-compliance with section 548 (company and its officers) will be liable to a fine
of N500 for every day that the default continues to survive and in respect of officers
of the company that allowed the name of the company to be used in any documents
etc (N500)

What the above means is that the true names and nationality of all the operators of
the company as well as the registration number of the company or business must be
published in all trade catalogues, trade circulars and business letters in legible
letters.

It is noteworthy to distinguish between corporate name and trade name. Corporate

name refers to the name with which an incorporated company is registered with the
Corporate Affairs Commission, and which the Certificate of Incorporation bears.
Trade name is the name style by which a Company conducts its affairs, that is the
usual name by which the company is known by most. Example Guaranty Trust Bank
Plc is the Corporate Name of the Bank more popularly known as GTB; FCMB for First
City Monument Bank Plc. Similarly Nigeria Bottling Company Plc is the corporate
name while Coca Cola is the trade name. See Bank of Baroda v Iyalabani Ltd
(1998) NWLR (pt 539) 600 for the distinction between corporate name and trade
name. Company can seek to protect its trade name and corporate name as company
can mount its sign-point with its trade name if it is accompanied with its
registration number. Company can go to Federal Ministry of Commerce to protect
its trade name.
The publication of name in accordance with Section 548 (1) (a)– (c) is thus in three
forms:
 Publication of name in name plate;

 Publication of name in common seal; and

 Publication of name in official documentation and bills of exchange.

The consequences of failure to comply with publication of name is that it is an

offence punishable fine of N500. Section 548 (3) CAMA. The necessity for
publication of name is aimed at identifying the true operators of the business.

STATUTORY BOOKS
These are books statutorily required to be kept by a Company preparatory to
commencement of business to be used for various purposes in the course of the
company’s business transactions. The statutory books are:
1. Register of Members – Section 83 and 84 of CAMA

2. Index of Members – Section 85 of CAMA

3. Register of Substantial Interest in Shares – Section 97 of CAMA

4. Register of Charges – Section 191 of CAMA

5. Register of Debenture Holders – Section 193 of CAMA

6. Minutes Book – Section 241 of CAMA

7. Register of Directors' Share Holdings – Section 275 of CAMA

8. Register of Directors and Secretaries – Section 292 of CAMA

9. Accounting Records – Section 331 of CAMA

MMSCDMDDA –

1. REGISTER OF MEMBERS

This is provided under Sections 83 and 84 of CAMA. The register is 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 cash or
other considerations are paid on the shares. The register must also contain the date,
the particular name of a shareholder and when he was registered as a member.
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. The names of all the members of a company must be
entered into the register of members, in fact it is not the subscription of shares that
make a person a member of a company but the entering of the name into the
register of members. This is kept in the registered office or other arranged
accessible place within Nigeria. If kept outside the Registered Office, CAC must be
notified.
2. INDEX OF MEMBERS

This is a requirement under Section 85 of CAMA. The name can be found on the
Register of Members. This is to contain a sufficient indication to enable the account
of that member in the register to be readily found. 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.
It should be noted that the index of members is only required where the
membership of the company is more than 50, in other words only for public
companies whose membership exceeds 50.

3. THE REGISTER OF SUBSTANTIAL INTEREST IN SHARES OF THE

COMPANY
This is a requirement under Section 97 of CAMA and it is required only for public
companies. The Sections requires those who acquire voting right in the annual
general meeting of a Public Company i.e. those who have up to 10 per cent and
above of the total shares to notify the Company (Section 95 CAMA) which shall in
turn notify the CAC within 14 days for registration under Section 97 CAMA. It is used
for recording acquisition of 10% unrestricted voting right in AGM of PLC singly
or combination of nominees after the company must have been notified which in
turn notifies CAC within 14 days. This is to be kept at the Registered Office or
another arranged place with Notice to CAC.

4. REGISTER OF CHARGES

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 and kept in the registered office for inspection. Section 191
& 192 of CAMA. Applicable only to Ltd and Plc
USES: It is used to keep copies of charges affecting property of the company.

5. REGISTER OF DEBENTURE HOLDERS

Section 193 of CAMA requires Companies to keep a register of the names, addresses
and particulars of the debenture holders, the principal of the debenture and the
debentures held by each of them and the terms of the issue within 30 days of
creation and 30 days of ceasing.
6. THE MINUTES BOOK

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. It should be open for inspection and copies and kept in bound books or
leaflets or in electronic storage device easily retrievable and available for inspection
within 6 hours per business day without charge, but fee is to be paid for making a
copy to be certified by the company secretary. The Minutes Book shall prima facie
be evidence of the proceedings. Sections 241 & 242 of CAMA. It is important to note
that minutes are in highlight form as opposed to record of proceedings of meetings,
the latter being near verbatim record of the events at a meeting.

7. REGISTER OF DIRECTORS’ SHAREHOLDING

This register is a must for all companies, whether private or public. It records the
shares and debentures of Directors in the company, and open for inspection to CAC
always and between 14 days before and 3 days after AGM for members and
debenture holders. Section 275 of CAMA. A separate book is not kept for subsidiary
company that is wholly owned by the holding company which, has already kept.
Important in company requiring director shareholding (i.e. a certain number of
shares to be a director)

8. REGISTER OF DIRECTORS AND SECRETARIES

This is also for all companies. It must contain the names, usual residential address,
nationality, date of birth and other particulars of other past and present Directors
and Secretaries of companies and the Company is bound to notify the CAC within 14
days of appointment and ceasing. Section 292 of CAMA.

9. ACCOUNTING RECORDS

This is also a must for all companies and it shall show and explain the transactions
of the company, that is, the financial position of the company and its assets and
liabilities sufficient to show and explain the transactions of the Company. Section
331 of CAMA

CORPORATE SEARCH

This is fast becoming an essential aspect of Corporate Law practice. It entails the
verification of the particulars of a corporate body submitted to the CAC. By a
combined reading of Sections 580, 581 and 606 CAMA, all documents filed in the
Companies Registry at the CAC are public records available for inspection and
obtaining certified true copies on the payment of prescribed fees (section 580).
Section 606: permission to inspect all documents. Corporate searches are usually
conducted at the CAC Headquarters in Abuja but in case of the searches relating to
Business Names, there are conducted at the Zonal Headquarters where Business
names are registered.

Corporate searches could be conducted for a variety of reasons including

a. Confirmation of due incorporation/registration

 b. Operation of a bank account

c. Granting of credit facilities

d. Due diligence/legal audit especially in the case of Banks – has company

complied with statutory requirements e.g. filling annual returns

e. Investigation of a company/organisation by CAC or other

Regulatory/Security agencies such as EFCC

f. Verification of corporate profile for award of contracts/projects etc.

g. Verify particulars of registered organisations

h. To obtain Certified True Copies of registered documents needed in court

proceedings

The procedure for conducting corporate search

i. Obtain and complete CAC prescribed form for search or write a formal
application to CAC

ii. Payment of search fee and fees for Certified True Copy of documents
requested for

iii. Evidence of payment of annual return up to date if application is made on

behalf of the company or any of its directors or secretary (third parties
are exempted from this)

iv. Preparation of the search report and attach the CTC of the relevant
documents received from CAC – REG 47&48 CR 2012

CHECKLIST OF CONTENTS OF CORPORATE SEARCH REPORT

1. Client’s Name and address: ……………………………………………………………………….

2. Date of search: …………………………………………………………………………………………..

3. Place of search: ………………………………………………………………………………………….

4. Name of Company ……………………………………………………………………………………..

5. Registered Certificate No (RC. No.) …………………………………………………………..

6. Date of Incorporation………………………………………………………………………………….

7. Business/Object ………………………………………………………………………………………….
 8. Subscribers…………………………………………………………………………………………………
.

9. Directors……………………………………………………………………………………………………
…

10. Share capital and distribution of issued shares…………………………………………

11. Any change in the registered particulars-alteration, conversions and re-

registration etc ……………………………………………

12. Any encumbrance-pending or discharged ……………………………………………..

13. Remarks ………………………………………………………………………

____________________
Name and Signature
CHECKLIST OF CONTENTS OF CORPORATE SEARCH REPORTS (PART A,B&C
CAMA)
COMPANIES(11) BUSINESS NAME OR INCORPORATED TRUSTEES
FIRM(9) (10)
1 Client’s Name & Client’s Name & Client’s Name & Address
Address Address
2. Date of search Date of Search Date of Search
3 Name of Company Business Name Name of the organization
4. Registered Certificate Registration No. and RC. No. and Registered
Number (RC. No and Registered Office
Registered office) Office/brand
5 Date of incorporation Date of Registration Date of Incorporation
6 Business Object Nature of Business Aims & Objectives, and basic
clauses in the constitution
with special clause
7 Directors Proprietor/Partners Trustees and Governing
Board/Board of Trustee
8 Share capital and Filing of Annual Filing of Annual Return (for
Distribution of issued Return (for Business Incorporated Trustees)
shares (if limited by Name)
shares) or Guarantee
value (if limited by
Guarantee)
9 Any change in the Ownership of landed
registered particulars property and any
– alterations, encumbrance
conversion and re-
registration etc
10. Any Encumbrance Any change in registered
 pending or particulars – names,
discharged trustees, address, etc.
11 REMARK: Comment REMARK: Comment REMARK: Comment on
on suitability to deal on suitability to deal suitability to deal with the
with the company with the Business organisation.
Name or Firm

CONVERSION OF COMPANIES
This has to do with a company originally registered under a particular type of
company changing its status by conversion and re-registration without
incorporating a new company. This is done by following the laid down procedures
and is subject to certain restrictions. But this does not imply that it has changed its
legal personality or that its former rights and liabilities are extinguished. Thus, all its
former rights and liabilities continue with it despite the conversion. E.g. N25billion –
statutory recapitalisation meant banks changed status from private to public
companies to increase their number of shareholders

A private company can be converted to a public company by following the

procedure laid down in Section 50 of CAMA. A company limited by shares may be
converted to an unlimited company – Section 51 of CAMA. An unlimited company
may be converted to a company limited by shares – Section 52 of CAMA. A public
company may be converted to a private company – Section 53 of CAMA. A statutory
corporation may also be re-registered as a Company Limited by shares.

The following types of re-registration are prohibited:

1. A private company previously re-registered as unlimited cannot re-register

to a public company: Section 50(7) CAMA

2. Where a company attained its limited liability by re-registration from

unlimited status, it cannot re-register back to unlimited. Section 51(2)
CAMA.

3. A public company or a company which has previously been re‐registered as

an unlimited company shall not be registered as unlimited: Section 51(3)
CAMA respectively

4. A re-registered unlimited company cannot be re-registered as a Public

Company or a company limited by guarantee: Section 52 (2) CAMA.

5. There is no provision for direct conversion from Public Company to

Unlimited Company. So it therefore follows that such company must convert
to a Private Company and then to Unlimited, but it cannot re-register back to
Public Company
 PROCEDURE FOR CONVERSION AND RE-REGISTRATION

RE-REGISTRATION OF PRIVATE COMPANY (LTD) AS A PUBLIC COMPANY (PLC)

(SECTION 50 CAMA)

- Board of directors resolution proposing the conversion/re-registration

- Notice of meeting to members indicating that a special resolution is going to

be passed at the general meeting

- Special resolution of the general meeting approving the conversion/re-

registration

- Consequential alterations made in the Memorandum and Articles of

association e.g. Name Clause, Type of Company Clause, Increase in Share
Capital (if applicable), removal of restrictions on transfer of shares and
regulations on appointment of Director and Secretary.

- Application to CAC for re-registration with

 Form CAC 1- availability and reservation of name

 Special resolution

 Copy of Memorandum and Articles of association duly altered

 Written statement certified on oath by Directors and Secretary that

paid up capital as at date of application is not less than 25% of
authorised capital

 Statutory declaration by a Director and Secretary that the resolution

has been passed and that the Company’s assets are not less than the
aggregate of the paid up capital and undistributed reserves.

 Copy of prospectus or statements in lieu of prospectus delivered

within the preceding 12 months to SEC (if applicable).

 Copy of balance sheet as at date of resolution or the preceding 6

months

 Evidence of up to date annual returns

 Original Receipt of prescribed filing fees. FSMWDPBAR

If satisfied with the requirements, CAC issues a new certificate, which serves as a
prima facie evidence that all the requirements for conversion and re-registration
have been complied with.
CONSEQUENTIAL ALTERATIONS TO THE MEMORANDUM OF ASSOCIATION
a. Alteration of name clause to end with PLC
b. Alteration of authorised share capital clause to meet legal minimum for PLC
c. Alteration of type clause to show that it is a public company

CONSEQUENTIAL ALTERATIONS TO THE ARTICLES OF ASSOCIATION

a. The name must be changed to PLC
b. Removal of the restriction on the transfer of its shares
c. Amendment of the qualification of Directors and appointment of those above 70
years old
d. Amendment of the qualification of the company Secretary
e. Written Resolutions not to be allowed

RE-REGISTRATION OF PUBLIC COMPANY AS A PRIVATE COMPANY (SECTION

53 CAMA)

- Board of directors’ resolution proposing the conversion/re-registration

- Notice for general meeting is issued to pass special resolution

- Special resolution by the general meeting approving the conversion/re-

registration

- Consequential alterations made in the Memorandum and Articles of

association e.g. Name Clause, Type of Company Clause, Increase in Share
Capital (if applicable), and inclusion of restrictions on transfer of shares.

- Wait for 28 days for any application to cancel the resolution at the Federal
High Court. Application can be brought by any member with not less than 5%
of the nominal value of the company’s issued capital or not less than 5% of
the Company’s members but not by a person who has consented to or voted
in favour of the resolution.

- If no application is made after 28 days, then Company should deliver within

15 days to the CAC an application for re-registration with the forms below

- If application is made for cancellation, and the Court (Federal High CT)
rejects the application, it is withdrawn, then the Company shall deliver to the
CAC an application for re-registration within 15 days with:

 Application in a prescribed form for the re-registration

 Copy of the Special resolution passed

 Certified True Copy of Court Order refusing cancellation of resolution

(where applicable)
  Availability and reservation of Re-registration name in duly approved
Form CAC 1.

 Copy of Memorandum and Articles of association duly altered

 Original receipt of payment of duly approved Form CAC 1.

 Evidence of filing of annual returns.

- If application is made for cancellation and the CT confirms the cancellation,

then submit to CAC within 15 days:

 Printed copy of the resolution

 CTC of the Ct order

If satisfied with the requirements, CAC issues a new certificate which serves as a
prima facie evidence that all the requirements for conversion and re-registration
have been complied with.

RE-REGISTRATION OF PRIVATE COMPANY LIMITED BY SHARES AS UNLIMITED

COMPANY (LTD – ULTD) S. 51 CAMA
THE PROCEDURE
1. Board of directors’ Resolution proposing the conversion.
2. Subscription of the prescribed Form of Assent to the re-registration by all the
members or on their behalf.
3. Statutory Declaration by all the Directors of the company that the persons who
or on whose behalf, the form of assent is subscribed constitute the whole
membership of the company and that all persons who subscribed on behalf of a
member did so with the member’s authority.
4. Pass a Special Resolution altering the Memorandum & Articles of the current
status of the company
5. Stamp the altered memorandum and articles of association
6. Apply to the CAC in the prescribed form (Form 2.7 for conversion and re-
registration) signed by the Director/the Secretary setting out the alterations in
the memo

Documents to submit to CAC

a. FORM CAC 1A-Availability and reservation of new name duly approved.
b. Application in prescribed form setting out the alterations signed by a
director & secretary or two known Directors.
c. A prescribed form of Assent of members in support of the re-registration
d. A statutory declaration made by the Directors of the Company.
e. Stamped memo & articles as altered.
f. Receipt of filing fees.
g. Evidence of filing Annual Returns up to date.
 RE-REGISTRATION OF UNLIMITED COMPANY AS PRIVATE COMPANY LIMITED
BY SHARES (ULTD – LTD) S. 52 CAMA
The members are still liable on previous obligations of the company-S. 52(9) CAMA
The Procedure
1. Board meeting and Resolution to propose the conversion and re-registration.
2. General meeting passes a Special Resolution to convert and re-registration as
LTD.
3. The Special Resolution shall state the proposed authorised share capital and the
consequential alterations in the memo & Articles.
4. Application in the prescribed form signed by a Director and Secretary or two
known Directors.
5. Memorandum and Articles of association
6. Payment of Registration fees.
7. Evidence of filing annual returns to date
NB: A copy of the Resolution and other documents must be filed, the CAC within
15 days of passing the Resolution.
RE-REGISTRATION OF STATUTORY CORPORATION AS COMPANY LIMITED BY
SHARES
A statutory corporation could be privatised and either unbundled into small
companies or re-registered as public Limited by share:

Essential Features of the conversion.

1. The company would cease to be statutory corporation and be formally registered
with CAC.
2. The company would have memorandum & articles which becomes its source
governance rather than the enabling laws which set up the corporation
3. The company ceases to enjoy status of statutory corporation being entitled to a pre-
action Notice.

The Procedure
a. Bureau of Public Enterprises (BPE) obtains a government white paper to
commercialise and privatise the enterprise and arrange its sale.
b. BPE takes steps to incorporate the new company as a public limited liability
company with CAC. Submit all approved documents.
c. BPE hands over the new company to its core investors.
PROHIBITED RE-REGISTRATIONS/ CONVERSIONS
Note: IT IS ONLY A PUBLIC COMPANY CONVERTING TO A PRIVATE COMPANY
OR VICE VERSA THAT CAN RE-REGISTER WITHOUT ANY RESTRICTION.

ALTERATION OF REGISTERED DOCUMENTS: s44-49, s100-111, s27 CAMA

(companies under Part A)

ALTERATION OF CONDITIONS OF THE MEMORANDUM

The Memorandum and Articles of Association of a Company are paramount
contractual documents of that Company. Thus, 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 44(1) of CAMA. Section 45 of CAMA makes provision for
how each condition can be changed.

The usual types of alterations in the Memorandum and Articles of Association of a

Company are:

For the memorandum, there are specific provisions in CAMA but for Articles, there
is an omnibus provision.

a. Change of name (Clause 1 of Memo)

b. Alteration of business or object clause (Clause 3 of Memo)

c. Change of type/status of company (Clause 4 of Memo): dealt with in

conversion and registration

d. Alteration in the share capital (Clause 6 of Memo): section 100-111 CAMA

e. Alteration on restriction of members and other provisions of the Articles of

Association - NOTS

NB: on registration, subscription closes and any other shareholder cannot take
shares through subscription after registration.

CHANGE OF NAME

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 6 months of its being registered under that name, the company
concerned shall change its name within a period of 6 weeks from the date of the
direction or such longer period as the Commission may allow.
CIRCUMSTANCES WARRANTING COMPULSORY CHANGE OF
NAME
A company may be directed by the CAC to compulsorily change its Name under the
following circumstances.
a. Inadvertent registration of a new company by a name of already existing
company or so nearly resembling it as to be likely to deceive. NIGER CHEMISTS
V. NIGERIA CHEMISTS
b. Later discovery that the company’s name conflicts with an existing trade mark or
business name registered in Nigeria without the consent of the owner of the trade
mark.
c. After a successful passing off Action, the court can direct the newly registered
company to change its name. HALIFAX PLC V. HALIFAX RE-POSSESSION LTD &
ORS.

PROCEDURE ON CHANGE OF NAME-S. 31(3) CAMA;R.24

1. Pass Board Resolution approving the change
2. Fill Form CAC 1 availability check and reservation of name, for approval of the
name
3. Notice of meeting specifying the intention to pass a resolution for change of
name
4. Pass SPECIAL RESOLUTION for the change of the company name
5. Make consequential alterations on the Memorandum and Articles of
Association
6. Write an application to the CAC for its consent on the change of name attached
with documents.

DOCUMENTS REQUIRED FOR VOLUNTARY CHANGE OF NAME

a. Duly signed copies of
special Resolution of the company and the Board Resolution
b. Stamped copies of the
Memorandum and Articles reflecting the new name
c. The approved Form CAC 1
d. Original Certificate of
Incorporation for cancellation
e. Evidence of filing annual
Returns
f. Receipt of filing fees
7. CAC will then advertise the change of name in its official Gazette
8. CAC will issue a new Certificate of Incorporation.
NOTE-The RC No of the company is still maintained after the change of name.-

ALTERATION OF THE BUSINESS OR OBJECT CLAUSE IN THE MEMORANDUM

The business or object clause in a company’s Memorandum may be altered by

Special Resolution at a meeting by which notice in writing was given to all members
(whether or not otherwise entitled thereto) – Sections 46(1) and 45(2) of CAMA.

Thus, a company may alter its business or objects at any time and for any reason as
long as the alteration is carried out by special resolution and there is, no minority
objection or if there is, the court has affirmed the resolution – Re Parent Tyre Co.
Ltd (1923) 2 Ch. 222; Re Government Stock Investment Co. (No. 2) (1907) 1 Ch.
579
PROCEDURE
1. BOD resolution
2. 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.
2. At the meeting, a Special Resolution must be passed by ¾ of members voting
in person or by proxy.

WHO CAN CHALLENGE THE ALTERATION OF OBJECT CLAUSE OF A COMPANY.

i. Holders of not less than 15% of the PAID UP SHARES in the company’s
issued capital. For a company not limited by shares, 15% of its members.
ii. holders of not less than 15% of the company’s debentures secured. Provided
that such application shall not be made by any person who consented to or
voted in favour of the alteration. S. 46(2)
NB- The application may be made in representative capacity on a written
appointment. S. 46(3)
Iii, CAC can refuse to approve a Resolution for alteration even though there is no
objection by members or debenture holders, if it is not satisfied with the
alteration. S. 46(8)(b)(ii).

GROUNDS FOR CHALLENGE OF THE ALTERATION

a. Minority and Creditor’s protection.
b. Non – compliance with the condition precedents for the validity of resolution.
This may be no or insufficient written Notice of meeting to members or
that the alteration was not based on Special Resolution.
NB == MEMBER in this section includes any person financially interested
in the company

Also, it is not stated in 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.

WHERE AN APPLICATION IS MADE TO FEDERAL HIGH 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. 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. If CAC is satisfied with the resolution then a printed copy of the
memorandum as altered will be delivered to it – 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, or within such extended time to deliver as
the court may allow – Section 46(8)(b) of CAMA.

However, 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. And any member can apply to have the resolution
declared invalid notwithstanding the number of shares he has subscribed to.

ALTERATION OF THE SHARE CAPITAL CLAUSE

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 – section 45(4) of
CAMA.

By virtue of Section 100(1)(a) CAMA dealing with consolidation of shares provides

that 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.

Section 100(1)(b) CAMA dealing with conversion of shares into stock and
conversion of stock into shares provides that a company can convert paid-up shares
into stock and to also reconvert stock into paid-up shares. A company however,
cannot issue stock directly but can only convert paid up shares into stock, and any
direct issue of stock is ultra vires – Re Home and Foreign Investment and Agency
Co. Ltd (1912) 1 Ch. 72.

Section 100(1)(c) of CAMA dealing with subdivision of shares provides that a

company can sub-divide 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.

CANCELLATION OF UNISSUED SHARES

Section 100(1)(d) of CAMA provides 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.
It should be noted that where a company takes any of the steps in Section 100 of
CAMA, 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 1 month of so doing – s101 CAMA

However, for there to be an agreement to take unissued shares there must be an

offer and a valid acceptance – Re Swindon Town Foodbal Co. Ltd. (1990) B.C.L.C
467.

ALTERATION OF INCREASE OF SHARE CAPITAL

This may be made by Resolution provided under Section 102(1) of CAMA and since
it didn’t mention the type of resolution, it is ordinary resolution. CAC in its
guidelines may require a different resolution (e.g. it recently required it to be special
resolution but law is above CAC Company Regulations 2012)/

A company limited by shares may in a General Meeting and not otherwise increase
its share capital by creating new shares. This is done by Ordinary Resolution except
the Articles of Association provides otherwise.

PROCEDURE FOR INCREASE

1. 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.
2. Notice of meeting must be given to members who are entitled to attend the
General Meeting of the company. The notice must specify the amount of the
proposed increase – Mac Connell v. E. Prill & Co. Ltd (1916) 2 Ch. 57.
3. A General Meeting will be convened where an Ordinary Resolution to
increase the capital of the company will be passed.
4. 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) A copy of the resolution authorising the increase – section 102(4) of
CAMA.
b) A notice of increase stating the class or classes of shares involved and
special rights attached to them, if any – section 102(2) & (4) of CAMA.
c) A statement of increase duly stamped (Form CAC 2). It should be
noted 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 (Form CAC 2) and return a stamped copy to the person
applying, which the applicant will include in the documents to be filed
with the CAC.
5. Within 6 months of giving the notice of increase to the CAC, the company
 must issue to members 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 – section 103 of CAMA.
6. The increase shall not take effect unless the Director’s statutory declaration
has been delivered to CAC. A statutory declaration verifying that fact that
25% of the total share capital has been issued. Attach the statement of share
capital and return of allotment – section 103(b) of CAMA.
7. A certificate of increase must be obtained from the CAC.
8. A copy each of the resolution and certificate of increase must be annexed to
the Memorandum of the company.

REDUCTION OF SHARE CAPITAL

Section 105 - 111 of CAMA provides for restriction on reduction of issued capital
except in accordance with the procedure laid down in CAMA.

Under section 106(1) of 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.

MODES OF REDUCTION OF SHARE CAPITAL

Section 106(2) of CAMA provides that a company may:

a) Extinguish or reduce the liability on any of its shares in respect of share
capital not paid up; or
b) 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
c) 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.

In Re Saltdean Estate Co. Ltd (1968) 1 WLR, the court confirmed the reduction
which involved repaying the capital paid up on each of the company’s preference
shares of 50p each plus a premium of 25p per share.

MODE OF REDUCTION OF SHARE CAPITAL

This can be done in three ways:

1. The article must provide for it.
2. The company must pass a special resolution to reduce share capital.
3. The court must confirm the reduction of share capital.

PROCEDURE FOR REDUCTION OF CAPITAL

1. Directors must meet to resolve that the share capital be reduced.
2. The scheme of reduction will be prepared.
 3. The General Meeting has to be convened. The Notice of Meeting should be
accompanied by explanatory circular and the scheme of reduction.
4. At the meeting, a Special Resolution must be passed reducing the capital and
approving the scheme of reduction – Re Moorgate Mercantile Holdings Ltd.
(1980) 1 All E. R 40.
5. Application must be made to the Court to confirm the reduction and also
approve the Scheme of Reduction. If the court is satisfied that every creditor
has duly consented or that adequate provisions have been made to discharge
or secure their debts or claims or that the debts has been determined and the
capital does not by this reduction fall below the authorised minimum, it may
by order confirm the reduction – section 108(1) of CAMA.
It should be noted that creditors who would be entitled to make a claim on
the company are entitled to object to the reduction – section 107(2) and (3)
of CAMA.
6. 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 (such as the amount of share capital, number of shares into
which it is to be divided and the amount of each share, the amount at the date
of registration deemed to be paid up on each share) must be delivered to
CAC.
a. A certificate of registration of the order and Minutes will be obtained
from the CAC.
b. 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 –
section 109(5) and (6) of CAMA.

QUERY-Distinction between Reduction and Cancellation of share capital

REDUCTION of share capital relates to ISSUED SHARES, whether paid up or
unpaid, called or uncalled.
CANCELLATION of share capital relates to UNISSUED SHARES
NB ==Cancellation of shares made pursuant to S. 100(1)(d) shall not be deemed
to be a reduction of share capital within the meaning of CAMA – S. 100

RATIONALE-the rigorous process involved in reduction of share capital is to protect

the creditors and third parties who may have financial relationship with the
company on the basis of its shares.

ALTERATION OF THE REGISTERED OFFICE CLAUSE

There is no specific provision in the CAMA for the alteration of the Registered Office
clause. However, complying with section 46 of CAMA, unless there is a provision to
the contrary, a company may alter any other provisions in the Memorandum of
Association of the company the alteration of which is not specifically provided for in
the Act – Section 45(5) of CAMA.
It should be noted 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 Abuja, 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.

The procedure to alter the restriction of the powers of the company clause is the
same as that of the business/object clause – Section 45(3) of CAMA.

ALTERATIONS OF PROVISIONS IN THE MEMORANDUM IN CERTAIN CASES

This deals with cases like 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 – Section 47(1) of CAMA.

PROCEDURE FOR ALTERATION OR CANCELLATION

The procedure to be adopted for alteration or cancellation 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 (omnibus provision) 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 – Section 48(1) and (2) of CAMA.
In Andrews v. Gas Meter Co. (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

1. There must be a Board meeting whereby a resolution will be passed to alter
the Articles.
 2. A notice of 21 days must be given to the Members accompanied with the
proposed Special Resolution.
3. A general meeting will be convened whereby a Special Resolution to alter the
Articles will be passed.
4. The printed copies of the amended Articles and printed copy of the Special
Resolution must be delivered to the CAC within 15 days of the passing of the
resolution for registration – Section 237(1) & (4)(a) of CAMA.
5. The resolution must be annexed to every copy of the Articles issued after the
passing of the resolution.

It should however be noted 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 -
(a) Take or subscribe for more shares than he held at the date on
which he became a member; or
(b) Increase his liability to contribute to the share capital of the
company; or
(c) Pay money by any other means to the company.

However, the question sometimes arises as to the right of a company to alter its
articles in breach of a contract with a third party, for example, a Director. The rule is
that the company “cannot be precluded from altering its articles thereby giving itself
power to act upon the provisions of the altered articles, but so to act may
nevertheless be a breach of a contract if it is contrary to a stipulation in a contract
validly made before the alteration. It was, however held in Lapite v. Nigeria
Airways Ltd. (Suit No. CA/L/158/87 of 11th January 1988 (unreported) that
“any decision taken by the company in breach of (or not in compliance with) the
articles of association is valid against the whole world, save members who complain
about it” and that since the articles do not constitute a contract between the
company and an outsider, even where aggrieved third party proves a breach of the
articles which is the basis of his claim, he cannot succeed. He will have no locus
standi.

POST INCORPORATION ALTERATIONS UNDER PART B OF CAMA (s574, s577

CAMA): how you ordinarily complete the registration i.e. if sole proprietor, he
signs, if partnership every partner sign unless a partner signs on behalf of
others with a declaration ….. If an infant, must be countersigned by a
magistrate, legal practitioner or police officer of or above ASP….. Applies to
any change other than age.
A.CHANGE OF A BUSINESS NAME UNDER PART B
OF CAMA
The procedure is:
1. Conduct an availability check and reservation of name using Form CAC 1A
2. Write an application to the Corporate Affairs Commission to effect the change of
name accompanied with the following documents:
a. Form CAC 1A
b. New filled Form CAC/BN/A1- Application for business name registration
c. Original Certificate of Registration of the business name for cancellation
d. Receipt of payment of the prescribed fees
e. Updated annual returns-REG.56 CR 2012
3. A new Certificate of Business name registration is issued by the CAC -
The application for change of business name is to be done WITHIN 28 DAYS of
the actual change of the name. S. 577 of CAMA

B- CHANGE OF PROPRIETORS NAME

Requirements for change of proprietor’s name shall include the following –
(1) Duly completed application form
(2) Evidence of change of name
(3) Duly completed form
(4) Formal application for change of name
(5) Original registration form for cancellation
(6) Form of identification where necessary
(7) Updated annual return
(8) Payment of filing fees-REG.57 CR 2012

CHANGE OF NATURE OF BUSINESS

Requirements for change of nature of business shall include the following –
(1) Duly completed application form
(2) Duly completed form for change of nature of business
(3) Formal application and proficiency certificate where applicable
(4) Original certificate of registration and form for cancellation
(5) Form of identification where necessary
(6) Updated annual return
(7) Payment of filing fees-REG.58 CR 2012.

CHANGE OF ADDRESS OF BUISNESS NAME

Requirements for change of address of business and or proprietor shall include
the following –
(1) Duly completed application form
(2) Duly completed form for change of address-CAC/BN/4
(3) Formal application for change of address
(4) Original certificate of registration and form for cancellation
(5) Form of identification where necessary
(6) Updated annual return
(7) Payment of filing fees-R.59 CR 2012.

ADDITION/ REMOVAL OF PARTNER

Requirements for addition or removal of partner shall include the following –
(1) Duly completed application form
(2) Duly completed form for removal or addition of partner
(3) Formal application for addition or removal of partner
 (4) Two passport-sized photographs for the new partner in case of individual and
CTC of resolution together with photocopy of certificate of incorporation in
case of company
(5) Copy of partnership agreement where applicable
(6) Form of identification where necessary
(7) Updated annual return
(8) Payment of filing fees-RULE 60 CR 2012.

NOTICE OF CESSATION OF BUISNESS

(1) Requirements for filing notice of cessation of business and removal of name
from the register of business names shall include the following –
(a) Notice of cessation of business by proprietor or personal representative of
proprietor in case of deceased proprietor
(b) Consent of all partners in case of partnership
(c) Submission of certificate and documents of registration for cancellation
(d) Updated annual return
(e) Payment of filing fees
2. The personal representative shall deliver the notice of cessation business to
the Commission within 3 months of the cessation of the business-RULE 61 CR
2012

POST INCORPORATED ALTERATION OF DOCUMENTS UNDER PART C CAMA.

(name and object: s597 CAMA; any other provision of the constitution: s598
CAMA; change of trustees: s599 CAMA)
A.CHANGE OF NAME OF INCORPORATED TRUSTEES-S.597 CAMA
RULE 67 CR 2012
1. Pass a Resolution approving the change by the Association (will see this
resolution in the minutes. The Constitution of the company decides how a
resolution will be passed).
2. Fill Form CAC 1- availability Check and reservation of name for approval
3. Advertise the proposed change in 2 National Newspapers for objections to be
made within 28 days (same as the original registration)
4. An application is to be written to the CAC to effect the change attached with
the following documents:
i. Form CAC 1
ii. Resolution of the Association approving the Change duly certified by the trustees
iii. 2 copies of the Newspaper adverts
iv. Original Certificate of Incorporation for cancellation
v. Newly filled Form CAC/IT/1- Application for registration of Incorporated
Trustees
5. CAC will then issue a new Certificate of Incorporation reflecting the new name-S.
597 of CAMA

B.CHANGE OF OBJECTS AND AMENDMENT OF CONSTITUTION: s597 CAMA

1. Convene general meeting and pass a resolution
 2. Advertise the notice of application in the newspapers stating the Provisions
of the constitution to be amended and invite objections to the application
WITHIN 28 DAYS of the publication
3. Make an application to CAC accompanied by
a) Duly completed application form
b) Formal application for change of objects and amendment of constitution
signed by the chairman and secretary or the solicitor
c) Extracts of minutes of general meeting where change of objects and
amendment of constitution was approved and signed by the chairman and
secretary
d) Two copies of the constitution as amended and marked’ Amended.
e) Copy of the public notice as pasted at the registered office of the association
f) Cuttings of publication page of notice of application for change of objects and
amendment of the constitution in two daily newspapers
g) Updated annual returns
h) Payment of fees

CHANGE OF ANY OTHER PROVISION OF THE CONSTITUTION: S598

 By a resolution passed by simple majority of the members approved by CAC

REPLACEMENT AND APPOINTMENT OF ADDITIONAL TRUSTEES: section 599

CAMA
1. Hold a general meeting adopting the proposed change i.e. by resolution
(depends on what is stated in the Constitution of the organisation)
2. Advertise notice of application for change of objects and amendment of the
constitution in two daily newspapers WITHIN 28 days.
(a) Duly completed change of trustees form
(b) Formal application for change or appointment of additional trustees signed
by the chairman or secretary or solicitor
(c) Extracts of minutes of general meeting where change or appointment of
additional trustees was adopted signed by the Chairman and Secretary
(d) Trustees declaration form duly deposed to by each of the new trustees in the
High Court
(e) Photocopy of information page of international passport or national identity
card for new trustee(s)
(f) Original certificate of incorporation (or CTC of certificate where applicable)
for cancellation
(g) Copy of the public notice as pasted at the registered office and every branch
of the association
(h) Updated annual return
(i) Payment of filing fee
2. The extracts of minutes shall list members present and the voting pattern for
outgoing and/or new trustees and state reasons for change or removal
3. Cuttings of publication page of notice of application for change or appointment of
additional trustees in two daily newspapers
4. The notice published in the newspapers shall state names of old trustees
indicating those to be removed, names of proposed trustees and shall invite
objections to the application WITHIN 28 DAYS of publication
5.Thumb prints by an illiterate trustee or officer shall be accompanied by an
illiterate jurat- RULE 69 CR 2012.

1.Application to re-register a private company to a public

company
GOLD PALMS LIMITED RC NO. 1015
NO. 15 KENT STREET IKOYI
OUR REF.:
DATE:
To
The Registrar-General
Corporate Affairs Commission
Opposite Gowon
House Aguiyi Ironsi
Crescent Maitama
Abuja.
Sir,

APPLICATION TO RE-REGISTER APEX INVESTMENT LIMITED RC NO. 1015 TO A

PUBLIC COMPANY PURSUANT TO SECTION 50 OF THE COMPANIES AND
ALLIEDMATTERS ACT 2004.
We, the members of the above named company, have passed a special Resolution to
change the above named company to GOLD PALMS PLC dated the 10 th day of
January 2014
Please find attached the following documents for your consideration:
1. Copy of the Special Resolution
2. Altered copies of the Memorandum and Articles of Association duly stamped
3. A written Statement by a Director and Secretary that up to 25 % of its shares
have been issued
4. Statutory Declaration by a Director and Secretary that a special Resolution
was duly passed
5. Copy of the balanced sheet of not more than 6 months period of the company
6. Copy of the Prospectus or statement in lieu of it
7. Original Certificate of Incorporation for cancellation
8. Receipt of payment of Annual Returns

Thanks for your consideration.

Yours faithfully,
………………. …………………
NnekaTochukwu Director
(Company secretary)
 2. Application to conduct a search to the CAC
NDU CHAMBERS
BARRISTERS AND SOLICITORS
NO. 15 BWARI STREET,WUSE ZONE 4 ABUJA.
OUR REF.:
DATE: 25 MAY 2012
The Registrar-General
Corporate Affairs Commission
Opposite Gowon House
Aguiyi Ironsi Crescent
Maitama Abuja.

Dear Sir,

APPLICATION TO CONDUCT SEARCH ON TROPICAL INVESTMENT LIMITED

WITH REGISTERED CERTIFICATE NO. 1350
We are the external Solicitors of Premier Bank PLC Alagomeji Branch Lagos, which
we will refer to as ‘our client’.
It is our client’s instructions that we carry out a search on Tropical Investment
Limited with RC No. 1350.
We specifically request that the following documents be made available to us
namely:
1. The Memorandum and Articles of Association
2. Particulars of Directors
3. Particulars of Charges and Debentures
4. Statement of the authorised Share Capital and Return of Allotment- Form CAC 2
5. Details of the change of name

Please find attached the following receipts to aid your kind consideration of our
application.
1. Receipt of payment of search fees
2. Receipt of payment for the certified true copies of the documents so requested.
3. Copy of the receipt of payment of Annual Returns for the year 2011.

Thank you for your prompt consideration.

Yours faithfully,

Adaji Rose E.
(Principal
Partner)
Adaji Rose & Co.
External Solicitors to Premier Bank Plc.

4. Search Report
 ADAJI ROSE & CO
BARRISTERS AND SOLICITORS
NO. 15 BASE STREET WUSE ZONE 4 ABUJA.
OUR REF.:
DATE: 22 JANUARY 2015

The Secretary/Legal Adviser

Premier Bank
PlcAlagomeji
Branch Lagos
State.
Dear Sir,
SEARCH REPORT ON TROPICAL INVESTMENT LIMITED
Sequel to your instruction dated the 21 ST day of December 2014 on the above
subject matter, we are pleased to inform you that we have carried out the search as
instructed.
Below is the Search Report:
1. DATE OF SEARCH: 20th January, 2015
2. PLACE OF SEARCH: Corporate Affairs Commission, Abuja.
3. NAME OF COMPANY: Tropical Investment Limited
4. REGISTERED CERTIFICATE NO.: RC 1350
5. REGISTERED ADDRESS: No 40 Broad Street Marina, Lagos State.
6. DATE OF INCORPORATION: 30 February 2007
7. BUSINESS/ OBJECTS OF THE COMPANY: buying and manufacture of cement and
marbles with matters incidental to the business.
8. PARTICULARS OF DIRECTORS: Ajao Kings of No 20 Kent Road Ikoyi Lagos and
Ahmed Usman of 10 Kano Street Ikeja Lagos.
9. RESTRICTION ON THE POWERS OF THE COMPANY: Nil
10. AUTHORISED SHARE CAPITAL: N15, 000, 000.00 divided into 15, 000,000 ordinary
shares of N1.00 each
11. ISSUED AND PAID UP SHARES: N13, 000, 000.00 divided into 13, 000,000 ordinary
shares of N1.00 each.
12. ENCUMBRANCES: Nil
13. COMMENT/ADVICE: the company is an on-going concern, so can do business with it.
Yours faithfully,
Adaji Rose E.
(Principal
Partner) Adaji
Rose & Co.

4.Board Resolution to change name of a company

APEX INVESTMENT LIMITED RC NO. 1350
NO. 15 BROAD STREET
IKEJA LAGOS.
OUR REF.:
DATE: 25 MAY, 2012.

BOARD RESOLUTION TO CHANGE APEX INVESTMENT LTD TO LONGMAN

BOOKSTORES LIMITED PURSUANT TO SECTION 31(3) OF THE COMPANIES AND
ALLIED-MATTERS ACT 2004

At the Board of Directors meeting held on the 15 day of February 2012 at the Board
conference room of the company, it was proposed and resolved as follows:
1. That subject to the consent of the Corporate Affairs Commission, the name of
the company APEX INVESTMENT LIMITED be changed to LONGMAN
BOOKSTORES LIMITED.
2. That the company secretary should take steps to comply with the procedures
to effect the proposed change of name with the Commission and to apply for its
consent.
DATED THE 16TH DAY OF FEBRUARY 2014.

……………… …………………
Director Director

5.Special Resolution of a company to change its name

GOLD PALMS LIMITED RC NO. 1350
NO. 15 BROAD STREET
IKEJA LAGOS.
OUR REF.:
DATE: 26 JAN 2014

SPECIAL RESOLUTION TO CHANGE THE NAME OF GOLD PALMS PLC TO

SUGAR PALMS LTD PURSUANT TO SECTION 31(3) OF THE COMPANIES AND
ALLIED-MATTERS ACT 2004
At the Extra- Ordinary General Meeting of Apex Investment Limited held at the
Board conference room of the company, it was duly proposed and resolved as
follows:
‘’ That the company name be changed to SUGAR PALMS LIMITED subject to the
consent of the Corporate Affairs Commission’’.

DATED THE ……… 25 DAY OF MAY 2012.

……………………. ………………………….
Director Secretary

6.Resolution to increase the authorised share capital of a company

GOLD PALMS LIMITED RC NO. 1350
NO. 15 BROAD STREET.IKEJA LAGOS.
OUR REF.:
DATE:
RESOLUTION FOR THE INCREASE OF THE AUTHORISED SHARE CAPITAL
PURSUANT TO SECTION 102 &103 OF THE COMPANIES AND ALLIED-MATTERS
ACT 2004
At an Extra- Ordinary General Meeting of Apex Investment Limited held on the 20
day of May 2012 at the Board conference room of the company, it was duly
proposed and resolved as follows:
‘’ That the company’s share capital be increased from N1, 000, 000.00 to N5, 000,
000.00 shares by the creation of additional N4, 000, 000.00 shares divided into 4,
000,000 ordinary shares of N1.00 each, the shares so created are to rank in pari
pasu with the existing shares of the company’’.

DATED THE ….DAY OF … 2014

………………… …………………..
Director Secretary

7.Special Resolution for the reduction of share capital

GOLD PALMS PLC RC NO. 1245

KM 5 IDIKOKO ROAD OTA
OGUN STATE-NIGERIA
OUR REF.:
DATE

SPECIAL RESOLUTION FOR THE REDUCTION OF SHARE CAPITAL PURSUANT

TO SECTION 106 OF THE COMPANIES AND ALLIED-MATTERS ACT 2004
At an Extra- Ordinary General Meeting of Kato PLC held on the 20 day of May 2012
at the Board conference room of the company, it was dully proposed and resolved
as follows:
1. ‘That subject to the confirmation of the Federal High Court, the share capital
of the company be reduced from N100, 000, 000.00 made up of 100, 000, 000
ordinary shares of N1.00 each to N50, 000, 000.00 made up of 50, 000,000
ordinary shares of N1.00 each by refunding pro rata the amount already paid
on those share’.
2. ‘That the Board of Directors be and are hereby empowered to take the
necessary action in this behalf’’.

DATED THE ……….. DAY OF …..2014

…………………. ……………………………………
Director Company Secretary

Wadata Sugar Nig Ltd, formerly a public company, but now re-registered is a sugar
manufacturing company with its office address in Jos seeks to expand its sphere of
operation to Niger state. It has a share capital of N2,000,000 (comprising of
2,000,000 ordinary shares of N1 each), all of which has been issued. However, it is
constrained by the enormous capital requirement it will need for the expansion
despite how profitable it perceives the venture would be. The directors have
recently increased its share capital to N5,000,000 (comprising of 5,000,000
ordinary shares each). Unfortunately only 500,000 unit of these additional shares
were taken up during the company’s private placement upon application. This has
made the members of the company to re-think their status as a private company
considering the restraint it has placed on them in raising capital from the public.
They are desirous of re-registering as a public company.
a) Can Wadata Sugar Ltd re-register as a public company?
b) What are the steps the company must take to achieve its purpose?
c) Draft the resolution necessary to give effect to re-registration.
d) List the consequential alterations in the memorandum and articles of association
of the company

Answer
a) Yes it can re-register as a public company. Under section 50 CAMA, a private
company can be converted to a public company if it follows the procedure laid down
in this section
b) Steps for the company to follow

- Board of its directors resolution proposing the conversion/re-registration

- Notice of meeting to members indicating that a special resolution is going to

be passed at the general meeting

- Special resolution of the general meeting approving the conversion/re-

registration

- Consequential alterations made in the Memorandum and Articles of

association e.g. Name Clause, Type of Company Clause, Increase in Share
Capital (if applicable), removal of restrictions on transfer of shares and
regulations on appointment of Director and Secretary.

- Application to CAC for re-registration with

 Form CAC 1- availability and reservation of name

 Special resolution

 Copy of Memorandum and Articles of association duly altered

 Written statement certified on oath by Directors and Secretary that

paid up capital as at date of application is not less than 25% of
authorised capital
  Statutory declaration by a Director and Secretary that the resolution
has been passed and that the Company’s assets are not less than the
aggregate of the paid up capital and undistributed reserves.

 Copy of prospectus or statements in lieu of prospectus delivered

within the preceding 12 months to SEC (if applicable).

 Copy of balance sheet as at date of resolution or the preceding 6

months

 Evidence of up to date annual returns

 Original Receipt of prescribed filing fees.

 If satisfied with the requirements, CAC issues a new certificate, which

serves as a prima facie evidence that all the requirements for
conversion and re-registration have been complied with.

c) Draft the resolution necessary to give effect to re-registration.

WADATA SUGAR NIGERIA LTD
NO. 15 BROAD STREET
JOS, PLATEAU STATE
TEL:08047364743 EMAIL: wadatasugar@yahoo.com
RC NO: 39201
SPECIAL RESOLUTION TO RE-REGISTER WADATA SUGAR NIGERIA LTD AS A
PUBLIC LIMITED COMPANY PURSUANT TO SECTION 50 OF THE COMPANIES
AND ALLIED MATTERS ACT CAP C20 LFN 2004
At the Extraordinary General Meeting of Wadata Sugar Ltd held at the Board
conference room of the company on the 22nd day of January 2015 at 10am, the
following special resolution was proposed and passed:
“That the company’s be re-registered as a public company with the name Wadata
Sugar Plc and that the consequential alteration in the memorandum of association
and articles of association be made”.
That the memorandum association be altered as follows:
1)The name clause of the company has now read as Watada Sugar Ltd
2)The company is now a public limited company
3)…………..

DATED THE 22nd DAY OF JANUARY 2015.

……………………. ………………………….
Director Secretary

d) CONSEQUENTIAL ALTERATIONS TO THE MEMORANDUM OF ASSOCIATION

i) Alteration of name clause to end with PLC
ii) Alteration of authorised share capital clause to meet legal minimum for PLC
iii) Alteration of type clause to show that it is a public company
CONSEQUENTIAL ALTERATIONS TO THE ARTICLES OF ASSOCIATION
i) The name must be changed to PLC
ii) Removal of the restriction on the transfer of its shares
iii) Amendment of the qualification of Directors and appointment of those above 70
years old
iv)Amendment of the qualification of the company Secretary
v) Written Resolutions not to be allowed

Week 10: Corporate Governance

Legal framework, Concepts and International Best Practices in Corporate
Governance
Corporate governance is the system by which companies are directed and
controlled. A system is a set of actors interacting within the framework of the law. It
protects the interests of major stakeholders in a corporation by ensuring that
adequate checks and balances are not just enshrined but complied with.

Who are the stakeholders in a corporation: shareholders, directors, employees,

customers, vendors/suppliers, creditors and the community

Major components of corporate governance

Corporate Governance principles as captured in the codes relate to key areas such
as:
 Leadership: Corporate Governance Code (CEO should be different from the
Managing Director (no fusion) – allows other people to have influence in the
company, balance of executive and non-executive directors – i.e. must have
checks and balances)
 Effectiveness: how effective is the system put in place to ensure the board of
directors run the company effectively (method of appointment of directors,
checks and balance, orientation and re-orientation for directors, are the
directors the best people to run the company e.g. s259 CAMA: periodic
review of the directors by rotation of directors
 Accountability: the processes in place to ensure that accounting processes
are in line with the provisions of the law (no book cooking/falsifying of
accounting records such as Lehman Bros), independence of external auditors
from internal auditors, audit committee
 Remuneration – a system for measuring the remuneration of directors
 Relations with shareholders: a means of promoting relationship with
shareholders e.g. annual general meetings – directors to attend meetings to
brief shareholders on the progress/running of the meeting (directors’ report
at the AGM) - LEARS
CAMA, Memorandum and Articles of Association; Code of Corporate Governance for
public listed companies 2011 provided by SEC, CBN Code of Corporate Governance
for Banks in Nigeria Post Consolidation

Agency theory: shareholders are principals and directors are the agents. So we need
codes guiding this agency duty (fiduciary relationship etc)
Shareholders model: shareholders are in control of the business

For shareholders
 Section 244(1) CAMA: directors are persons duly appointed by the company
to direct and manage the business of the company
 Section 262 CAMA: director can be removed but subject to confirmation at
the general meeting. Section 233 CAMA: confirmation by ordinary
resolution (simple majority cast by members in a meeting.
 Section 63(5)(c) CAMA: stating hat members may ratify or confirm any
action taken by the board of directors
 Section 299 CAMA: only the company can sue for wrong or ratify irregular
conduct committed in the course of a company’s affairs.
 Section: 300 CAMA: and the rule on Foss v Harbottle on minority protection
 Section 248 CAMA: Members in general meeting have the power to re-elect
or reject directors and appoint new ones

For directors
 Company is a legal person different from its members. A decided case stated
a principle that directors are agents of the company and not agents of the
 members because even if members want to change the objects, they cannot
without the resolution by the directors
 Members must follow procedure before removing directors. They cannot just
remove the directors without following this procedure
 Section 244 CAMA: directors appointed to run the company (not the
members)
 Section 63(1) CAMA: stated three persons that have power to run the
company (members in general meeting, board of directors or agents
appointed by board of directors or by the members of the company). It
doesn’t state that shareholders are more powerful than directors
 Section 63(3) CAMA: board of directors run the company
 Section 63(4) CAMA: Board of directors shall not be bound to obey
instructions of general meeting if acting within powers in their articles of
association
Depends on the articles of association as to whether or not the directors or
members will be more powerful.

MODELS OF CORPORATE GOVERNANCE

1. Berle and means model (Agency theory)
2. Takeover model
3. German bank model
4. Leverage buyout
5. Stakeholders model
6. Disclosure model
7. The co-determination model
8. Political model: political interplay between different players in a company
e.g. shareholders versus directors) BTGLSDCP

STAKEHOLDER MODEL OF CORPORATE GOVERNANCE

1. Directors who are the managers of the company.
2. Shareholders/members. They are the “owners” of the company; they ratify
decisions of the board. They are the investors.
3. Creditors e.g. debenture holders.
4. Auditors
5. Employees of the company: They run and see to the affairs of the company in
order for their jobs to be secured.
6. Expert, financial, branch managers who may not be directors of the company.
They may constitute the management team as distinct from the Board of
Directors. They are engaged by the Board and are accountable to the Board.
7. Company Secretaries: They are the Returning Officers, Compliance Officers,
Managers of the Company’s Secretariat. They serve as a bridge between
shareholders and the board.
NB == There is no universally agreed Code of Good Corporate Governance. What
obtains usually is a set of rules laid down to be followed by Companies. NEPAD AND
OECD
GERMAN MODEL OF CORPORATE GOVERNANCE
The Germans operate a two tier of Directorship – Directors (Vorstand) who are
directly managing the affairs of a company and a Supervisory Board (Aufsichsrat)
which oversees the acts of the Directors. This is embedded in the structure and
management of public companies

SOME INT’L BEST PRACTICES FOR CORPORATE GOVERNANCE.

1. If possible the German model of two tier of directorship should be
recommended and adopted by other countries i.e. management board and
Supervisory Board.
2. Offices of CEO/Managing Director and Chairman of a company should no
longer be fused.
3. Tenure of office of CEO should be fixed to prevent perpetuation.
4. Board of Directors should include a balance of Executive and Non – Executive
Directors.
5. Transparency in procedure for appointment of auditors
6. Limitation of the number of shares that can be owned by a member.
7. Regular re-election of Directors (S.248 CAMA)
8. Ensure transparent relationship between external and internal auditors of a
company to avoid cooking the books of the company’s financial transactions.
9. No individual should unduly hold large number of shares in large companies-
S95 CAMA states that person who has at least 10% unrestricted voting rights
at a general meeting in a public company shall give notice in writing to the
company within 14 days after the person becomes aware that he is a
substantial shareholders. A fine of N50 payable for every day during which
the default continues
10. Rules of corporate democracy and sovereignty must be follow
11. Transparency, Accountability and Credibility in the management of a
company.
12. The interests of shareholders and stakeholders of the company must be
protected.
13. S. 300 CAMA: Members Direct Action to protect the rights of the minority
shareholders.
14. Regular and continuous scrutiny of the financial transactions of the company
by persons independent of the company i.e. Auditors
15. The mode of arriving at decisions must follow due process. This means that
the decisions are to be taken at duly convened meetings at which requisite
notices had been given to members-S 211 – 215 CAMA.
16. The Provision of a Director acting as a Secretary ought not to be abused.
S. 294 CAMA provides that the Director may act as a Secretary but cannot act
in both capacities at the same time e.g. signing a document.

POSSIBLE SUPRISE EXAM AREA

Find out the international benchmark on good corporate governance i.e. the
minimum standard of practices to ensure good corporate governance
Using CBN Code of corporate Governance and CAMA
How far or not has the international best practices been entrenched in Nigerian law
Task- Propose the law school centenary model of corporate governance in
Nigeria.

International Best Practice

Organisation for Economic Co-operation and Development Benchmark
 CEO and Chairman of the Board should not be occupied by one individual.
Compare with Rule 5.1(b) of the Corporate Governance Code for Public
Companies
 Ensure tenure of office of CEO to prevent self perpetuation
 Every company should be headed by an effective board of directors
 There should be formal, rigorous and transparent procedure for the
appointment of new directors to the board
 All directors should be submitted for re-election at regular intervals subject
to continued satisfactory performance
 No individual should hold unduly large number of shares in large numbers.
The percentage should be pegged
 The relationship btw interval and external auditors should be formal and
transparent to prevent compromised financial practices leading to ‘book
cooking’.
 In the preparation of financial records, up-to-date accounting standard must
be consistently applied
 The rules of corporate democracy and corporate sovereignty should always
be observed in reaching corporate decisions

In Nigeria, the move to corporate governance started by Industry regulation e.g.

CBN (CEO cannot be more than 10 years in office). Get a copy of the 2011 Code from
SEC and see how it aligns with OECD benchmark on corporate governance. Look at
CAMA to see which provisions contradict or align with the 2011 Code.

Corporate Social responsibility: the World Business Council for Sustainable

Development defines CSR as the continuing commitment by business to behave
ethically and contribute to economic development while improving the quality of
life of the work force and their families as well as the local community and the
society at large. It is also called corporate conscience, corporate citizenship,
company’s sense of responsibility
NB: must separate charity (sense of helping someone) from corporate social
responsibility (something done as part of the ethics of business)
Measures to enhance good corporate social responsibility

CSR Obligations
CSR Framework in Nigeria will require companies/corporations to:
 Contribute to economic, social and environmental progress with a view to
achieving sustainable development of affected communities
 Respect the human rights of those affected by their activities in keeping with
Nigeria’s international obligations and commitments
  Encourage local capacity through close co-operation with local community,
including local business interests, as well as developing appropriate linkage
lines of their corporate activities to the benefit of the communities
 Develop and apply effective self-regulatory practices and management
systems that foster a relationship of confidence and mutual trust btw
enterprises and societies in which they operate.
 Support and uphold good governance principles and practice
 Abstain from any improper involvement in local political activities

CBN: Code of Corporate Governance for Banks in Nigeria Post Consolidation

 The Board should meet regularly, at least 4 regular meetings in a financial
year. There should be adequate notice for all Board meetings, as specified in
the Memoart
 MD/CEO (Head of management) and Chairman (Head of the Board to be
separate
 No two members of the same extended family should occupy the position of
Chairman and CEO/Executive Director of a bank at the same time.
 Government direct and indirect equity holding in any bank shall be limited to
10%. An equity holding of above 10% by any investor is subject to CBN’s
prior approval.
 The number of non-executive board directors should be more than that of
executive directors subject to a maximum board size of 20 directors
 A committee of non-executive directors should determine the remuneration
of executive directors
 Non-executive directors should not remain on the board of a bank
continuously for more than 3 terms of 4 years each (12 years)
 When board directors and companies/entities/persons related to them are
engaged as service providers or suppliers to the bank, full disclosure of such
interests should be made to the CBN
 The Board Credit Committee should have neither the Chairman of the Board
nor the MD as its chairman
 Internal auditors should be largely independent and be a member of a
relevant professional body

Code of Corporate Governance for Public Companies – for listed public companies
 Membership of the Board should not be less than 5
 Majority of the Board should be non-executive directors, at least one of
whom should be independent directors
 The Chairman of the Board should be a non-executive director
 The Board should be independent of Management to enable it carry out its
oversight function in an objective and effective manner
 Not more than two members of the same family should sit on the board. No
such provision in CAMA
 Company secretary selected through a rigorous selection process. The board
in addition to the Audit Committee required by CAMA establish a
Governance/Remuneration Committee and Risk management committee and
 such other committees as the Board may deem appropriate depending on the
size, needs or industry requirements of the company
 To effectively perform an oversight function and monitor management’s
performance, the Board should meet at least every quarter.
 Every director should be required to attend at least two-thirds of all Board
meetings.

Code of Corporate Governance for Public Companies 2011

4.2 (Code 2011): states that the board of directors should not be less than 5 but
CAMA states that board of directors should not be less than 2. Cannot be a listed
public company on the stock exchange if less than 5 directors

No classification as to different types of directors in CAMA but this is done in the

Code as well as the differences and relationship between the different types of
directors
See section 259 CAMA: at the first annual general meeting, all directors shall retire
which is in line with Code 2011

Qualification of executive directors: he must have the necessary qualifications

duty of care and skill in CAMA. Code 2011 just give details on what amounts to care
and skill (reinforces CAMA)
CAMA is silent on the issue on whether you can merge the position of Chairman and
CEO but Code 2011 is clear that these posts must be occupied by separate people.

6.1(d) Directors should not be members of Board of companies in the same industry
– not expressly stated in CAMA

2014 past question of corporate governance

Mr Mike Ijesha aged 75, a business mogul has concluded plans to invest in the
Banking sector in Nigeria. In furtherance of this, he has consulted you to facilitate
the incorporation of New Age Bank (Nig) Plc. He intends to take 80% of the
company’s total 25 billion ordinary shares of N1 each with his wife Mrs Sarah Ijesha
in proportion 60:40. Mr and Mrs Ijesha intend also to be the only directors of the
company. They intend to serve as MD/CEO and Executive Director (Finance and
Operation) respectively. Mr Ijesha has appointed Miss Clara Ijesha his daughter and
an undergraduate law student to be the company secretary. He intends to remain
director till he is 90 years and does not want any other person that is not in his
immediate family to join the board of directors or become a shareholder.
Questions
1) In the light of international benchmark on good corporate governance as adopted
in Nigeria, advise your client
 Corporate governance rules applies in this case
 Must disclose your age of directors before the members in a general meeting
 Can be the MD and CEO, the only thing the benchmark bars is CEO and
Chairman being the same person. The MD/CEO should be executive, and the
 Chairman should a non-executive director. Must be an equal mix of executive
and non-executive. All other operational directors should be executive
 Not more than two members of a family should be part of the board of
directors
 There should be 5 directors
 As a bank, the directors have to be qualified. Are Mr & Mrs Ijesha qualified?
 Is Miss Ijesha qualified to be a company secretary?
 Bank is a public entity – 80% is outrageous. Code of corporate governance
for banks, the maximum you can hold is 5% for individuals, institutions and
governments is 10%
 10 yrs for any CEO to hold office – CBN rules
Age, banking, quantum of shares held, ratio of share distribution, the only directors
in the company, serving as MD/CEO and Executive Director, intends to remain
director till 90yrs – only executive directors in the company, cannot be a director for
life (must resign and be re-appointed)

NB: can raise funds for private placement. A member of the public makes an
application to get shares in the company (and not the private company offering
shares to the public). In such a case, the corporate governance code will apply.

OECD, 2011 Code, CBN Code and CAMA

WEEK 11: OFFICERS OF A COMPANY: DIRECTORS AND SECRETARY

Section 63(1) CAMA: A company shall act through its members in general meeting
or its board of directors or through officers or agents, appointed by, or under
authority derived from, the members in general meeting or the board of directors.

Section 244(1) CAMA: Directors of a company registered under this Act are persons
duly appointed by the company to direct and manage the business of the company.

Section 567: "director" includes any person occupying the position of director by
whatever name called; and includes any person in accordance with whose
directions or instructions the directors of the company are accustomed to act;

Section 245(1): Without prejudice to the provisions of sections 244 and 250, and
for the purposes of sections 253, 275 and 281 of this Act, "director" shall include any
person on whose instructions and directions the directors are accustomed to act.
(Constrains a shadow director to interpreting sections 253, 275 and 281).

Section 245(3) CAMA: For the avoidance of doubt, the fact that a person in his
professional capacity gives advice and a director acts on it shall not be construed to
make such a person under this Act a person in accordance with whose directions or
instructions the director of a company is accustomed to act.
 Implication of not being appointed as a director

 Where a person not duly appointed as director acts or holds himself out as
having been duly appointed without the concurrence of the company, then:

 Criminal liability: s244(3) CAMA, he shall be guilty of an offence and on

conviction be liable to imprisonment for 2years or to a fine of N100 for each
day he so acts or holds out himself as a director, or to both such
imprisonment or fine and shall be restrained by the company

 Civil liability: s250 CAMA – his act shall not bind the company and he shall be
personally liable for such action; provided that where it is the company
which holds him out as director the company shall be bound by his acts

Section 68 on presumptions: Except as mentioned in section 197 of this Act,

regarding particulars in the register of particulars of charges, a person shall not be
deemed to have knowledge of the contents of the memorandum and articles of a
company or of any other particulars, documents, or the contents of documents
merely because such particulars or documents are registered by the Commission or
referred to in any particulars or documents so registered, or are available for
inspection at an office of the company.

Read section 68 in conjunction with section 244(3)

Director is the alter ego of a company-YALAJU AMAYE V.AREC

TYPES OF DIRECTORS OF A COMPANY

1. EXECUTIVE DIRECTORS
They are full timed or salaried Directors who are appointed to take charge of day-
to-day running of company affairs. They occupy dual status as alter ego as well as
an employee of the company and thus has contract of service
As an alter ego he sits at Board meetings formulating policy directions for the
company, and as an employee, he is in charge of implementation of the policies of
the company.

2. MANAGING DIRECTORS/CEO
 He is usually either appointed from among the Directors or from the employees
of the company to oversee the management of the day-to-day business of the
company.
 Once appointed, he is regarded as an employee of the company.
 Dual position as an employee and alter ego-LEE V.LEE FARMING CO
 Board of Directors can delegate its functions to him-S.64 CAMA. Unless
otherwise provided in this Act or in the articles, the board of directors may‐(a)
exercise their powers through committees consisting of such members of the
body as they think fit; or (b) from time to time, appoint one or more of their
body to the office of managing director and may delegate all or any of their
powers to such managing director.
  He is removable by the Board of Directors as the managing director if appointed
from amongst the directors but will still remain a Director of the company
unless he is removed in pursuance to section 262 of CAMA.
 Section 263(5) CAMA: The 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 the managing director or any committee so
formed shall, in the exercise of the powers so delegated, conform to any
regulations that may be made by the directors.

3. ALTERNATE DIRECTOR
 This is the Director who is appointed to take the position of another Director in
the event of absence.
 It is the Director that appoints his alternate but is approved by the resolution
of the General Meeting i.e. director appoints alternate to attend board
meetings when he cannot attend
 There must be a provision in the Articles of Association of the company
recognising the possibility of creating this position.
 The Alternate Director ceases to hold office whenever the substantive Director
ceases to hold office

4. LIFE DIRECTOR
Section 255 CAMA: This is a person appointed a director for life as a director of the
company, which means that he is not subject to the rotation of directors but he is
removable under S. 262 of CAMA or where he is disqualified or vacates the office

5. NOMINEE OR REPRESENTATIVE DIRECTOR

Where a company is a Director in another company, the company is obliged to
appoint a nominee to represent it in the Board for a fixed period.
Upon filing returns at CAC, the company files the name of the representative of the
Director – company

6. SHADOW DIRECTOR
This is a person who is not expressly made a director of a company but in
accordance with whose directions the real directors of the company are accustomed
to act. S. 245 of CAMA. One is considered a shadow director for the limited
purposes as provided in Ss. 253, 275 and 281 CAMA .It arises when considering the
above sections only. NOTE- nobody appoints him
An Exception to the above rule is professionals engaged by the company to advise
it.

7. CHAIRMAN
He presides over the Board and General meetings of the company and he is also a
director. S. 239 and 240 of CAMA. Section 263(4) CAMA: The directors may elect
a chairman of their meetings and determine the period for which he is to hold office;
but if no such chairman is elected or if at any meeting the chairman is not present
within one hour after the time appointed for holding the same or he is unwilling to
 act, the directors present may choose one of their number to be chairman of the
meeting.

8. NON-EXECUTIVE DIRECTORS
He is duly appointed and carries out affairs of the company. Not involved in the day-
to-day management and he is not an employee. These are part-time directors who
are not entitled to remuneration but only reimbursement for their out of pocket
expenses in carrying out the company affairs EXCEPT as provided in the ARTICLES
OF ASSOCIATION
CAMA recognises executive and non-executive directors e.g. section 282(4) states
that the same standard of care in relation to the director's duties to the company
shall be required for both executive and non‐executive directors

9. FIRST DIRECTORS
S. 247 CAMA: Subject to section 246 of this Act, the number of directors and the
names of the first directors shall be determined in writing by the subscribers of the
memorandum of association or a majority of them or the directors may be named in
the articles.

10. CASUAL DIRECTOR

Where there is a vacancy arising out of death, resignation, retirement, or removal of

a Director, the Board of Directors shall appoint new persons to fill any such casual
vacancy subject to approval by the members in general meeting and if not approved,
he shall cease to be a director -S. 249(1)&(2)
NOTE-The new appointee steps into the shoes/tenure of the removed or dead or
retired director. He merely enjoys the unexpired residue of the term of the initial
director.
POSSIBLE EXAM QUESTION-Discuss the types of directors and persons who
appoints them

NUMBER OF DIRECTORS
The minimum number of directors of a company is 2 directors: section 246 of
CAMA.

DUTY OF COMPANY WHERE DIRECTORS BELOW THE MINIMUM-If less than 2

directors, that is one director, is running a company more are to be appointed
WITHIN 1 MONTH OF falling below the requirement of 2 directors.(S.246(2)
CAMA.

LIABILTY- A director or member of a company who knows that a company carries

on business after the number of directors has fallen below two for more than 60
days shall be liable for all liabilities and debts incurred by the company during that
period when the company so carried on business: s246(3) CAMA
Section 249(3): 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: Provided that such reduction
shall not invalidate any prior act of the removed director.

APPOINTMENT OF DIRECTORS (exam area)

This depends on the time of their appointment as follows:
1. Appointment of First Directors:
These are directors appointed at the point of incorporation of the company by the
SUBSCRIBERS. It is either
a. Stated in writing by the subscribers of the memorandum of association or a
majority of them; or
b. Directors may be named in the Articles-S. 247

DRAFT OF INSTRUMENT OF APPOINTMENT OF FIRST DIRECTORS

That _______________(names) of ______________________(address) being adults of less than
70 years of age, having been nominated, are hereby appointed as first Directors of
_________ (name of proposed company), by the subscribers to the Memorandum and
Articles of Association of the within named company.
DATED THIS _____ DAY OF _________ 20 ____

________________ ________________
Subscriber Subscriber
2. Appointment of Subsequent Directors
These are Directors appointed after the company is incorporated and while the
company is operating in ordinary course of business.
The members at the annual general meeting shall have power to re-elect or reject
directors and appoint new ones.-S. 248(1). If articles excludes rotation rule (i.e. the
directors don’t retire at the AGM), members can reject directors by removal
Upon appointment of subsequent directors, the company shall file at the CAC FORM
CAC 7A(Change in Particulars of Directors) within 14 days of the change – check
section on CAMA accompanied with the resolution of the appointment.
3. Appointment of Directors after Death of all Directors and Shareholders
(exam area)
Any of the personal representatives of the dead Directors and shareholders
shall apply to the Federal High Court for an order to convene a general meeting
of all the personal representatives of the shareholders entitled to attend and vote
at general meeting to appoint new directors.
Where they fail to convene the meeting; the creditors if any, shall do so S. 248 (2)
Note- Power can be conferred on an outsider to appoint or remove directors in the
memorandum or articles and that power is enforceable: S. 41 (3) of CAMA and
WOODLAND V. LOGAN.

Section 249: (1) The board of directors shall have power to appoint new directors
to fill any casual vacancy arising out of death, resignation, retirement or removal.
(2) Where a casual vacancy is filled by the directors, the person may be approved by
the general meeting at the next annual general meeting, and if not so approved, he
shall forthwith cease to be a director.

Section 259(4): No person other than a director retiring at the meeting shall, unless
recommended by the directors, be eligible for election to the office of director at any
general meeting unless not less than 3 nor more than 21 days before the date
appointed for the meeting there shall have been left at the registered office or head
office of the company notice in writing, signed by a member duly qualified to attend
and vote at the meeting for which such notice is given, of his intention to propose
such person for election, and also notice in writing signed by that person of his
willingness to be elected.

By members (with special notice) at a meeting replacing a position of a director that

has been removed in the same meeting: s262(2) CAMA

AGE OF DIRECTOR
A director must be above 18 years of age
Section 252(1): 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. (2) Any person who fails to
disclose his age as required under this section shall be guilty of an offence and liable
to a fine of N500.

Section 256: Subject to the provisions of this Act, a person may be appointed a
director of a public company notwithstanding that he is 70 years or more of age but
special notice shall be required of any resolution appointing or approving the
appointment of such a director for the purposes of this section, and the notice given
to the company and by the company to its members shall state the age of the person
to whom it relates.

Section 236: 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 28 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 21 days before the meeting.

DEFECTIVE APPOINTMENT OF DIRECTORS

The acts of a director wrongly appointed by a company are valid notwithstanding
any defects in his appointment. S. 260 of CAMA and IWUCHUHWU V. NWIZU
CERTAIN PUBLICATIONS IN RESPECT OF DIRECTORS
1. REGISTER OF DIRECTOR’S SHAREHOLDING
By S. 275 CAMA every company shall keep a register showing in respect of each
Director the number, description and amount of any shares and/or Debentures of
the company held by him or held in trust for him.
The Register shall be kept at the company’s registered or Head office.
It shall be open for inspection during business hours to members and debenture
holders 14 DAYS BEFORE AGM AND 3 DAYS after the date of AGM. It is open for
inspection to CAC always.
2. REGISTER OF DIRECTORS AND SECRETARIES
Every company is required to keep a Register of its Directors and Secretaries past
and present in accordance with S. 292 CAMA.
The Register shall contain the following particulars
a. Present forename and surname.
b. Residential address
c. Nationality
d. Occupation
e. Date of Birth
f. Particulars of any other Directorship

3. PARTICULARS OF DIRECTORS IN TRADE CATALOGUES

Every company is required to state in legible characters, in all trade circulars, show
cards, and business letters in which the company’s name appears and which are
issued or sent to any person in Nigeria, the following particulars of every directors:
a. Present forename or initials and surname.
b. Any former forename and surname.
c. Nationality if not Nigerian.
S. 278
Default renders the officers in default liable to conviction and to N50 or fine.
DISQUALIFICATION OF DIRECTORS: s257
The following persons cannot be appointed as directors of a company:
a) Infant under 18 years of age
b) a lunatic or person of unsound mind
c) a person disqualified under sections 253, 254 and 258 of the Act
d) a corporation other than its representative appointed to the board for a given
term
For (c), when someone is barred from being a director for a period of time, he is
totally disqualified for that period. S253 (insolvent persons); s254 (guilty of fraud
in relation to company: banned for 10 years

Section 258: Vacation of office of director

(1) The office of director shall be vacated if the director‐

(a) ceases to be a director by virtue of section 251 of this Act (where articles provide
for a person to hold particular number of shares to be a director); or

(b) becomes bankrupt or makes any arrangement or composition with his creditors
generally; or
(c) becomes prohibited from being a director by reason of any order made under
section 254 of this Act; or

(d) becomes of unsound mind; or

(e) resigns his office by notice in writing to the company.

Also expiration of tenure as fixed by the relevant regulatory body e.g. CBN rule of
10years for bank CEOs

Section 63(5): Notwithstanding the provisions of subsection (3) of this section, the
members in general meeting may‐ (a) act in any matter if the members of the board
of directors are disqualified or are unable to act because of a deadlock on the board
or otherwise (difficult to reconcile this position of deadlock since the Chairman has
the casting vote). Section 263(2): Any question arising at any meeting shall be
decided by a majority of votes, and in case of an equality of votes, the chairman shall
have a second or casting vote

Section 253 CAMA: If any person, being an insolvent person, acts as director of or
directly or indirectly takes part in or is concerned in the management of any
company, he shall be guilty of an offence and liable on conviction to a fine of N500,
or to imprisonment for a term not less than six months or more than two years, or
both.

S. 254: restraint of fraudulent persons

(1) Where‐

(a) a person is convicted by a High Court of any offence in connection with the
promotion, formation or management of a company; or

(b) in the course of winding up a company it appears that a person‐

(i) has been guilty of any offence for which he is liable (whether he has been
convicted or not) under section 513 of this Act; or

(ii) has otherwise been guilty, while an officer of the company, of any fraud in
relation to the company or of any breach of his duty to the company, the court shall
make an order that that person shall not be a director of or in any way, whether
directly or indirectly, be concerned or take part in the management of a company for
a specified period not exceeding 10 years.

VACATION OF OFFICE OF A DIRECTOR

S. 258 deal with the circumstances when the office of a director shall be vacated viz;
Bankruptcy,
Insanity,
Resignation,
Prohibition under S. 254
 Ceasure under S. 251 share holding qualification.

SHARE QUALIFICATION FOR APPOINTMENT AS A DIRECTOR

This will be mandatory to fulfil if the Articles of Association of the company so
require it but it is not a condition to be fulfilled under the Companies and Allied-
Matters Act: S. 251 of CAMA

RETIREMENT/ ROTATION OF DIRECTORS

If no provision on the retirement or rotation of directors is made in the Articles of
Association of a company, then the provisions of the Companies and Allied Matters
Act can apply which are as follows:
I. At the first Annual General Meeting (AGM), all the directors (excluding life
directors) are to retire.
II. In subsequent AGMs, one-third (1/3) of the directors or if their number is
not three or a multiple of three, then the number nearest one third shall retire
from office- SECTION 259 (1)
III. Retirement is by Rotation according to the number of years spent as director
in office; those who have been longest in office since their last election
shall retire (First in First out): section 259(2)
IV. The company at the meeting at which a director retires in the manner
mentioned in subsections (1) and (2) of this section, may fill the vacated office
by electing a person to that office and in default, the retiring director shall, if
offering himself for re‐election, be deemed to have been re‐elected, unless at
such meeting it is expressly resolved not to fill such vacated office or unless a
resolution for the re‐election of such director shall have been put to the
meeting and lost: s259(3)
V. No person other than a director retiring at the meeting shall, unless
recommended by the directors, be eligible for election to the office of director
at any general meeting unless not less than 3 nor more than 21 days before
the date appointed for the meeting there shall have been left at the registered
office or head office of the company notice in writing, signed by a member
duly qualified to attend and vote at the meeting for which such notice is given,
of his intention to propose such person for election, and also notice in writing
signed by that person of his willingness to be elected: S. 259(4) of CAMA. No
need to sign if it is the board proposing it.
VI. Section 258(2): Where a director presents himself for re‐election, a record of
his attendance at the meetings of the board during the preceding one year
shall be made available to members at the general meeting where he is to be
re‐ elected.
VII. Where two or more directors are appointed the same day are to retire, retirement
shall be by casting lot unless they agree among themselves who should retire: S.
259 (2)
VIII. Where a director at retirement presents himself for RE-ELECTION then
whether the company is silent or not, he is deemed to have been re-elected as a
director, unless there is a resolution shifting the telling of vacancy or rejecting
 him or another director has been elected in his place. NOTE-where he is deemed
to be re-elected as director, he is the newest in office.
IX. A person appointed to replace a removed director continues the tenure of the
person removed. S. 262(5)

EXCEPTIONS TO RETIREMENT AND ROTATION RULE

a. If the Articles of Association exempt the rule S. 259(1) CAMA
b. A Life Director is not affected by the rule.

REMOVAL OF DIRECTORS – s262 CAMA – ordinarily a last resort

Section 262(1): A company may by ordinary resolution remove a director before
the expiration of his period of office, notwithstanding anything in its articles or in
any agreement between it and him.

The procedure is:

I. Send a special notice (not less than 28 before the meeting to the company
and company to send to members not less than 21 days before the
meeting, see S. 262 of CAMA)
II. Send a copy of the Notice for his removal to the director concerned
III. The director is to make representations in writing as to his defence on the
grounds on which he is sought to be removed or if he failed to, he is to be
allowed to be heard orally at the meeting of the company (whether or not he is
a member of the company) where he is to be removed
IV. Where the representations are made in writing, the said director may request
that such representations be made available to the members
V. The company shall inform the members (to whom notice of the meeting is sent)
of the fact of such representation having been made and make same available to
members provided that: it is not received by it too late; they do not exceed a
reasonable length
VI. Where the representations are not made available to members for reason of
receiving it too late, the director can request for the written representation to
be read. This does not derogate from his right to make oral representations
VII.Copies of the representations need not be sent out and the representations
need not be read out at the meeting if, on the application either of the company
or any other person who claims to be aggrieved, the court is satisfied that the
rights conferred by this section are being abused to secure needless publicity
for defamatory matter and the court may order the company's costs on an
application under this section to be paid in whole or in part by the director,
notwithstanding that he is not a party to the application.
VIII. The meeting is to pass an ordinary Resolution for his removal.
IX. Secretary to fill Form CAC 7A-Particulars of Directors containing the
particulars of the directors of the company after the removal to be filed at the
CAC WITHIN 14 DAYS of the passage of the Resolution, attached with the said
Resolution.
X. The company is to make the changes in its Register of Directors and Secretary.
S. 262 of CAMA.
Nb- A director cannot be suspended-LONGE V FBN
Replacing a removed director
 At the same meeting by the members – section 262(2) or
 By the directors filling the vacancy as a casual vacancy at the board of
directors’ meeting
 Calculation of tenure of office of an individual appointed in the place of a
removed director – s262(5) including life directors

THE EFFECT OF NON-COMPLIANCE WITH THE PROCEDURE OF REMOVAL OF A

COMPANY’S DIRECTOR
A director who is removed not in accordance with the procedure under the
Companies and Allied-Matters Act, the removal will be INVALID AND VOID.
Such will be SET ASIDE.
LONGE V. FIRST BANK PLC,
YALAJU-AMAYE V. AREC and IWUCHUKWU V. NWIZU
Shadow director: Whenever the directors stop taking instructions from him, he
ceases to be a director. When the person who is the MD is removed as a director, he
cannot remain the managing director
YALAJU AMAYE V.AREC: when you remove a MD in that special office, he remains a
director.

Can articles state that Mr A can never be removed as a director? No by virtue of

section 262(1): A company may by ordinary resolution remove a director before
the expiration of his period of office, notwithstanding anything in its articles or in
any agreement between it and him.

Can articles state that Mr A can never be removed except at the general meeting?
Lecturer answers in the negative as the removal of directors is not a special matter
at AGM so why should it be restricted to AGM.

Longe v First Bank (2010): if a person has been appointed MD, how do you
remove him? Is it s262 or otherwise. Can a MD be suspended? In what ways can you
remove a director (is it only by s262 or other recognised ways)?
Supreme Ct (Oputa JSC) held that a Director cannot be removed otherwise than in
compliance with s262 CAMA. Possible that His Lordship was interested in the justice
of the case as in the meeting where he was removed, Longe was not given notice of
meeting. Cannot refuse to give notice of meeting because Longe was suspended.
Also the letter of suspension didn’t really look like suspension. It stated Longe
should leave all other official work and go and recover the loan
Before Longe decision, an executive director could be removed from office based on
his employment contract.
An advertisement by First Bank subject to their articles empowering the board of
directors (deriving from s64 to permit the company to delegate all or any of its
functions to the board or MD) to appoint any person who appears competent and
possess the requisite skill to the position of an executive director including MD.
Longe was one of the applicant and he was successful. Board was empowered by
 articles to set conditions of service including remuneration, length of notice for
disengagement etc. Problems arose and company was not satisfied with the
competence employed in handling the Econet licensing matter. The Board decided
to place the MD on suspension. Is the concept of suspension of director known to
Nigerian law? Which law? Under CAMA, nothing like suspension for directors but
also nothing like executive director in CAMA. As an executive director, company law
and labour law apply. In labour law, there can be suspension of an employee (CT of
Appeal). An executive director cannot take the benefit of employment contract and
avoid the incidence of their obligation express in the contract and implied (under
common law). CT of Appeal found in favour of First Bank as Longe was not served
with notice of meeting while at suspension and at this meeting, he was removed. CT
of Appeal allowed it to stand. Section 266: renders null and void a meeting of the
board excluding any member who is entitled to attend who has not been served
notice and that he should have been removed in compliance with the CAMA and that
he remains a director notwithstanding the suspension. Supreme CT held that the CT
of Appeal was wrong as once you are a director, the incidence of the principles of
common law of labour law will not apply and will not avail the company to place a
director on suspension or exclude a suspended director of notice of meeting.
Therefore, a director can only be removed as provided for in s262 (this decision
looks per incuriam). SC held that he should be reinstated almost 10yrs after the
incidence and paid back payment of his salary. (Basically SC forced a servant on a
master)

Compare section 262(1) and section 262(2)

Section 262(1): A company may by ordinary resolution remove a director before
the expiration of his period of office, notwithstanding anything in its articles or in
any agreement between it and him.
Section 262(6): Nothing in this section shall be taken as depriving a person
removed under it of compensation or damages payable to him in respect of the
termination of his appointment as a director or of any appointment terminating
with that as director, or as derogating from any power to remove a director which
may exist apart from this section.

YALAJU AMAYE V.AREC: Yalaju was one of the first directors appointed (s247) and
later he was employed as the MD of the company. He was removed as MD. The
question was should he be served notice of board of directors. Is removal of office of
MD automatic removal from board of directors? Supreme CT held in the negative.
Therefore, he held dual status while he was MD. Even after removal as MD, he was
still a director and entitled to be served notice of meeting of the board

REMEDIES FOR WRONGFUL REMOVAL OF A DIRECTOR

1.A declaration that the removal was wrongful hence void-AWOYEMI V. SOLOMON
2.Seek for an Order of Court re-instating him as a director
3.Pray for an Order of compensation for breach of service contract
4.Compensation for loss of office-S.262(6)
5.Seek for damages for the unlawful removal
6.The company can approve a non-contractual compensation to the director wrongly
removed - S. 271 of CAMA
SOUTHERN FOUNDARIES V. SHIRLEY

REMUNERATION OF DIRECTORS
 Generally, every director of a company is not entitled to remuneration for
services rendered to the company EXCEPT expressly stated in the Articles and
Service Contracts or fixed by the General meeting-SECTION 267(4)
 Section 267(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.
 EXCEPTION-However, Directors may be paid for out of pocket expenses i.e.
travelling, hotel and other expenses properly incurred in attending meetings
or in connection with business of the company. S. 267(2) e.g. Chairman,
alternate and non-executive directors
 Section 267(3): Where remuneration has been fixed by the articles, it shall be
alterable only by a special resolution
 NOTE-Executive Directors are employees, thus have service contracts, which
would provide for remuneration. Thus, Non –Executive Directors require
express provision in the Articles or resolution to be able to earn remuneration.
Director’s remuneration is also apportionable-S. 267(7)
 The amount of remuneration shall be a debt from the company, so directors can
sue the company on account of the debt or prove it in the liquidation-S.
267(5)
NOTE-A director who receives more money than he is entitled to shall be guilty
of misfeasance and shall be accountable to the company for such money –
section 267(6)

REMUNERATION OF MANAGING DIRECTOR

 The Managing Director’s remuneration is AUTOMATIC upon appointment and
is not subject to Articles or General meeting.
 Thus, 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 other directors may determine-S. 268(1)
 A managing director remuneration is taxable under S. 269 CAMA.
 He shall be entitled to payment on a Quantum Meruit where he performs some
services without a contract – S. 268 (3)
 Where a director is removed under S. 262 he shall have a claim for
compensation for breach of contract – S. 268(2)

DUTIES OF DIRECTORS
By S. 283(1) CAMA, the basic legal position of Directors is that they are trustees of
the company as well as its agents.
The duties of Directors are classified into two broad headings.
 a. Fiduciary Duties (to company and shareholder and any person dealing with
company securities)
Breaches = secret profit, acted in his benefit and not that of company, refused to do
a thing because he wants an advantage to accrue to him
 b. Duties of care and skill – measured according to the qualification and skill of
the directors – reasonable and prudent director in the shoes of the director

A.FIDUCIARY DUTIES
Directors owe fiduciary duties to the following persons:
i. Company to which it must observe utmost good faith in any transactions
with it or on its behalf.
ii. Shareholders when acting as shareholders’ agent.
iii. Shareholder in any transaction affecting his interest.
iv. Any person dealing with the company’s securities-Section 279(1)&(2)
THE FIDUCIARY DUTIES OF DIRECTORS
a. Duty to act bona fide for the benefit of the company.
b. Exercise power for proper purpose: s279(5)
c. Not to fetter discretion to vote in a particular way: s279(6)
d. Not to conflict duty and interest.
e. Not to make secret profits by appropriating corporate assets or
opportunities.

A.DUTY TO ACT BONAFIDE FOR THE BENEFIT OF THE COMPANY

 A director shall act at all times in what he believes to be the best interest of the
company as a whole- S. 279(3); ARTRA IND. NIG. LTD V. NIGERIAN BANK FOR
COMMERCE AND INDUSTRY
 The interest of employees and members is to be considered S. 279(4)

B.DUTY TO EXERCISE POWER FOR A PROPER PURPOSE

 A director shall exercise his power for the purpose for which it is specified and
shall not do so for a collateral purpose.
 However, such powers when exercised for proper purpose is VALID even if it
incidentally affected a member adversely. S. 279(5)
C.DUTY NOT TO FETTER DISCRETION TO VOTE IN A PARTICULAR WAY
 A director is a trustee of the company as such he shall not exercise his discretion
to vote in a particular way WITHOUT the consent of the company, being the
Beneficiary. S. 279(6) CAMA
 Therefore, a Director cannot make a valid agreement among other Directors
with shareholders or outsiders to vote in a particular way at Board meetings.

D.DUTY NOT TO CONFLICT DUTY AND INTEREST

 The personal interest of a director shall not conflict with any of his duties as a
director-S. 280 (1)
 Any director of a company who is in any way whether directly or indirectly,
interested in a contract or proposed contract with the company, shall declare the
nature of his interest at a meeting of the directors of a company-S. 277 (1)
 For a proposed contract, the director shall declare his interest at a Board
meeting where the contract was first considered; where not interested on that
date, the next meeting held after he became so interested S. 277(2)
NB -A director is prohibited from entering into guarantee or provision of
security with the company. S. 270(1)
 Payments made to a director by way of compensation for loss of office or
retirement must be disclosed to members in general meeting and approved by
them-S. 273
 A director is restricted from the acquisition of non cash asset of the company
without approval by resolution of general meeting.-S. 284

E-DUTY NOT TO MAKE SECRET PROFITS AND EXPLOIT CORPORATE ASSETS

INFORMATION AND OPPORTUNITIES
 A director shall not accept a bribe, a gift or commission either in cash or kind
from any person or a share in the profit of that person in respect of any
transaction involving the company in order to introduce the company to deal
with such a person-S. 287 (1)
 However, if the gift is unsolicited in the form of gratitude after the transaction
has been completed, the Director may be allowed to keep the gift provided he
declares it before the Board.
 The Board’s decision approving his keeping the gift is to be entered in the
Minutes Book of Directors-S. 287(3)
 Directors are not allowed, either during or after the termination of their service
with the company to use for their own benefit anything, property, trade secret or
confidential information entrusted in them by virtue of their position.
 This duty also extends to officers who have access to such information.
 The fact that a person holds multiple directorships shall not derogate from
his fiduciary duties to each company; he is not to use information from one
company to the advantage of the other company-S. 281

CONSEQUENCES OF BREACH OF DUTY NOT TO MAKE SECRET PROFIT

 a. The director shall be accountable to the company for any secret profits or
unnecessary benefit derived by him. S. 280(3)
 b. The director may be sued by the company to recover such secret profit or
benefit. S. 287(2)
 It does not matter that the Director acted bona fide: Regal (Hasting) Ltd v.
Gulliver

DUTIES OF CARE AND SKILL

 Under the Common Law, a Director need not exhibit the performance of his
duties with a greater degree of skill than may reasonably be expected from a
person of his knowledge and experience, he is not bound to give continuous
attention to the affairs of his company. Re City Equitable Fire Insurance
Company. This was a subjective standard of care and skill. Director could
delegate his duty any how he liked. Director is not bound to give continuous
attention to the affairs of his company
 But under the CAMA, S. 282(1) introduced professionalism and objective
standard of care and skill stating that “every director shall exercise the powers
and discharge his duties of his office honestly, in good faith, in the best interest
of the company and shall exercise that degree of care, diligence and skill which a
reasonable, prudent director would exercise in comparable circumstances” (an
objective test. Section 279(7): director can delegate his duties as long as it does
not amount to an abdication of duty

EFFECT OF FAILURE
 Failure to take reasonable care can ground an action against the director for
negligence and breach of duty S. 282(2)
 Every Director is individually responsible for actions of the Board in which he is
a member. His absence unless justified does not relieve him of such
responsibility. Section 282(3)

PERSONAL LIABILITY OF DIRECTORS

Directors’ personal liabilities may arise in the following instances:
1.Misuse of loans collected by them for the company meant for some other
projects, see S. 290 of CAMA
2.When less than two (2) directors act and the company incurs debts- S. 246(3)
of CAMA
3.When the members of the company are less than 2 and the company incurs
debt.

REMEDIES
1. Termination/
Removal
2. Injunction
3. Damages
4. Rescission and
Restoration of company’s asset (traceable)
5. Account for profit
(most suitable for breach of fiduciary duties) - TIDRA
Any duty imposed on a director under this section shall be enforceable against the
director by the company: section 279(9)
NB-S. 279(8) precludes any exemption from liability which may be inserted in the
Articles or Resolution or contract of the company.

PUBLICATIONS REQUIRED OF DIRECTORS

 Register of directors’ shareholding: s275 CAMA
 Register of directors and secretary: s292 CAMA
 Publication of name and particulars in trade catalogues: s278 CAMA
PROCEEDINGS OF DIRECTORS
The first meeting of the Board of directors is to be held not later than 6 MONTHS
after incorporation of the company. - S.263 (1) of CAMA.
AGENDA OF THE FIRST BOARD MEETING
The agenda of the first Board meeting should usually contain the following:
a. Appointment of the Chairman from amongst the directors
b. Appointment of auditor
c. Appointment of secretary
d. Appointment of the managing director
e. Appointment of the solicitor of the company
f. Adoption of the common seal of the company
g. Appointment of Bankers - CASMSCB
Section 266(1): Every director shall be entitled to receive notice of the directors'
meetings, unless he is disqualified by any reason under the Act from continuing with
the office of director.

Section 263(2): Mode of voting is by majority of votes and in a case of equality of

votes, the Chairman shall have a second or casting vote

Section 263(3): A director may, and the secretary on the requisition of a director
shall, at any time summon a meeting of the directors.

Section 263(8): 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. Section 263(9): In all the directors' meetings, each director shall be entitled to
one vote. Therefore, directors in their Board meeting cannot vote by poll (i.e. based
on their number of shares).

Section 64(1)(a): board can set up committees and the committee will have a
Chairman

LENGTH OF NOTICE
Section 266(1): (1) Every director shall be entitled to receive notice of the
directors' meetings, unless he is disqualified by any reason under the Act from
continuing with the office of director.

The length of Notice of Board meetings is 14 days notice in writing unless

otherwise provided in the articles: Section 266(2) of CAMA

QUORUM OF BOARD MEETINGS

Section 264(1): The quorum of Board meetings is two (2) if the directors are not
more than 6 or 1/3 or 1/3 to the nearest number if they are more than 6
directors of the company.-S. 264 of CAMA (unless otherwise provided by the
articles)
Section 264(2): Where a committee of directors is appointed by the board of
directors, the board shall fix its quorum, but where no quorum is fixed, the whole
committee shall meet and act by a majority.

Section 265: Where the board is unable to act because a quorum cannot be formed,
the general meeting may act in place of the board and where a committee is unable
to act because a quorum cannot be formed, the board may act in place of the
committee.

Section 63(5)(a) CAMA: Notwithstanding the provisions of subsection (3) of this

section, the members in general meeting may act in any matter if the members of
the board of directors are disqualified or are unable to act because of a deadlock on
the board or otherwise;

COMPANY SECRETARY -
Section 293: every company shall have a secretary
Section 35 on the requirement for CAC for incorporation: the form for company
secretary is not there but s293 is the basis for CAC Form 2.1 insisting on a company
secretary. No penalty for not having a company secretary and default is further
encouraged by s293(2) CAMA stating that anything required or authorised to be
done by or of the secretary may, if the office is vacant or there is for any other
reason no secretary capable of acting, be done by or of any assistant or deputy
secretary or, if there is no assistant or deputy secretary capable of acting, by or of
any officer of the company authorised generally or specially in that behalf by the
directors.

But note that an officer can carry out an act that is required by law to be done by a
company secretary. This doesn’t extend to occasions where the law requires an act
to be done by a director and secretary: s294 CAMA

QUALIFICATIONS OF A COMPANY SECRETARY

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 have the requisite
knowledge and experience to discharge the functions of a secretary of a company:
s295 CAMA

PUBLIC COMPANY (PLC) – s295 CAMA

A person qualified to be appointed a company secretary may be:

(a) A member of the Institute of Chartered Secretaries of
Nigeria
(b) A Legal practitioner within the meaning of the Legal
Practitioners Act
(c) A member of the Institute of Chartered Accountants of
Nigeria or such other bodies of accountants as are
established from time to time by an Act or;
(d) Any person who had held the office of the company
secretary of a public company for at least 3 years of
the 5 years preceding his appointment in a public
company
(e) A body corporate or a firm consisting of members each
of whom is qualified under paragraphs (a)-(d)
 APPOINTMENT AND REMOVAL OF A COMPANY SECRETARY
A company secretary is appointed and removable by the Board of Directors of the
company. S.296(1) of CAMA.
Distinction btw section 296 for company secretary and 262(6) for director. The
latter seems to state that it does not take away the power to remove a director apart
from s262. The former states that removal of company secretary can only be done
subject to the provisions of this section (cannot derogate from this section).
However, see the case of Longe v First Bank where the Supreme Ct held that a
Director cannot be removed otherwise than in compliance with s262 CAMA

THE PROCEDURE FOR THE REMOVAL OF A COMPANY SECRETARY DEPENDS:

Public company: s296(2) CAMA
I. Give the affected secretary a Notice
a. Stating that it is intended to remove him
b. The proposed grounds for his removal
c. Giving him not less than 7 working DAYS to make his defence
d. Giving him the option to resign WITHIN 7 working DAYS
i. The Board may pass a Resolution for his removal if there was no reply from the
Secretary and report same at the next general meeting
ii. Where he makes a defence within 7 working days and the defence is found to be
insufficient by the board of directors, then
iii. The Board will remove him straight away on the grounds of fraud or serious
misconduct and report it to the next General Meeting – s296(3)(a)
iv. If the grounds for the removal are on any other ground except fraud, the Board will
only suspend him and await the approval of the next General meeting for his
removal. – s296(3)(b)
LONGE V. FIRSTBANK PLC
Section 296(4): Where a suspended secretary is removed by the general meeting,
his removal by the general meeting takes effect from any time determined by the
general meeting.

BINDING NATURE OF ACTS DONE BY THE SECRETARY

Previously, a company secretary is regarded as a mere servant that cannot bind the
company. BARNET HOARES & CO V. SOUTH LONDON TRAMWAYS CO
The status of a company secretary has now been improved as he can now bind the
company as an officer and alter ego of the company
-PANORAMA DEV. (GUILFORD) LTD V. FIDELIS FURNISHING FABRICS.

THE DUAL STATUS OF A COMPANY SECRETARY

A company secretary can act as both a secretary and a director of the company
but he cannot execute company documents alone if it is required to be signed by
a director and secretary - S. 294 of CAMA.

DUTIES OF A COMPANY SECRETARY

No fiduciary duty except where acting as an agent: s297 CAMA
The duties are (section 298 CAMA)
(a) Attending the meeting of the company, the board of directors and its
committees, rendering all necessary secretarial services in respect of the meeting
and advising on compliance by the meetings with the applicable rules and
regulations;

(b) Maintaining the registers and other records required to be maintained by the
company under this Act;

(c) Rendering proper returns and giving notification to the Commission required
under this Act; and

(d) Carrying out such administrative and other secretarial duties as directed by the
director, or the Company.

Section 298(2): The secretary shall not without the authority of the board exercise
any powers vested in the directors.
The duties of a company secretary BEFORE, DURING AND AFTER the company
meetings are:

DUTIES BEFORE A MEETING

1. Serve out Notice of meetings and the agendas on all members and officers of the
company
2. Receive the Notice of proxies attendance within 48 HOURS to the meeting
3. Keep the statutory records
4. To ensure the venue of the meeting is secured
5. To publish additional Notice of meeting in at least two National Newspapers

DUTIES DURING THE MEETINGS

6. To take down the minutes of the meeting
7. To ensure compliance with the Law
8. To assist the Chairman

DUTIES AFTER THE MEETING

1. To draft Resolutions of the meeting ready for filing at the Corporate Affairs
Commission
2. To prepare the minutes of the meetings to the Chairman/secretary to sign
3. To file statutory returns at the CAC required by Law
4. To update Statutory Records/ Registers kept by the company to reflect
current Resolutions.

QUERY-Can the Board of Directors remove their fellow Director?

The power to remove a director is vested only in the members in General Meeting.
Thus, the Board of Directors has no power to remove or suspend a fellow Director.
For an effective removal of a Director, the Procedure set out in SECTION 262 CAMA
must be present.
 ETHICAL ISSUES

1. Rule 7 of the Rule of Professional Conduct (RPC) 2007.

2. A director of a registered company shall not appear as an advocate in court

or judicial tribunal for his company – Rule 8(3) of RPC
GOLD PALMS LIMITED
10 KENT ROAD
IKOYI- LAGOS
NOMINATION OF FIRST DIRECTORS, SECRETARY AND SITUATION OF THE
REGISTERED OFFICE OF THE COMPANY
WE, THE UNDERSIGNED, being the subscribers of the Memorandum of Association
of the above named company hereby:
1. State that the number of directors of the company shall be four
2. Appoint ourselves to be its first directors
3. Appoint Chief Magmus Ole to be its first secretary
4. State that its registered office shall be at 12 Azu Lane Marina, Lagos.
DATED THE 10 DAY OF JANUARY 2010.
SIGNED:
1.Chief Ume ………………..
2.DanjumaDudo ………………..
3.RemiFalaye ………………..
NO. 45 LAWSCHOOL DRIVE
ABAYOMI STREET VICTORIA ISLAND LAGOS
DATE:
RESOLUTION OF ACE NIGERIA LIMITED TO APPOINT DIRECTORS
PURSUANT TO SECTION 248 OF THE COMPANIES AND ALLIED-MATTERS ACT
2004
At the 2nd Annual General Meeting of the above named company held on the 15 day
of March 2010 at the Company’s Board room, it was proposed and duly resolved as
follows:
1. That Mr. Kareem Lawrence be and is hereby appointed a director of the
company as an additional director.
2. That Mr. Nwankwo Chizoba be and is hereby appointed a director of the
company filling up the vacancy created by the resignation of Adewale Lanre as
a director.
DATED THE 10TH DAY OF MAY 2010
……………………
Mr. AlabiOtondo
No. 15 Kent Street Ikoyi Lagos
25 May, 2012.

To
The Secretary
Ace Nigeria Limited
No. 45 Law School Drive
 Abayomi street
Victoria-Island
Lagos.
Sir,
NOTICE OF REQUISITION TO REMOVE MR. KAREEM LAWRENECE AS A
DIRECTOR OFTHE COMPANY.
TAKE NOTICE that I, Mr. Alabi Otondo of the above address and a shareholder
holding not less than one-tenth (1/10) of the paid-up capital of the company, intend
at the next general meeting of the company to move a Resolution that “Mr. Kareem
Law, a director of the company, be removed from his office as a director and that
…………………………… be appointed a director in his place”.
Yours faithfully,

Mr Alabi Otondo
ABAYOMI STREET VICTORIA ISLAND LA GOS
DATE:

3. Resolution of a company removing directors

RESOLUTION FOR THE REMOVAL OF MR. KAREEM LAW AS A DIRECTOR OF
THE COMPANY PURSUANT TO SECTION 262 OF THE COMPANIES AND ALLIED-
MATTERS ACT 2004

At the Annual General Meeting of the company held on the 10 day of June 2012 at
the company Conference Room, it was duly proposed and resolved as follows:
1.That Mr. Kareem Law be, and he is hereby removed from office as a director of the
company and that ………………………… be, and he is hereby appointed as a director of
the company in his place to hold office only during such time that Mr. Kareem Law
would have held office if he had not been removed.
DATED THE 11THDAY OF JUNE 2012
…………………… ………………………….
Director Secretary
ABAYOMI STREET VICTORIA ISLAND LAGOS
RESOLUTION OF THE BOARD OF DIRECTORS
APPOINTING A SECRETARY OF THE
COMPANY PURSUANT TO SECTION 296 OF THE COMPANIES AND ALLIED-
MATTERS ACT 2004
At the Board of Directors meeting of the above named company held on the 10 day
of May 2012 at the Board Conference Room of the company, it was duly proposed
and resolved as follows:
1.That Mr Owonikoko Abiodun, a chartered Secretary, be and is hereby appointed a
secretary of the company at a salary of N100,000.00 per annum, and that Mr.
……………… be authorised to sign on behalf of the company a Service Contract for his
engagement as approved by the Board.
DATED THE 13TH DAY OF MAY 2012.
…………………… ………………………….
Director Director
5.Notice of Board of Directors’ intention to remove a secretary
To
Mr. OwonikokoAbiodun
No.15 Broad Street
Bariga Lagos State.

Sir,
NOTICE OF BORAD OF DIRECTORS’ INTENTION TO REMOVE YOU AS THE
COMPANY SECRETARY PURSUANT TO SECTION 296 OF THE COMPANIES AND
ALLIED-MATTERS ACT 2004
You are hereby given Notice of the Board’s intention to remove you as the secretary
of the company for failing to file statutory returns to the Corporate Affairs
Commission for a period of six months now.
You are given a period of seven (7) working days to make your defence or
alternatively to put in a Notice of your resignation to the Board.
Yours faithfully,
Chairman
By Order of the Board
WEEK 12
MEMBERSHIP, MEETINGS AND RESOLUTIONS
MEMBERSHIP OF A COMPANY
A member is a person who has subscribed to the memorandum of a company or any
person who has agreed in writing to become a member of a company and whose
name is entered in the register of members. SECTION 79(1)&(2) CAMA.
A person who subscribes to the memorandum becomes a member on the
incorporation of the company. They are deemed to have taken the shares set
opposite their names
-An infant can be a member of a company only if there are two (2) other adult
subscribers. S. 20 of CAMA. The minimum number of the members of a company is
two (2).
The maximum number depends on the type of company as follows:
Plc- no limit
Ltd.-not above 50 members
A company may take shares and be a member of another company and be attending
the meetings of the other company by a representative authorised by resolution of
its directors. SECTION 231

NB-a company can subscribe to the MEMO if its signs through its
SECRETARY/MD/AUTHORISED OFFICER.
A company in liquidation is disqualified from been a member of a proposed
company-SECTION 80(3)

HOW TO BE A MEMBER OF A COMPANY

It can be by any of the following:
1. Membership by subscription only available to the first subscribers, promoters.
2. By Allotment and being placed on the register of members.-S.125&129.
Allotment is the application for shares in a company by desirous members of
the public. The company (board of directors) where it accepts the offer will allot
shares to the person within 42 days via letter of allotment: s125(1) CAMA.
Within 2 months after allotment, issue a certificate of allotment: s146(1). Then
your name has to be written in the register of member.
3. Transfer of shares (SALE) from existing shareholders and being placed on the
register of members.-S.151&152 CAMA. Assignment of shares held in a
company by the holder of the shares called transferor or to another person with
whom agreement has been reached known as the transferee as gift or with
consideration. Upon the transfer, steps are taken to register the transfer with
the company so that the name of the transferor is substituted with the name of
the transferee: s152, a part of the shares held by a member may be transferred.
New share certificate for transferee: 3 months (s146(1))
Rectification of the register of members
 S90 CAMA rectification of the register of members
 The transferee should first notify the company that he is the holder of the
share in question. Where the company does not respond to the notification,
the transferee may apply to the court (Federal High Court) for rectification of
the register of members.
4. Transmission (INHERITANCE) i.e. by succeeding to the estate of a decreased,
bankrupt member, and being placed on the register of members.-S.148&155
CAMA. By operation of law – occurs where the shares of the deceased
shareholder or shareholder who is bankrupt devolves or transmits to the
successor in title or his personal representative (administrator of estate:
intestacy, executor if there is a will). Section 156 CAMA: Protection of
beneficiary: When shares are given to personal representative, the beneficiary
should file an affidavit of interest with the registrar of the company. Registrar
will inform the beneficiary if the personal representative tries to sell the shares
without the beneficiary’s notice (i.e. whenever the personal representative
wants to deal with the shares)
NB-A subscriber to the memorandum becomes a member in the incorporation of the
company. They are deemed to have taken the shares set opposite their names.

Capacity as to membership: special cases

 Companies: a company may take shares and be a member of another
company and be attending the meetings of the other company by a
representative authorised by resolution of its directors: s231
 A company in liquidation is not capable of becoming a member of a company:
s80(3)
 An alien may join in forming a company or acquire shares in a company but
must comply with the laws relating to alien participation: s20(4) CAMA; s17
NIPC Act

OTHER MEMBERS
Every person other than subscribers must meet two conditions to become a
member of a company.
1. An agreement in writing to become a member and
2. Entry of his name in the register of members.
HOW TO CEASE TO BE A MEMBER OF A COMPANY
IT MAY BE BY ANY OF THE FOLLOWING MEANS:
1. Transfer of all ones shares to another
2. Forfeiture of shares
3. Transmission of shares
4. Surrender of shares
5. Liquidation of a company
6. Repudiation by an infant

INCIDENTS/RIGHTS OF MEMBERSHIP
1. Right to dividends when declared
2. Right to bonus shares
3. Right to attend meetings
4. Right to receive notice of meetings
5. Right to vote at meetings and be voted for
6. Right to demand poll.
7. Right to appoint proxy
8. Right to requisition extra – ordinary general meeting.
9. Right to own shares
10. Right to transfer shares.
11. Right to sell, mortgage or otherwise dispose of shares
13. Right to object to alteration of objects clause, shares etc.
14. Right to take up minority action.
15. Right to petition for investigation by CAC, SEC.
16. Right to petition for winding up.
17. Right to copies of memo and Articles.
18. Right to financial reports
19. Right to inspect minutes of meetings.
20. Right to remain a member unless restructured out ordinary and shares
acquired compulsory.
QUESTION
How can the shares of an infant be sold? This has to be by transfer of such shares by
the guardian of the infant to another person
MEETINGS
Types of General meetings of a company
1. Statutory meeting.
2. Annual General Meeting (AGM)
3. Extra – ordinary General Meeting (EGM)
4 Court – ordered meeting (some authors add this)

STATUTORY MEETING-SECTION 211

Every public company shall, within a period of 6 months from the date of its
incorporation, hold a general meeting of the members of the company to be refereed
to as the ‘statutory meeting’
ESSENTIAL FEATURES OF STATUTORY MEETING
a. Solely for Public companies (PLC)
b. It is compulsory.
c. To be held within 6 months of the date of incorporation of the company.
d. It must be held in Nigeria S. 216
e. Notice must be sent to members AT LEAST 21 DAYS BEFORE THE
MEETINGS. 217 (1)
but shorter notice is allowed if agreed to by majority holding not less than 95%
in nominal value of the shares with right to attend and votes, in the case of a
company not having a share capital, together representing not less than 95 per cent
of the total voting rights at that meeting of all the members: s217 (2)(b).

BUSINESS TRANSACTED AT STATUTORY MEETING: s211(8)

The members of the company present at the statutory meeting may
i. Discuss any matter relating to the formation of the company and
commencement of business.
ii. Consider the statutory report.
iii. Consider matters arising from the statutory report

STATUTORY REPORT:
 The directors shall AT LEAST 21 DAYS before the day on which the
statutory meeting is held, forward to every member of the company
statutory report: S. 211(2)
 The statutory report shall be CERTIFIED BY NOT LESS THAN TWO
DIRECTORS or by a director and the Secretary of the company S. 211(3)
 The directors shall also deliver a certified copy of the statutory report to the
CAC-S. 211 (6)

CONTENTS OF STATUTORY REPORT: s211(3) CAMA

a. The total number of shares allotted, either as fully paid up, partly paid up or
partly paid up otherwise than in cash; for shares partly paid up the extent to
which they are so paid up, or the consideration for which they have been
allotted.
b. The total amount of cash received by the company in respect of all the shares
allotted, distinguished as aforesaid.
c. The names, addresses and descriptions of the directors, auditors, managers, if
any, and secretary of the company.
d. The particulars of any pre-incorporation contract together with the particulars
of any modification or proposed modification.
e. Any underwriting contract that has not been carried out and the reasons
therefore.
f. The arrears, if any due on calls from every director.
g. The particulars of any commission or brokerage paid or to be paid on the issue
or sale of shares or debentures to a director or manager
h. An abstract of the receipts of the company and of the payments made from
them up to a date: S. 211(4)
== The Statutory Report as it relates to shares and capital account (receipts and
payment shall be certified by the auditors S. 211(5)

RESOLUTION ON STATUTORY REPORT

By S. 211(9) CAMA, if a member wishes to propose a Resolution on any matter
arising out of the statutory report, from the date of his receipt of the statutory
report, he must give a further 21 days notice to the company, of his intention to
propose such a resolution in the general meeting.

EFFECT OF NON-COMPLIANCE
Failure to hold statutory meeting or deliver statutory Report would result to
i. The Company and any officer in default shall be guilty of an offence and liable
to a fine of N50 for every day during which the default continues: Section 212
ii. It can constitute a ground for winding up of the company by the court-S408(b)
CAMA. Judge can at his discretion can instead of winding up the company can
make an order that the statutory meeting be held.
Statutory report to be submitted to CAC immediately after statutory meeting
ANNUAL GENERAL MEETING-SECTION 213
Essential Features of AGM
a. It is compulsory for all companies. Every company shall in each year hold a
general meeting as its annual general meeting in addition to any other meetings in
that year
b. A company should hold its first AGM within 18 months of incorporation.
c. Subsequent AGM SHOULD BE HELD WITHIN A SPACE OF 15 MONTHS but so
long as a company holds its first AGM within 18 months of its incorporation, it
need not hold it in that year or in the following year S. 213(1)(a)
d. Apart from the first AGM, CAC can extend the time of holding any
subsequent AGM by not more than 3 months. S. 213(1)(b).
e. The AGM must be held in Nigeria S. 216
f. Notice must be sent to members AT LEAST 21 DAYS before the meeting but
shorter notice is allowed if agreed to by all the members entitled to attend and
vote. S. 217(2)(a).

Procedure to Compel Holding of AGM: Power of CAC to call or direct the calling
of AGM
i. A member can apply to the CAC urging the CAC to call or direct the calling of a
meeting: s213(2). If a member’s application is timely and the CAC grants the
order to hold the meeting in that year, the meeting is an AGM of that same
year.
However, where a meeting so held is not held in the year in which the default in
holding the AGM occurred, the meeting is not to be treated as the
 company’s AGM of the previous year, unless at that meeting the company
resolves that it shall be so treated. S. 213(3)
iii. If the company resolves that it should be treated as its AGM of the previous
year, a copy of the Resolution shall, WITHIN 15 DAYS AFTER THE PASSAGE,
be filed with the CAC. S. 213(4). If not guilty of a fine of N25.
The CAC shall give a direction that one member of the company present in person or
by proxy may apply to the Federal High Court for an order to take a decision which
shall bind all the members S. 213(2)

EFFECT OF NON-COMPLIANCE
Section 213(5): The company and every officer who is in default shall be guilty of
an offence and be liable to a fine of N500 if non-compliance with holding the
meeting

BUSINESS TRANSACTED AT ANNUAL GENERAL MEETING

Two types of business are transacted at the AGM of company ordinary and special
businesses.
ORDINARY BUSINESS OF AGM
i. Declaration of dividend.
ii. Presentation of the Financial Statements – the Reports of Directors and
Auditors
iii. Election of directors in place of those retiring.
iv. Appointment of Auditors.
v. Fixing of remuneration of the auditors.
vi. Appointment of members of the Audit committee – DFEARA

SPECIAL BUSINESS OF AGM

Any other business not listed as ordinary business of AGM is deemed Special
Business of AGM: SECTION 214

B.EXTRA-ORDINARY GENERAL MEETING-SECTION 215

 Extra – ordinary General Meeting (EGM) is the General Meeting held at any
time to transact business that cannot conveniently wait for the next Annual
General Meeting (AGM).
NB- An EGM can hold at any time and need not hold in Nigeria S. 216

WHO CAN CONVENE AN EGM? S215(2)

i. Board of Directors.
ii. Any Director if there are not sufficient Directors within Nigeria capable of
acting to form a quorum
iii. Requisition by members holding not less than 1/10th of the paid up share
capital of the company, or in the case of a company not having a share capital,
members of the company representing not less than one tenth of the total voting
rights of all the members having at the said date a right to vote at general meetings
of the company, and the directors shall on receipt of the requisition forthwith
proceed duly to convene an extraordinary general meeting of the company,
notwithstanding anything in its articles:

PROCEDURE FOR MEMBERS’ REQUISITIONED EGM

1. The Requisitionists must deposit a signed requisition at the registered office
of the company, stating “the objects of the meeting” and the Resolutions which
they intend to propose. S. 215(3)
2. If the directors do not WITHIN 21 DAYS from the date of the deposit of the
requisition proceed duly to convene a meeting, the requisitionists, or any one
or more of them, representing more than ½ of the total voting rights of all
of them, may themselves convene a meeting.
NB-However, such meeting must be convened within 3 months of the deposit of
the requisition. S. 215(4)
3. Any reasonable expenses of the requisitionists in convening the meeting shall
be repaid to the requisitionists by the company S. 215(6)
4. If no quorum is present at the requisitioned meeting, within one hour from
the time appointed for the meeting, it is dissolved i.e. that would be the end of
the matter, there is no adjournment S. 239 (3) CAMA.

Business Transacted at Extra – ordinary General Meeting.

Businesses transacted at an extra – ordinary general meeting shall be deemed
“SPECIAL BUSINESS”-By Section 215(8) CAMA,
NB-Therefore, a matter which constitutes ORDINARY BUSINESS CANNOT be
discussed at EGM.
Example, appointment of director is an ordinary business and cannot be done at
EGM. What of removal of a director?

COURT- ORDERED MEETING-SECTION 223 –

The FEDERAL HIGH COURT can upon an Application by interested Party, order a
company’s meeting in the following circumstances:
1. If for any reason, it is impracticable to call a meeting of the company or
for the board of directors in any manner prescribed by the Articles or
CAMA
2. Upon application of any director of the company or of any member of the
company who would be entitled to vote at the meeting, the court can
make all or any of the following orders:
o That the meeting be called, held and conducted in any manner, the
CT thinks
o Give such ancillary or consequential directions as it thinks
expedient including a direction that one member of the company
present in person or by proxy may apply to the CT for an order to
take a decision which shall bind all the members: s223(2)
3. The directions should be confined to matter that will facilitate the
meeting and the CT should not pronounce on matters raised for the
meeting
4. In the event of all the directors and shareholders dying, any of the
personal representatives shall be able to apply to the court for an order to
 convene a meeting of all the personal representatives of the shareholders
entitled to attend and vote at a general meeting to appoint new directors
to manage the company, and if they fail to convene a meeting, the
creditors, if any, shall be able to do so: s248(2)

Practical examples/instances of court ordered meeting

 Court ordered meeting for restructuring scheme. Where there is a scheme
proposed for a merger, compromise, arrangement or reconstruction btw two
or more companies, any of the companies can apply to the Federal High CT to
order separate meetings of the companies: s117, 126 ISA 2007
 Where a company makes a compromise with its members or creditors but
not involving sale of the company’s assets it requires the approval of a
specified majority of creditors and/or members with the sanction of the
court: s539 CAMA

CHAIRMAN OF A MEETING
The chairman of the AGM is also the Chairman of the Board of Directors.
If he is not present after 5 minutes of the time for the Board meeting, another
will be appointed to act as chairman.- S. 263(4) of CAMA
If it is a general meeting of the company for which he is not present WITHIN ONE
(1) HOUR of the scheduled time, another will be appointed to chair the meeting.-
S.240(2) of CAMA.

THE FUNCTIONS OF A CHAIRMAN OF A MEETING

1. To ensure the meeting is properly conducted
2. Preservation of order
3. He ensures that all questions that arises in the course of a meeting are properly
decided
4. To preside over both the Board and company meetings
5. To act bona fide in the interest of the company
6. He has the power to adjourn meetings
7. He has a casting vote on issues if there is a vote tie by the members

ISSUES AFFECTING VALID CONVENING OF MEETING

The issues affecting the validity of a meeting bother mainly on notification and how
to notify, where and who attends the meetings.
1. VENUE OF MEETING
Company meetings that must be held in Nigeria are STATUTORY MEETING AND
ANNUAL GENERAL MEETING. S. 216 CAMA
Thus, EXTRA –ORDINARY GENERAL MEETING need not hold in Nigeria.

2 ELIGIBILITY TO ATTEND COMPANY MEETING-SECTION 219, Also see

Longe v First Bank (Supreme CT judgment)
The following persons are entitled to receive Notice of a general meeting, and thus
are eligible to attend.
a. Every member
b. Legal representative, receiver or a trustee in bankruptcy of a member.
c. Every director of the company.
d. Every auditor of the company-S.363 CAMA
e. Company Secretary
NOTE-Apart from the listed persons, no other person is entitled to receive
Notices of General Meetings and/or attend meetings
s. 219 (2)
Auditor: section 363(1) CAMA reconfirms the fact that a company’s auditor shall
be entitled to attend any general meeting of the company and to receive all notices

3. NOTICE OF MEETING
No business may be transacted at any general meeting unless notice of it has been
duly given S. 218.

CONTENTS OF NOTICE S. 218

A valid notice of a meeting must specify
a. The place, date and time of the meeting; (Venue)
b. The type of meeting
c. Agenda i.e. general nature of the business to be transacted
d. For AGM, it is to be stated in the Notice; that the meeting is to transact
“Ordinary Business” and state them. It is enough to put that ‘Ordinary Business’
shall be transacted.
e. For Special Business, terms of the resolution should be set out.
f. Provision should be made for proxy attendance.
g. It should be expressed to be BY ORDER OF THE BOARD OF DIRECTORS or
REQUISITIONED BY MEMBERS, BY ORDER OF THE COURT’
h. Signed by Company Secretary.
i. Dated

LENGTH OF NOTICE S. 217

The notice required for all types of general meetings shall be 21 DAYS from the
date on which the notice was sent out.
However, a shorter notice may be agreed by all the members entitled to attend
and vote at the AGM OR by members representing 95% of the voting
rights/shares for other General meetings. S. 217 (2).
Service of Notice S. 220
a. Personal service
b. By post to the person entitled or to his registered address
NOTE-If he has no registered address within Nigeria to the address if any
supplied by him to the company for giving of notice to him.
 Where a notice is sent by post and the letter is properly addressed and
stamped, then the addressee is deemed to RECEIVE IT 7 DAYS after the
letter is posted– S. 220 (2)
NOTE-Thus, the 21 DAYS is calculated from that time.
EFFECT OF FAILURE TO GIVE NOTICE OF MEETING S. 221 – Longe v First Bank
  Failure to give notice of meeting to a person entitled to receive it shall, when
he applies to court, invalidate the meeting.
The EXCEPTION is where such failure is an accidental omission on the part of the
persons giving the notice.
NOTE-However, if the failure was due to a misrepresentation or
misinterpretation of the provisions of CAMA or the Articles this shall not amount
to accidental omission - S. 221(2): Longe v First Bank (where they misinterpreted
CAMA).

ADDITIONAL NOTICE FOR PUBLIC COMPANIES S. 222 CAMA

In addition to the normal individual notices sent out, every Public Company (PLC)
shall AT LEAST 21 DAYS before any General meeting advertise a notice of such
meeting in at least two daily newspapers.
Current trend in corporate governance
 Adequate notice
 Service of notices must be effective and proposed to reach the company
 Proof of services

4. PROXY
 Proxy means a person nominated by any member to attend a company
meeting on his behalf, takes part in the voting and can exercise the same
right as the member appointing him.
NB: a member who appoints a proxy must be entitled to attend and vote at the
meeting.
A proxy may not be a member of the company-SECTION 230(1) CAMA
Proxy is not allowed in company without share capital unless its Articles permit e.g.
Incorporated Trustees. Proviso to S. 230 (1)CAMA
How a Proxy is appointed
a. The Notice of meeting MUST provide for member’s right to appoint proxy:
Section 230(2)
NOTE-Breach of this constitutes an offence S. 230(2)
b. The instrument appointing a proxy shall be in writing under the hand of
the appointer or of his Attorney duly authorised in writing. If the appointer is a
corporation, the Proxy Instrument shall either be under seal or under the hand of
an officer or Attorney duly authorised S. 230(6)
c. The Proxy instrument shall be deposited at the registered office or head
office of the company or at such other place within Nigeria as is specified for that
purpose in the Notice of the meeting S. 230(7)
d. Proxy Form/Instrument is to be lodged not later than 48HOURS before a
meeting or adjourned meeting -S. 230 (3)
If it is an instrument in respect of Poll voting, it has to be deposited NOT LESS
THAN 24 HOURS before the time appointed for the taking of poll.-S. 230 (7)

REVOCATION OF PROXY’S APPOINTMENT

The appointer may have a change of mind after appointing a proxy.
He is allowed to revoke the Proxy and attend the meeting of himself.
NOTE-But unless he has successfully revoked the Proxy, he can no longer be
allowed in the meeting as he would have double attendance.

PROCEDURE FOR REVOCATION

For the Proxy to be validly revoked, the Revocation must be communicated to the
company timely before the commencement of the meeting or adjourned
meeting in which the Proxy is to be used.
NOTE-This rule also applies upon death, insanity or transfer of share EXCEPT
information in writing of such death etc. has been received by the company before
commencement of the meeting.

5. CORPORATE REPRESENTATION
A company, which is a shareholder or member of another company is required to
appoint any person by a Resolution of the Board or Governing Council, to be its
representative in the general meetings of the company of which it is a member-
SECTION 231 CAMA
NB == Such a Representative is not thereby a Proxy and can therefore exercise
the right of the Company S. 231 (2) e.g. can appoint Proxy under S. 230(1).
NB-A creditor company (including a holder of debentures) of another company can
also appoint a Representative to be attending the creditors meeting in the
debtor company. S. 231(1)(b)

ISSUES AFFECTING VALIDITY OF PROCEEDINGS AT MEETINGS

QUORUM
Quorum refers to the total number of members present in person or by proxy,
whose presence satisfies the required minimum number of members that would be
present for the meeting to start and progressively proceed to the expected end.

HOW IS QUORUM DETERMINED?

SECTION 232 (1) CAMA
Unless otherwise provided in the articles; no business shall be transacted at any
general meetings unless a quorum of members is present at the time when the
meeting proceeds to business and throughout the meeting.
For the purpose of determining a quorum, all members or their proxies shall be
counted– S. 232(3)
Unless otherwise provided in the articles, the quorum for a meeting shall be:
a. 1/3 of the total number of members of the company or 25 members
(whichever is less) present in person or by proxy.
b. where the number of members is not a multiple of 3, then the number
nearest to 1/3.
c. where the number of members is 6 or less, the quorum shall be 2
members.- SECTION 232(2) CAMA

QUORUM DURING THE PROGRESS OF THE MEETING

  Unless the Articles otherwise provides, quorum is to be maintained from the
starting of the business of the meeting and throughout the meeting. Section
232(1) NB: proxy is counted for the purpose of calculating quorum
 Where quorum was formed at the commencement of a meeting but the
quorum was lost as the meeting progressed, then the chairman ought to
direct on the fate of the meeting.
 The chairman’s direction depends on whether the reason for withdrawal
from the meeting was for “sufficient” or “insufficient reason”.
 If it is for insufficient reason or for the purpose of reducing the quorum,
the meeting can continue with the number present, and their decision shall
bind all the shareholders and where it remains only one member, he may
seek direction of the court to take a decision. S. 232 (4)
 If it is for sufficient reasons, the meeting shall be adjourned to the same
place and time, in a week’s time. If there is no quorum still at the adjourned
meeting, the members present shall be the quorum and their decision shall
bind all shareholders. If only one member is present at the adjourned
meeting, he may seek direction of the Fed High Court to take a decision. S.
232 (5)

VOTING
Voting is done to ascertain the support of a particular Resolution by members.
There are basically two types of voting at any General meeting: s224(1)
a. Show of hand
b. By demanding a poll
SHOW OF HAND: This is voting according to the number of persons present and
entitled to vote even by proxy. It is determined by counting the number of members
supporting or opposing a Resolution.
DEMAND OF POLL
Voting on a poll entails the shareholders voting according to the number of shares
he owns. Although one share attracts one vote, certain classes of shares are
permitted to have weighted vote i.e. attracts more than one vote e.g. preferential
shares – S. 143
Proxies also vote according to the number of shares which the member they are
representing hold.

PROCEDURE UPON DEMAND OF POLL

 If a poll is duly demanded, the result of the previous show of hands is then
disregarded. The poll shall be taken in such manner as the chairman directs,
and the result of the poll shall be deemed to be the Resolution of the
meeting at which the poll was demanded SECTION 226(2)
 However, a poll demanded on the election of a chairman or on a question of
adjournment shall be taken forthwith, and on any other question shall be
taken at such time as the chairman of the meeting directs, and any business
other than that upon which a poll has been demanded may be proceeded
with pending the taking of the poll: section 226 (4)
RESTRICTIONS ON DEMAND OF POLL
The right to demand poll shall not be limited by Articles EXCEPT on the election
of chairman and adjournment of meeting.
Where the Articles limits the right, the Articles shall BE VOID: SECTION 225(1)
 Thus a Company’s Articles can validly restrict the use of poll voting in
respect of election of the Chairman or adjournment of meeting.
NOTE-However, there SHALL BE NO RIGHT to demand on poll on the election of
members of the Audit Committee under S. 359 CAMA. This is an absolute bar
Section 225 (3)

WHO CAN DEMAND A POLL?

The following persons can demand a poll
i. The Chairman, where he is a shareholder or a proxy.
ii. At least three members PRESENT IN PERSON OR BY PROXY.
iii. Any member or members present in person or by proxy and who
represent not less than 1/10 of the total voting rights.
iv. Any member or members holding shares not less than 1/10 of the total
fully paid up shares in the capital of the company.
SECTION 224(1) a – d

CHAIRMAN’S CASTING VOTE

In the case of an equality of votes, whether on a show of hands or on a poll, the
Chairman is entitled to a second or casting vote: SECTION 226(3)

RESULT OF VOTE
 For show of hands, the Chairman’s declaration of the result is
conclusive. Thus, no one can re-count hands after such declaration
unless a poll is demanded.
 An entry to that effect in the Minutes Book shall be conclusive evidence of
the result, without proof of the number or proportion of the votes recorded
in favour of, or against the resolution SECTION 224(2)
 For Poll, in computing the majority, the number of votes cast for and
against the resolution should be counted.

ADJOURNMENT OF MEETINGS-SECTION 239 CAMA

A meeting may be adjourned either because
i. No Quorum is formed at the original meeting, or
ii. The business was unfinished at the original meeting.
 The Chairman, may with the consent or directive from the members at the
meeting, adjourn the meeting from time to time and from place to place.
 No new business is allowed at the adjourned meeting only the unfinished
business from the original meeting shall be transacted S. 239 (1)
It is not necessary to give notice of adjourned meeting unless it is adjourned for
30 days or more, then notice must be given: S. 239 (2)

QUORUM AT ADJOURNED MEETING

If within ONE HOUR from the time an adjourned meeting is due to start, a
quorum is not present;
- If the meeting is convened upon the requisition of members, the meeting
shall be dissolved.
- If not a requisitioned meeting, it shall stand adjourned to the same day
in the next week, at the same time and place or to such other day, time and place as
directed by chairman and in his absence, the directors: S. 239(3)
NB-At the second adjourned meeting, any two or more members present shall
form a quorum and their decision shall bind all shareholders; and if only one
member is present, he may seek the direction of the court to take a decision.
S. 239 (4)

MINUTES OF PROCEEDINGS
Every company shall keep minutes of all proceedings of general meetings, board
meetings and meeting of its managers, if any: SECTION 241 (1)
Where there is default, the company and every officer in default shall be guilty of an
offence and liable to a fine of N500: Section 241(4)
The minutes when signed by the Chairman of the meeting or the chairman of the
next succeeding meeting, shall be prima facia evidence of the proceedings and that
the meeting was duly held and convened, and matters agreed to the meeting are
deemed to be valid – S. 241 (3)

FORM OF MINUTES
The Minutes can be kept in any of the following forms
i. Bound books
ii. Loose leaves
iii. Photographic film form
iv. Stored on any information storage device capable of being reproduced into
intelligible written form e.g. Compact Disks (CD), Flash drives etc.

INSPECTION OF MINUTE BOOKS AND OBTAINING COPIES

The Minutes Book, should be kept at the registered office of the company, and
shall be open for inspection for at least 6 hours in a day without charge; but for
copies to be delivered to him, a token cost is to be paid (the company is
obliged to supply the copy WITHIN 7 DAYS of member’s request: S. 242 (1)& (2)
CAMA
 It is an offence not to allow members to inspect or refuse to give them copies
of minutes upon request.
 A member can sue the company for an order to compel immediate
inspection/supply of copy of minutes- INT’L AGRIC. INDUSTRIES (NIG)
LTD V. CHIKA BROTHERS.

RESOLUTIONS
Resolutions refer to decisions taken at the company meetings; arrived at through
voting, or unanimous agreement by members entitled to vote.
TYPES OF RESOLUTION
There are two basic types of Resolutions
i. Ordinary Resolution.
ii. Special Resolution

ORDINARY RESOLUTION
This is a resolution passed by a simple majority of votes cast by members being
entitled to vote either in person or by Proxy- SECTION 233(1)

WRITTEN RESOLUTION
 Section 234 provides that all resolutions shall be passed at general meeting
and shall not be effective unless so passed
 Provided that in the case of a private company, a written resolution signed by
all the members entitled to attend and vote shall be as valid and effective as if
passed in a general meeting
 A.G ENUGU V.AVOP PLC

SPECIAL RESOLUTION
This is a resolution passed by not less than ¾ (75%) of the votes cast by such
members being entitled to vote either run person or by proxy, OF WHICH 21 DAYS
NOTICE, specifying the intention to propose the resolution as a special
Resolution has been duly given
NB- ONLY THOSE WHO VOTED ARE COUNTED

NB: Notice of LESS THAN 21 DAYS may be given where members agree (95% of
nominal value of shares or 95% total voting rights in company with no share
capital)
SECTION 233(2)
Examples of matters requiring Special Resolution
1. Change of Name S. 31 (2) Alteration of the Articles S. 48
3. Alteration of Objects S. 46 (4) Reduction of Capital S. 106
5. Voluntary Winding up S. 457 (6) Compulsory winding up S. 408
7. Re-registration of LTD as PLC S. 50(1) 8. Re-registration of PLC as LTD: s53
9. Rendering Liability of directors unlimited S. 289
10. Re-registration of ULTD as LTD S. 52
11. Variation of Class rights S.
12. Payment of interest out of capital S. 113

RESOLUTIONS REQUIRING SPECIAL NOTICE

Special resolution deals with the number of votes to be cast for a decision;
whereas Special Notice deals with how to inform those entitled to attend and
vote on the Resolution.

THE PROCEDURE IS …
a. The member gives Special Notice of his intention to the company at
LEAST 28 DAYS before the date of the meeting at which he intends to move the
Resolution; the Resolution is enclosed on the Notice.
b. On receipt of the members notice, the company in turn will give the members
21 days Notice as well as enclose the Resolution in the notice.
c. Where the company fails to call a meeting for a date 28 days less after the
notice has been given, this will not invalidate the meeting.

EXAMPLES OF RESOLUTIONS THAT REQUIRES SPECIAL NOTICES ARE:

1. Appointment as Auditor a person OTHER than a retiring Auditor.
2. Removing an Auditor before expiration of his term of office S. 364
3. Appointing or re-appointing a Director aged more than 70 for a Public
Company S. 256
4. To Remove a director from office. S. 262
5. To appoint new Director to replace a removed Director in the same meeting
after removal, pursuant to S. 262 (2).

DATE OF PASSING OF RESOLUTION

Resolutions passed at company meeting, holders of any class of shares of
company meeting or directors of a company meeting even on adjourned
meeting shall be treated as passed on the date on which it was actually passed
and not an earlier date – S. 238
For Written Resolution, it is deemed to be passed when the last signature is
affixed to the resolution.

REGISTRATION OF CERTAIN RESOLUTION

Printed copies of the following Resolution and Agreement must be forwarded to
CAC for registration WITHIN 15 DAYS AFTER its passage.-S. 237(1)&(4) CAMA,
i. Special Resolution
ii. Unanimous resolution on issue, which requires Special Resolution.
iii. Unanimous Class Resolution
iv. Resolution requiring a company to be wound up voluntarily under S. 457(a)
CAMA

REQUISITION OF RESOLUTION
Members holding 1/20 of the total voting rights in a company can requisition a
notice of their Resolution on an issue, and cause the company to circulate it to
members entitled to attend the meeting in which the Resolution is proposed
to be moved: S. 235(1)&(4)
 WEEK 13: FINANCIAL STATEMENTS, AUDITS AND ANNUAL RETURNS
FINANCIAL STATEMENTS
The financial statements of a company are its bills of health. The financial
statements show the annual state of affairs of the company and they are vital and of
crucial importance not only to members of the company but also to third parties
dealing with it.
The financial statements enable a member to know if his investments are growing
or depreciating and whether to sell off or retain his shares in the company; the
statements also provide a potential investor with information which would either
persuade him to invest or dissuade him from investing in a particular company.

S331(1) CAMA: Every company shall cause accounting records to be kept in

accordance with this section.

S331(2) CAMA: The accounting records shall be sufficient to show and explain the
transactions of the company and shall be such as to‐ (a) disclose with reasonable
accuracy, at any time, the financial position of the company; and (b) enable the
directors to ensure that any financial statements prepared under this Part comply
with the requirements of this Act as to the form and content of the company's
financial statements; Nigerian Wire Industries Plc v European Trade & Finance
Plc (1997) 6 NWLR (Pt 510) 632

Accounting records forms the basic of relevant information and data to be used in
preparing financial statements and audited account of the company: Per Uwaifo
JCA in African Continental Bank LTD v Dominion Builders Co. Ltd (1992)

Contents of accounting record:

Section 331(3): The accounting records shall, in particular, contain‐

(a) entries from day to day of all sums of money received and expended by the
company, and the matters in respect of which the receipt and expenditure took
place; and
(b) a record of the assets and liabilities of the company.

S331(4): If the business of the company involves dealing in goods, the accounting
records shall contain‐

(a) statements of stocks held by the company at the end of each year of the
company;

(b) all statements of stock-takings from which any such statement of stock as is
mentioned in paragraph (a) of this subsection has been or is to be prepared; and

(c) except in the case of goods sold by way of ordinary retail trade, statements of all
goods sold and purchased, showing the goods and the buyers and sellers in
sufficient detail to enable all these to be identified.

Location and presentation of accounting records

S332(1): The accounting records of a company shall be kept at its registered office
or such other place in Nigeria as the directors think fit, and shall at all times be open
to inspection by the officers of the company.

S332(2): Subject to any direction with respect to the disposal of records given
under winding up rules made under section 552 of this Act, accounting records
which a company is required by section 331 of this Act to keep shall be preserved by
it for a period of 6 years from the date on which they were made (doesn’t mean that
after 6 yrs the records should be destroyed)

DUTY TO PREPARE FINANCIAL STATEMENTS

At the first meeting of the board, after incorporation, BOD must determine to what
date in each year the financial statements for the year. Must inform CAC within 14
days of deciding the financial year. However, the CBN pursuant to its regularity
power may direct Bank to fix a period to make financial statements, which may not
accord with the period agreed by board resolution of the Bank. Thus banks are
bound to comply despite the inconsistency with the powers conferred on the board
(1st January - 31st December is financial year for financial institutions)

The Directors must, in respect of each financial year of a company, prepare financial
statements for the year – section 334(1) of CAMA. This includes –
(a) Statement of the accounting policies;

(b) The balance sheet as the last day of the financial year;

(c) A profit and loss account or, in the case of a company not trading for profit an
income and expenditure account for the financial year;

(d) Notes on the accounts;

 (e) The auditor’s report;

(f) The director’s report;

(g) A statement of the source and application of fund;

(h) A value added statement for the financial year;

(i) A five year financial summary; and

(j) In the case of a holding company, the group financial statement – section
334(2) of CAMA.

FINANCIAL STATEMENTS OF A PRIVATE COMPANY

A financial statement of a private company need not include the following –
1. Statement of the accounting policies;

2. Statement of the source and application of fund;

3. Value added statement for the financial year; and

4. A five year financial summary – section 334(3) of CAMA.

Form and content of individual financial statements

The combination of provisions of s335, 336, 337, 340 and 341 CAMA. CAMA
stipulates the contents of a financial statement of a Nigerian company

Section 335 (1): The financial statements of a company prepared under section 334
of this Act, shall comply with the requirements of the Second Schedule to this Act (so
far as applicable) with respect to their form and content, and with the accounting
standards laid down in the Statements of Accounting Standards issued from time to
time by the Nigerian Accounting Standards Board to be constituted by the
Minister after due consultation with such accounting bodies as he may deem fit in
circumstances for this purposes: Provided that such accounting standards do not
conflict with the provisions of this Act or the Second Schedule to this Act.

335(2): The balance sheet shall give a true and fair view of the state of affairs of the
company as at the end of the year; and the profit and loss account shall give a true
and fair view of the profit or loss of the company for the year.

335(3): The statement of the source and application of funds shall provide
information on the generation and utilisation of funds by the company during the
year.

335(4): The value added statement shall report the wealth created by the company
during the year and its distribution among various interest groups such as the
employees, the government, creditors, proprietors and the company.
335(5): The five‐year financial summary shall provide a report for a comparison
over a period of five years or more of vital financial information.

Note: Section 553(1) CAMA: Every banking company or an insurance company or a

deposit, provident, or benefit society shall, before it commences business, and also
on the 1st Monday in February and the 1st Tuesday in August in every year
during which it carries on business, submit to the Commission a statement in the
form in the Fourteenth Schedule to this Act or as near thereto as circumstances may
admit. When to file reports for banks and insurance (statement of affairs) Rule 50
Company Regulation 2012 and s553(1) CAMA

PUBLICATION OF FINANCIAL STATEMENTS

A company publishes its financial statements when the financial statements laid
before the company in general meeting are delivered to the Commission and
Section 354 indicates that a company publishes its full account when the complete
statements laid before the company in general meeting are also those delivered to
the Commission.
However, where a company is entitled to publish abridged financial statements, it
needs to publish only the balance sheet or profit and loss account, otherwise than as
part of full financial statements to which Section 354 applies – Section 355(1) of
CAMA.
Where a company publishes full financial statements, it must publish the relevant
auditor’s report with them – Section 354(2) of CAMA, and where appropriate, its
group financial statements – Section 354(3) and (4) of CAMA.

354(6) CAMA: A company which contravenes any provision of this section and any
officer of it who is in default, shall be guilty of an offence and liable to a daily default
fine of N100.

DUTY TO LAY AND DELIVER FINANCIAL STATEMENTS

In respect of each year, the directors must at a date not later than eighteen (18)
months after incorporation of the company and subsequently once at least in every
year, lay before the company in general meeting copies of the financial statements of
the company made up to a date not exceeding nine (9) months previous to the date
of the meeting – Section 345(1) of CAMA.
In respect of each year, the directors shall deliver with the annual return to the
Commission a copy of the balance sheet, the profit and loss account and the notes on
the statements, which were laid before the general meeting – Section 345(3) of
CAMA.
A company’s balance sheet and every copy of it which is laid before the company in
general meeting or delivered to the Commission shall be signed on behalf of the
board by two of the directors of the company – Section 343(1) of CAMA.

Penalty for laying or delivering defective financial statements

Section 348(1) CAMA: If any financial statements of a company (other than its
group financial statement) of which a copy is laid before the shareholders in general
meeting or delivered to the Commission do not comply with the requirement of this
Act as to the matters to be included in, or in a note to, those financial statements,
every person who at the time when the copy is laid or delivered is a director of the
company shall be guilty of an offence and in respect of each offence, liable to a fine
of N100.

(2) If any group financial statements of which a copy is laid before a company in a
general meeting or delivered to the Commission do not comply with section 345 (4)
and (5) or section 346 of this Act and with the other requirements of this Act as to
the matters to be included in or in a note to those financial statements, every person
who at the time when the copy was so laid or delivered was a director of the
company shall be guilty of an offence and liable to a fine of N250.

(3) In proceedings against a person for an offence under this section, it shall be a
defence for him to prove that he took all reasonable steps for securing compliance
with the requirements in question.

PERSONS ENTITLED TO RECEIVE FINANCIAL STATEMENT AS OF RIGHT

A copy of the company’s financial statements for the financial year must, not less
than twenty-one (21) days before the date of the meeting at which they are to be
laid, be sent to each of the following persons –
1. Every member of the company (whether or not so entitled to receive notice
of general meetings);

2. Every holder of the company’s debentures (whether or not so entitled); and

3. All persons other than members and debenture holders, being persons so
entitled – Section 344(1)(a),(b) & (c) of CAMA.

In the case of a company not having a share capital, a copy of financial statement
may not be sent to a member who is not entitled to receive notices of general
meetings of the company, or to a holder of the company’s debentures who is not so
entitled – section 344(2) of CAMA.

Any person entitled but not given can demand for it and the company is obliged to
give him a copy within 7 days of demand otherwise the company and every officer
is in default is guilty of an offence, daily fine of N100: s349 CAMA. Failure to deliver
financial statement only attracts penalty but does not affect the validity of the
meeting or resolution reached thereafter (different from notice of meeting)

AUDIT
  Audit deals with the examination of the books of accounts of the company by
external experts with a view to ascertaining its compliance with the
accounting policy of a company and accounting standard rules.
 It is the process of ensuring that a company accounting records, financial
statements and practices comply with the law. The audited account must also
show the financial status of the company
 The Audited Statement of Account of a company is the best way of showing
the financial position of the company at any given time-LIVESTOCK FEEDS
PLC V. IGBINO FARMS LTD

AUDITOR-this is an independent external person who verifies and checks the

compliance of accounting records of the company with basic accounting stands and
legal requirements. For this lecture, only focus on external auditors distinguished
from an internal auditor who regularly work for the company. Thus a company has
internal and external auditors

APPOINTMENT OF AUDITORS
Section 357(1): Every company shall at each annual general meeting appoint an
auditor or auditors to audit the financial statements of the company, and to hold
office from the conclusion of that, until the conclusion of the next, annual general
meeting.

WHO APPOINTS FIRST AUDITORS?

The first auditors of a company may be appointed by the directors at any time
before the company is entitled to commence business and auditors so appointed
shall hold office until the conclusion of the next annual general meeting: s357(5)
CAMA

REMOVAL OF FIRST AUDITORS BY GENERAL MEETING

However, the first Auditors appointed by the Directors may be removed by the
company at a General Meeting.
The company can replace the affected Auditor with any other person who has been
nominated for appointment by any members of the company and notice of his
nomination must have been given to the members NOT LESS THAN 14 DAYS
BEFORE THE DATE OF THE MEETING. S. 357(5)(a)

FAILURE OF THE DIRECTORS TO APPOINT FIRST AUDITORS.

Where the Directors fail to appoint first Auditors, the company may in a General
meeting convened for that purpose appoint the first auditors.
Such appointment of the Auditor by the General meeting terminates the powers of
the Directors to appoint the Auditor. S. 357 (5)(b)

RE-APPOINTMENT OF AUDITORS
Section 357(2)
At any AGM a retiring auditor however appointed shall be re-appointed without
any resolution being passed UNLESS –
 (a) He is not qualified for reappointment; or
(b) A resolution has been passed at that meeting appointing some other
person instead of him or providing expressly that he shall not be re-
appointed;
(c) He has given the company notice in writing of his unwillingness to be
reappointed.

VACANCY BASED ON NON-APPOINTMENT OF AUDITOR

Where at an AGM, no auditors are appointed or re-appointed the directors may
appoint a person to fill the vacancy: S. 357 (3)
However, the company SHALL WITHIN ONE WEEK OF SUCH VACANCY notify the
CAC of that fact and then proceed to fill the vacancy and if a company fails to give
notice as required by this subsection, the company and every officer of the company
who is in default shall be guilty of an offence and liable to a fine of N100 for every
day during which the default continues: S. 357(4)

QUALIFICATION OF AUDITORS
Auditors are essentially qualified Accountants since Auditing is a specialised branch
of Accountancy.
There is no specific qualification of an Auditor in terms of the professional
Accountancy body he should belong.
However, any Audit or investigation being carried out pursuant to the provisions of
CAMA must be carried out in accordance with the provisions of the Institute of
Chartered Accountants of Nigeria (ICAN) Act.
DISQUALIFIED AUDITORS
The following persons are prohibited from being appointed Auditors SECTION
358(1) CAMA
a. An officer or servant of the company.
b. A person who is a partner of or in the employment of an officer or servant of
the company.
c. A body corporate

NB: Code of conduct for good banking: if you have acted as an auditor for a bank for
10 years, must take a break from auditing this particular bank for 10 years before he
can be reappointed: section 8(2) Code of Good Corporate Governance for Banks
2010.

Section 358(2): In the application of subsection (1) of this section, the

disqualification shall extend and apply to persons who in respect of any period of an
audit were in the employment of the company or were otherwise connected
therewith in any manner.

Section 358(3) A person shall also not qualify for appointment as an auditor of a
company if he is, under subsection (6) of this section, disqualified for appointment
as auditor of any other body corporate which is that company's subsidiary or
holding company or a subsidiary of that company's holding company, or would be
so disqualified if the body corporate were a company.

== A FIRM is qualified for appointment as Auditor of a company if, but only if, all
the partners are qualified for appointment as auditors-S. 358(4)

Section 358(5): No person shall act as auditor of a company at a time when he

knows that he is disqualified for appointment to that office and if an auditor of a
company to his knowledge becomes so disqualified during his term of office, he shall
thereupon vacate his office and give notice in writing to the company that he has
vacated it by reason of that disqualification.

Section 358(6): A person who acts as auditor in contravention of subsection (5), of

this section or fails without reasonable excuse to give notice of vacating his office as
required by that subsection, shall be guilty of an offence and liable to a fine of N500
and, for continued contravention, to a daily default fine of N50.

AUDITORS RIGHT TO ATTEND COMPANY’S MEETINGS

 Although an Auditor is not a member of the company and must be truly
independent of the company; the Auditor has right to attend company’s
meetings.
 A company’s auditors shall be entitled to attend and be heard at any general
meeting of the company and to receive all notices of and other
communications relating to any general meeting: SECTION 363(1) CAMA
NOTE (EXAMS): In the same vein, an Auditor of a company who has been
removed shall be entitled to attend the general meeting at which his term of office
would otherwise have expired and any general meeting at which it is proposed
to fill the vacancy caused by his removal and to receive all notices,
communications as stated above S. 363(2).

RESIGNATION OF AUDITORS
Procedure:
1. An Auditor of a company may resign his office by depositing a notice in
writing to that effect at the company’s Registered Office.
2. Such notice shall bring his office to an end on the date of which the notice
is deposited or a later date specified in the letter: S. 365 (1).
3. A copy of the Notice must be submitted at CAC WITHIN 14 DAYS of the
deposit: S. 365(3)(a)
4. Section 365(2) An auditor's notice of resignation shall not be effective unless
it contains either‐ (a) a statement to the effect that there are no
circumstances connected with his resignation which he considers should be
brought to the notice of the members or creditors of the company; or
(b) a statement of any such circumstances as are mentioned above.

5. Where an auditor’s notice of resignation contains a statement of a

circumstances which will be of interest to the creditor or member in notice of
resignation: he may accompany the notice with a requisition calling on the
 directors to convene an extra-ordinary general meeting for the purpose of
attending and considering the explanation of these circumstances connected
with his resignation: s366(1) CAMA
6. Where the Auditors Notice of Resignation contains a statement as mentioned
above, the Notice and statement shall be sent to CAC and every person
entitled to receive financial statement of the company Within 14 Days – S.
365(3)(a) & (b)
7. The company or any other person aggrieved over the content of the
statement made by the resigning Auditor, MAY WITHIN 14 DAYS OF THE
RECEIPT OF THE NOTICE, apply to the Federal High court on the ground
that the Auditor is using the Resignation Notice to secure needless publicity
for defamatory matter. The court where satisfied may order that copies of
the notice need not be sent out and may further order the company's costs on
the application to be paid in whole or in part by the auditor, notwithstanding
that he is not a party to the application: s365(4) & (5) CAMA.
REMOVAL OF AUDITOR PROCEDURE BEFORE EXPIRATION OF HIS TERM
1. Issue a Special Notice to the company for his proposed removal stating the
grounds
2. At the AGM, pass an ordinary Resolution removing him from office as auditor
3. The Notice of his removal is to be filed with the CAC WITHIN 14 DAYS of the
Resolution. If a company fails to give the notice to the CAC, the company and
every officer of it who is in default shall be guilty of an offence and liable to a
daily default fine of N100.
S. 362 of CAMA
AUDITOR’S REPORTS OR LIABILITIES OF AUDITORS
 The Auditor of a company shall make a Report to the members on the
account examined by him, and on every balance sheet, and profit and loss
account and on all group financial statements. Copies of these report are to
be laid before the company in general meeting during the Auditor’s tenure of
office-SECTION 359 (1) CAMA
 In addition, An auditor shall in the CASE OF A PUBLIC COMPANY also make
a report to an Audit Committee established by the company -S. 359(3)

LIABILITIES OF AUDITORS
 A company’s Auditor shall in the performance of his duties exercise all such
care, diligence and skill as is reasonably necessary in each particular
circumstance. SECTION 368(1) CAMA
 Where a company suffers damage or loss because of Auditor’s breach of
fiduciary duty, the Auditors shall be liable for negligence and the
directors may institute an action for negligence against him in the court: S.
368(2) CAMA
 Where the Directors fail to institute the action against the Auditor, any
member may do so after the expiration OF 30 DAYS NOTICE TO THE
COMPANY OF HIS INTENTION to institute such action: SECTION 368(3);
RE.THOMAS GERRARD & SONS LTD.
 The company will pay for this action
FALSE STATEMENTS TO AUDITORS
An officer of a company who conveys information which is misleading, false or
deceptive in a material particular to an Auditor knowingly or recklessly, shall be
guilty of an offence and liable to imprisonment for one year or to a fine of N500
or both – SECTION 369 CAMA

AUDIT COMMITTEE
 Every PUBLIC COMPANY shall have Audit Committee. Audit Committee
should be formally constituted and have written term of reference: s359(3)
CAMA

MEMBERSHIP OF AUDIT COMMITTEE-

SECTION 359 (4) CAMA
 Audit Committee shall consist of an equal number of directors and
representatives of the shareholders of the company subject to A MAXIMUM
OF 6 MEMBERS and shall examine the auditors' report and make
recommendations thereon to the annual general meeting as it may think fit:
s359(4)

 Nomination of a shareholder as a member of the Audit Committee may be

made by a member giving Notice of such nomination to the Company
Secretary AT LEAST 21 DAYS BEFORE THE AGM. 359(5)

A member appointed to the Audit Committee may be re-elected annually and shall
not be entitled to remuneration – S. 359 (4) but shall be reimbursed for out of
pocket expenses

QUALITIES OF A MEMBER OF AUDIT COMMITEE

For a person to be appointed a member of Audit Committee, he should possess
 A strong financial literacy skills,
 Integrity,
 Willingness to accept accountability
 Objectivity and
 Intellectual honesty.

OBJECTIVES AND FUNCTIONS OF THE AUDIT COMMITTEE

Section 359(6): Subject to other additional functions and powers that the
company’s articles of association may stipulate, the objectives and functions of the
Audit Committee shall be to:-
(a) ascertain whether the accounting and reporting policies of the company are in
accordance with legal requirements and agreed ethical practices;

(b) review the scope and planning of audit requirements;

(c) review the findings on management matters in conjunction with the external
auditor and departmental responses thereon;

(d) keep under review the effectiveness of the company's system of accounting and
internal control;

(e) make recommendations to the Board in regard to the appointment, removal and
remuneration of the external auditors of the company; and

(f) authorise the internal auditor to carry out investigations into any activities of the
company which may be of interest or concern to the committee.

CODE OF CORPORATE GOVERNANCE (it is enforceable

 This Code is now enforceable in PLCs (before now it was voluntary)

 Audit committee does not take away functions of the auditors

 The Committee should meet at least three times a year

 Quorum should be specified in terms of reference to the Committee

 Non-Executive as Chairman

 Company secretary as secretary for the committee

 Code of Conduct for Corporate governance for listed companies: 3yrs break
of 3yrs years – for capital market companies, if you act as a member of the
audit committee for 3yrs, then retire for 3yrs before you act again

 Nigerian companies to have audit commits with objective of raising standard

of corporate governance

 Audited committees should not act as barrier btw auditors, executive

directors and board of directors

 Audit Committee should be comprised of strong, independent persons;

however the committee shall not obstruct executive management

 No influence of any dominant personality on the board of directors

 Audit committee should not be construed as abdication of BOD responsibility

of reviewing and approving financial statement

ANNUAL RETURN
It is to be filed once at least in every year at CAC provided that a company need not
make a return under this section either in the year of its incorporation or, if it is not
required by section 213 of this Act to hold an annual general meeting during the
following year, in that year: S. 370 of CAMA
The time for its filing is within 42 days after the AGM for the year: (s374 CAMA)

CONTENTS OF ANNUAL RETURNS OF A COMPANY HAVING SHARE CAPITAL

OTHER THAN SMALL COMPANY.FORM CAC 10
1. Name and Registered Certificate Number (RC No) of the company.
2. Address of the Registered Office;
3. Situation of the Register of members and Register of Debenture holders;
4. Summary of Share Capital and Debentures;
5. Particulars of Indebtedness;
6. List of past and present members;
7. Particulars of Directors and Secretary.

DOCUMENTS TO BE ANNEXED TO ANNUAL RETURN

Section 375 CAMA: Subject to the provision of S. 377 CAMA EXEMPTING
UNLIMITED COMPANIES AND SMALL COMPANIES, the Annual Return must have
annexed to it.
1. A written copy, certified by a Director and the Secretary of the company to be
a true copy of every balance, and profit and loss account laid before the
company in general meeting held in the year to which the return relates
2. A copy certified by a Director and Secretary of the copy of the Auditors
Report and the Report of the Directors accompanying the balance sheet.
3. Where the balance sheet contains amendments, the fact that the copy has
been so amended shall be stated on it

CERTIFICATE TO BE ANNEXED TO THE ANNUAL RETURNS OF A PRIVATE

COMPANY-S.376(1)
In the case of a Private Company, the Annual Return shall be accompanied by
 A certificate by a Director and the Secretary to the effect that the company
has not since the date of incorporation or last annual return, issued any
invitation to the public to subscribe for any share or debenture of the
company;
 If applicable accompany a certificate stating that number of members
exceeds 50
 Directives as to when certain companies are to start and end their financial
year.
=NB=All Banks end their financial year on 31 st December of every year; CBN
Directive

Conditions for a small company: s351 CAMA

(1) A company qualifies as a small company in a year if for that year the following
conditions are satisfied‐

(a) it is a private company having a share capital;

(b) the amount of its turnover for that year is not more than N2 million or such
amount as may be fixed by CAC
(c) its net assets value is not more than N1 million or such amount as may be fixed
by the Commission;

(d) none of its members is an alien;

(e) none of its members is a Government or a Government corporation or agency or

its nominee; and

(f) the directors between them hold not less than 51 per cent of its equity share
capital.

CERTIFICATE TO BE ANNEXED TO ANNUAL RETURNS FOR SMALL COMPANIES

For a small company, in addition to the documents required in S. 376(1) it shall
deliver to CAC a certificate signed by a director and the secretary that:
a. It is a private company limited by shares.
b. The amount of its turnover for that year is not more than N2 million or
such amount as fixed by CAC.
c. Its net assets value is not more than N1 million or such amount as fixed by
CAC.
d. None of its members is an alien.
e. None of its members is a government, a government agent or nominee.
f. the directors among them hold not less than 51% of the equity share
capital of the company.
==SECTION 376 (2)

OBLIGATION TO FILE ANNUAL RETURNS

The obligation to file Annual Return starts after incorporation.
The annual return shall be completed, signed by both a director and a Secretary
and FILED AT CAC WITHIN 42 DAYS AFTER THE AGM FOR THE YEAR, whether
or not that meeting is the first or only ordinary general meeting of the
company in that year-
Section 374 CAMA
Every company must at least once every year make and deliver to the commission
(CAC) an annual return or have in the form and containing the specified matters
relating to the company-Section 370 CAMA –for companies limited by shares or
guarantee.

FORMS OF ANNUAL RETURN BY COMPANIES

The Annual Return shall be in the form stated in the following schedules of PART A
of CAMA.
Schedule 8 Company having share capital other than small company.
Schedule 9 Small company
Schedule 10 Company Limited by Guarantee
Other form
CAC/BN/7 Annual Returns for Business Names
CAC/IT/4 Annual Returns for Incorporated Trustees
FORM CAC 10
FORM CAC 10A
FORM CAC 10B
FORM CAC 10C

CONSEQUENCES OF FAILURE TO FILE ANNUAL RETURNS

I. PENALTY: BY S. 378(1) CAMA, A PENALTY OF N1000 for public company
and N100 fine for private company (NB: penalties can be changed at any time)
ii. It is an offence and directors are guilty and liable with the company to the
penalty of fine.
iii. Striking off a defunct company:
By S. 525 CAMA, CAC can assume a company’s failure to file Annual Returns as an
indication that it is defunct and no longer a going concern, then CAC complying with
the procedure may proceed to strike off the Name of the company.

==Any existing liability incurred by the Directors and officers subsists and the
court can still formally wind up the company.
iv. Enforcement of Return: By S. 565 CAMA: WITHIN 14 DAYS AFTER
SERVICE ON THE COMPANY BY CAC a Notice to file its Annual Return as required,
a member, creditor or CAC can apply to the Federal High Court to Order the
company to comply.

PROCEDURE BY CAC TO STRIKE OFF DEFUNCT COMPANY -SECTION 525

1. CAC sends letter inquiring whether the company is carrying on business or in
operation requesting the company to reply WITHIN ONE MONTH.
2. If within one month no response is made by the company to CAC, CAC shall
WITHIN 14 DAYS OF EXPIRATION OF THE ONE MONTH write A SECOND
LETTER referring TO THE FIRST LETTER and giving another one month to
respond and stating that after that one month, CAC would publish a Notice
in the Gazette with a view to striking the name of the company off the
Register of companies.
3. If within one month, CAC receives an answer confirming that the company
is not carrying on business or in operation or the company fails to respond,
after expiration of the ONE MONTH (the 2nd one month) CAC may publish
in the Gazette and notify the company by post that at the expiration OF 3
MONTHS FROM THE DATE OF THE NOTICE, it shall proceed to strike off
the name of the company from the Register and the company shall be
dissolved.
PROCEDURE TO RESTORE STRUCK OFF COMPANY
By S. 525 (6) CAMA where a company’s name is struck off the Register of
companies by CAC, It can be restored when;
1. An application is made to the Fed High Court (by any company or member or
creditor) WITHIN 20 YEARS of publishing the Notice to restore the company
to the Register.
2. If the court is convinced it would make an order restoring the company in
the Register of companies at the CAC.
3. The court may give an order placing the company and other persons in as
nearly the same position as if the name had not been struck off the Register.
4. The Restoration takes EFFECT upon delivery to CAC a Certified True Copy of
the court order.
See sample draft of Notice of Resignation by an Auditor below:
Mr. Abik Hamza & Co
Chartered Accountants
Suit A4 Goni Plaza Wuse Zone 2 FCT Abuja.

The Company Secretary

Acquak Bank Plc
No. 10 Bank
Road Wuse Zone
5 FCT Abuja.

Date: 25 May 2012.

Dear Sir
NOTICE OF RESIGNATION AS AUDITOR
The above subject matter refers.

I, Mr. Abik Hamza, as Auditor of your company write to resign my appointment

which is to take effect from the 30 day of May 2012.
The reason for my decision is to protect my professional integrity as the Directors
pressured me to falsify the tax obligations of the company in the Financial
Statement laid before the company.
Thank you.
Yours faithfully,
Mr. Hamza Abik
Week 14: CORPORATE SOVEREIGNTY AND MAJORITY RULE
NB: if voting is by show of hands, majority is the number of people who raise
their hands. If voting is by poll, majority is based on the amount shareholding
in the company.
The general rule in the case of FOSS V. HARBOTTLE (1843) 2 Hare 461 and
Section 299 of CAMA is that only a company can sue to redress a wrong done to it
or defend an action against the company.
VIRGIN TECH V. MOHAMMED;
AGIP(NIG) LTD v. AGIP PETROL INTL
This general rule has been applied in a number of cases in Nigeria.-
YALAJU-AMAYE V. AREC CO. LTD and
ABUBAKRI V. SMITH & ORS.
The rule is also applicable in respect of non-business organisation: EJIKEME V.
AMECHI

THE RATIONALE FOR THE RULE

1. It prevents multiplicity of suits over one or similar incident; if each
shareholder is allowed to sue over a single wrong done to the company, the
company would be exposed to multiplicity of suits.
2. The members in general meeting can ratify the wrongful acts of the Director,
if each individual shareholders could sue, this power to ratify would have
been meaningless.
3. The company is a separate legal personality, thus should institute actions on
its own.
4. It preserves the principle of majority rule.
5. To protect courts of law from interfering in the internal affairs of a company

EXCEPTIONS TO THE RULE IN FOSS v. HARBOTTLE (PROTECTION OF

MINORITY)
Injunction or declaration in certain cases: s300
Personal and representative action: s301
Derivative action: s303
Relief on grounds of unfairly prejudicial and oppressive conduct: s311
IPDU

SECTION 300 (a) – (f) CAMA provides exceptions to protect the minority
shareholders who may be injured by the majority decisions of the company.
The court, on the application of any member, may by injunction or declaration
restrain the company from the following:
1. Illegal or ultra vires acts of the company-
S. 300(a) of CAMA;
PARKE V. DAILY NEWS
SUITABLE TYPE OF ACTION-The best action to take in redressing an illegal or
ultra vires act of the company is a DERIVATIVE ACTION (i.e. to sue in the name of
the company) if the end of it will be for the benefit of the company or to get back
the properties illegally taken.
RATIONALE-if a direct action is to be used (i.e. to sue in the name of the minority
shareholder), it is only an Order of injunction or declaration that can be given
2. The company purporting to do by ordinary Resolution, any act which CAMA
or the Articles of the company require a special Resolution (irregularity).
S. 300(b) of CAMA; EDWARD V. HALLIWELL.
SUITABLE TYPE OF ACTION-
The best way to redress an irregularity by the company is to take out a
MEMBERS DIRECT ACTION seeking to declare the procedure as illegal and to be
set aside.
WILLIAMS V. WILLIAMS.
3. Infringement of personal rights of a member of the company. S. 300(c)
of CAMA
This includes breach of the member’s personal right in the company (such as the
right to attends meetings, to be paid dividend when declared, to vote in meetings, to
receive Notice of meetings etc)
SUITABLE TYPE OF ACTION- MEMBERS DIRECT ACTION; PENDER V.
LUSHINGTON, a shareholder can sue to compel the company to record his vote.
DERIAVATIVE ACTION-can be used if the breach of the member’s right will
require him to recover money or property from the company (e.g. is where
dividends on shares held were declared and is in arrears within 12 years of the
declaration of the dividend) it is better to use a derivative action. S. 303 of CAMA
4. Commission of fraud on the company or the minority shareholders and
the directors fail to take steps to redress it. S. 300(d) of CAMA.
An example of this ground is the misappropriation of the company’s
property/money by the directors or majority shareholders. COOKS V. DEEKS.
SUITABLE TYPE OF ACTION The best action to take in redressing this is a
DERIVATIVE ACTION where the company must be the plaintiff and the wrong
doers the defendants.
The fraud must be specially and adequately proved under this head,
If the fraud cannot be adequately proved, it will be better to proceed under S.
300(f) of CAMA that the directors have derived profits from their negligence or
breach of duty.
5. A company meeting cannot be practically called in time to redress a
wrong done to the company. S. 300(e)of CAMA
A good example is where the Directors have exceeded the borrowing limits and
have mortgaged the prime asset of the company
SUITABLE MODE OF ACTION-Apply to the Corporate Affairs Commission or the
Federal High Court to order a meeting of the company-
The members holding 1/10 of the paid-up capital can requisition a meeting. -S.
215&223 of CAMA.
6. Directors deriving profits or benefits from their negligence or breach of
duty. S.
300(f) of CAMA
A good example is sale of company property at an under value: DANIELS V.
DANIELS
SUITABLE TYPE OF ACTION DERIVATIVE ACTION
RATIONALE- This would enable a refund of the benefits so derived from the
company to the company-DANIELS V. DANIELS.

Section 302. Definition of member

For the purpose of sections 300 and 301 of this Act, "member" includes‐

(a) The personal representative of a deceased member; and

(b) Any person to whom shares have been transferred or transmitted by operation
of law.

DIVIDENDS
  It is the money declared by a company as its distributable income to the
members/ shareholders of a company realised from the business of the
company.
 The Law is that a company is not compelled to pay dividends but if it decides
to, it must be from the profits of the company.
 The Board of Directors recommends the amount to be declared as
dividends to the Annual General Meeting (AGM), which may in turn
reduce or approve it.
 The AGM cannot increase it. S. 379(3) of CAMA.
Once dividend has been approved or declared, it must be paid and it can be
recovered as a debt by action in COURT WITHIN 12 YEARS OF THE DIVIDEND
BEEN IN ARREARS.

FORMS OF MINORITY PROTECTION ACTIONS

A-MEMBERS DIRECT ACTION
Breach of s.300 CAMA entitles a member/shareholder to bring a members
direct action to enforce his rights –S.301 CAMA.The members direct action can
be brought in two forms as follows;

A.PERSONAL ACTION
A member can institute a personal action to enforce a right due to him personally.
SECTION 301(1) CAMA.
Personal action is restricted to such infringements directed at the individual
membership rights in the company e.g. entitlement to notice of meeting, voting,
attendance to meetings, payment of dividend when declared etc.

B-REPRESENTATIVE ACTION – S301(2)

Members can bring action in a representative capacity for the enforcement of
personal rights due to them.
Such members must nominate those who are member or members to bring action
in a representative capacity for the enforcement of rights due to them.
They can be named in the suit as their representatives and satisfy all the
conditions for instituting representative actions in court. SECTION 301 (2)
CAMA.

PROPER PARTIES TO A MEMBER DIRECT ACTION

The member of the company sues in his name or in representative capacity as
the plaintiff while the company and the directors are made defendants to the
action

WHO CAN BRING A MEMBERS DIRECT ACTION-

S.301&302 CAMA
1. Member
2. Debenture holder secured by floating charge
3. Shareholder-S.79 CAMA
4. Personal representative of a deceased member
 5. Any person to whom shares have been transferred or transmitted

RELIEFS AVAILAIBLE TO A PERSON INSTITUTING A MEMERS DIRECT ACTION

a. Declaration or
b. Injunction restraining the company and/or directors from doing a particular
act.
c. The cost for instituting the action may be awarded the members whether or
not his action succeeds. S. 301 (3)
NB-The court may order that the member shall give security for costs S. 301 (4)
NOTE-Where the act has been done, the member should seek for declarations.
Where the act has not been done; the member should seek for an injunction
NB (EXAMS)The members bringing MDA are not entitled to COMPENSATION
OR DAMAGES-Declaration -S. 301 of CAMA

B-DERIVATIVE ACTION-SECTION 303

They are actions which ought to have been brought by the company through the
directors. Thus, the plaintiff’s right of action derives from that of the company.

MODES OF DERIVATIVE ACTION

 A member can commence a derivative action in the name of the company
OR
 In a representative capacity on behalf of the company.

WHO CAN APPLY FOR DERIVATIVE ACTION

SECTION 309 CAMA; the following persons can apply for Derivative action for a
company:
a. a registered holder (member) or beneficial owner (by Transfer or
Transmission) and a former registered holder or beneficial owner of a
company’s security (debenture holder).
b. a director or officer or a former Director or Officer of a company.
c. Corporate Affairs Commission.
d. Any other person the Court may permit to make the application.

THE PROCEDURE
Obtain leave of court by way of originating summons at the Federal high Court
with an Affidavit in support and a Written address (NB: drafting of originating
summons)

CONDITIONS PRECEDENT FOR APPLICATION FOR DERIVATIVE ACTIONS-

SECTION 303(2)
The Affidavit in support of the Originating summons must show the following:-
a. That the wrong doers are the directors in control of the company who will not
take the necessary steps to redress the illegality
b. That a reasonable Notice of intention to seek redress in Court has been given to
them
c. The Applicant is acting in good faith; and
 d. It appears to be in the best interest of the company that the action be brought,
prosecuted, defended or discontinued
NOTE-all the conditions are CUMULATIVE and must be present.

REMEDIES THE COURT CAN GRANT

The court may upon a successful derivative action grant general reliefs as well as
specific reliefs as follows-
a) An Order that the amount illegally collected from the company be returned to
it
b) An order authorising the applicant or any other person to control the
conduct of the action;
c) An order directing that any amount adjudged payable by a defendant in the
action shall be paid, in whole or in part, directly to former and present
security holders of the company instead of to the company.
d) An order requiring the company to pay reasonable legal fees incurred by
the Applicant
e) A direction that a Director of the company controls the action in Court to
redress the illegal act or to recover the company’s property. SECTION
304(2) CAMA
f) Appointment of a receiver/ manager of the property of the company
g) Direct the company or its member to institute specific actions
h) Vary or set aside a contract which the company is a party
i) Restrain a person from a specific action
j) Require a person to do a specific act or thing. S. 312 of CAMA

PROPER PARTIES TO A DERIVATIVE ACTION

The appropriate parties in a derivative action should be
PLAINTIFF-the company and the Applicant as Plaintiffs/Applicants and
DEFENDANT-the Directors, third party or wrongdoer as the
Defendant/Respondent.
NB-Agip (Nig.) Ltd v. Agip Petrol Int’l- the company was reflected as plaintiff as
well as Defendant.

DIFFERENCE BETWEEN DERIVATIVE ACTION AND MEMBERS DIRECT ACTION

Derivative action is different from members’ direct action in that, members direct
action seeks to protect the rights of members and shareholder whereas
derivative action seeks to protect the company.

RELIEF ON THE GROUNDS OF UNFAIRLY PREJUDICIAL AND OPPRESSIVE

CONDUCT-S.311 CAMA
Here, the affairs of the company are being conducted in an illegal or oppressive
manner or unfairly prejudicial or discriminatory against a member or
members interest or in disregard of public interest.
PROCEDURE
The member should file a PETITION to the Federal High Court-S.311 CAMA;
OMOLOLU_MULELE V. IJALE PROPERTIES CO. LTD
NOTE-The petitioner must prove PECUNIARY LOSS here.

WHO CAN BRING A PETITION

The following persons have locus standi to institute action by Petition to the
Federal High Court under S. 311-
Section 310(1)&(2) CAMA,
a. A member of the company,
b. The personal representative of a deceased member
c. Any person to whom shares have been transferred or transmitted by
operation of law.
d. Director or officer or former Director or Officer of the company.
e. A Creditor;
f. Corporate Affairs Commission; or
g. Any other person who, in the discretion of the Court, is the proper to
make the application.
NB == It is only CAC that can petition on the ground that the affairs of the
company are being conducted against the members in a manner which is in
disregard to public interests. S. 311(2)(c).
The others can bring action on the ground that it would unfairly would be
oppressive or unfairly prejudicial to, or unfairly discriminatory against, or which is
in a manner in disregard of the interests of that person: s311(2)(b)

POSSIBLE RELIEFS/ ORDERS THE COURT CAN GRANT UPON SUCCESSFUL

PETITION

S.312(2) CAMA lists the several reliefs which may be ordered by the court as
follows:

(a) That the company be wound up;

(b) For regulating the conduct of the affairs of the company in future;

(c) For the purchase of the shares of any member by other members of the
company;

(d) For the purchase of the shares of any member by the company and for the
reduction accordingly of the company’s capital;

(e) Directing the company to institute, prosecute, defend or discontinue specific

proceedings, or authorising a member or the company to institute, prosecute,
defend or discontinue specific proceedings in the name or on behalf of the company;

(f) Varying or setting aside a transaction or contract to which the company is a party
and compensating the company or any other party to the transaction or contract;

(g) Directing an investigation to be made by the CAC;

(h) Appointing a receiver or a receiver and manager of property of the company;

(i) Restraining a person from engaging in specific conduct or from doing a specific
act or thing;

(j) Requiring a person to do a specific act or thing.

D-INVESTIGATION OF COMPANY
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-
SECTION 314 (1) CAMA. This is an instance of lifting the veil.

WHO CAN PROMPT AN INVESTIGATION INTO COMPANY’S AFFAIRS

By S. 314 (2) the following can prompt such investigation
a. In case of a company having by shares (Ltd, Plc, Ultd); on the application of
members holding not less than ¼ of the issued shares.
b. In the case of a company not having share capital (LTD/GTE); on the
application of not less than ¼ of members listed in the Register of members.
c. In any other case, on the application of the company.
d. by Court order directing that the affairs of the company be investigated
S.315(1) ;SPECTRA LTD V.STABILINI VISIONI
Application to be supported by good reasons
The commission may appoint one or more competent inspectors to investigate the
affairs of the company.
The inspectors shall have power to
a) Demand for production of books or documents
b) To demand appearance of any officer
c) To demand from the officers assistance for the investigation: s317
d) Power to call for directors’ bank account: s318

CIRCUMSTANCES WARRANTING AN APPLICATION FOR INVESTIGATION OF

COMPANY
By S. 315 (2) CAMA, the CAC may order investigation if ;
1. The company’s affairs are being or have been conducted with intent to
defraud its creditors or the creditors of any other person, or in a manner
which is unfairly prejudicial to some part of its members; or
2. Any actual or proposed act or omission of the company (including an act or
omission on its behalf) is or would be so prejudicial or
3. That the company was formed for any fraudulent or unlawful purpose or;
4. Persons concerned with the company’s formation or the management of its
affairs have in connection therewith been guilty of fraud, misfeasance or
other misconduct towards it or towards its members.
5. The company’s members have not been given all the information with
respect to its affairs, which they might reasonably expect.

USES OF THE INSPECTION REPORT BY THE CAC

The CAC has power to:
i. Bring civil proceedings on behalf of the company on the basis of the
Inspector’s Report.
ii. Send the Inspector’s Report to the Attorney General of the Federation for
criminal prosecution or other proceedings.
iii. Bring winding up petition in respect of the company.

STATUTORY SAFEGUARDS FOR ACTIONS COMMENCED FOR MINORITY

PROTECTION
1. Where court alters or adds to the memo or articles, such alteration shall
have effect as it had been duly made by a Resolution of the company; the
company shall not have power, without the leave of court, to make further
alteration to the memo and articles inconsistent with provisions of the
court order. S. 312 (4)
2. Within 14 DAYS of altering the memo and articles by the court, a certified
true copy of the Order should be delivered to CAC and it is an offence to
default. S. 312 (5)
3. A Derivative action 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.
Note-However, evidence of approval by the shareholders may be taken into
account by the court in making an order under S. 304.
Section 305 CAMA
3 It is an offence not to comply with an order of the court made under S.
312—
Section 313 CAMA

OTHER FORMS OF MINORITY PROTECTION UNDER CAMA

1. Winding up where the court is of the opinion that it is just and equitable
to do so. S. 408(e) of CAMA
It is to file a petition for winding up in Court. -OKEOWU V. MILGORE.
2. If the company carrying out a variation of class rights, 15 % holders of the
issued shares of that class of shares of the company can apply to the
Federal High Court to cancel the variation: S. 142 of CAMA
3. If the company is cancelling or altering the object/business of the
company, 15% of the dissenting members as holders of nominal share
capital or holders of 15% of the company’s debentures of the company
can apply to the Court for its cancellation.
S. 46(2)(a) & (b) of CAMA.
4. Upon the re-registration of a public company (PLC) to a private
company, 5 % of the holders of the issued shares or 5% of company’s
members may apply to the Court to cancel it: S. 53(3) of CAMA.
5. Requisition of a meeting under sec 215(2) CAMA by the minority members
notwithstanding the provisions in the articles.

CLASS ACTIVITY
Write a Letter/Application to the Registrar – General of CAC requesting for
investigation into the affairs of the company.(SEE DRAFTING NOTE)

WEEK 15: COMPANY SECURITIES I-SHARES AND DEBENTURES

WHAT ARE SHARES?
Shares is a unit of a member’s interest in a company which attaches to it rights and
liabilities. A share is a bundle of rights and liabilities, which a person has in the
capital of a company: S. 114 of CAMA; BORLAND’S TRUSTEE V. STEEL BROS. &
CO; Supreme CT held in OKOYA V SANTILI that shares represent a unit of the
bundles of rights and liabilities which people hold in companies

It is a chose in action and transferable property: S. 115 of CAMA; OKOYA V.

SANTILI

LEGAL NATURE OF A SHARE

 Personal property (a chose in action)
 An intangible personal right, which a person has in a company.
 A res in persona
  It confers a bundle of rights and liabilities

INALIENABLE RIGHTS THAT ATTACHES TO SHARES IN A COMPANY

1) Right to receive dividends when declared by the company
2) Right to vote at the Annual General Meeting whether in person or by proxy
3) Right to attend meetings
4) Right to the balance sheet of the company
5) Right of access to the minute book
6) Right to demand a poll
7) Right to bonus
8) Right to have name in register of members
9) Right to a copy of memorandum and articles of association
10)Right to notice of meetings
11)Right to petition for winding up
12)Right to bring derivative action
13)Right to instigate the investigation of the company

LIABILITIES OF SHARES
1) To pay for shares issued to him in the company
2) To forfeit his shares where calls are made for the shares and he is unable to pay
within the time limit
3) Liable to contribute to the company upon winding up – to the extent of the
amount of shares unpaid held by the individual in the company (for limited liability
companies)
4) Where the veil of the company is lifted and it is discovered that it is carrying on
business with less than the statutory minimum, the directors and members are
individually liable

S118 CAMA allows different classes of shares

S119 CAMA allows varying rights to various classes of shareholders
Ordinary, preference shares, deferred/founder’s shares.

To give control/voting rights in the company, then you need to have preference and
deferred shares. Preference will give guaranteed/fixed return on investment and
deferred shares because it is the cheapest share in the company (and these are
cheaper than ordinary shares and still carry voting rights). Also make him a life
director (not subject to rotation) under s255 CAMA.
Make a custodian of the company seal so major contracts cannot be done without
him. A signatory to the company and the lion shareholding in the company

THE RIGHTS AND LIABILITIES ATTACHING TO THE SHARES OF A COMPANY

SHALL BE DEPENDENT ON
a. the terms of issue and the terms in the Articles of Association-SECTION
114(a)

NB- RIGHTS of shareholders is the same with rights of members

DUTIES ATTACHED TO SHARES
1. Payment of unpaid amount on shares
 When call is made
 Time fixed for payment at the time of issue
2. Repayment of unlawfully dividend received

MODE OF PAYMENT FOR SHARES-S.135 CAMA

 Payment for shares may be in cash –S.136 CAMA
 Payment/consideration other than in cash subject to the articles: S.137

PROCEDURE FOR VALUATION OF SHARES OTHER THAN CASH-S.137(1-4))

CAMA
1. Appoint an independent valuer to determine true value of the consideration
and submit a valuation report to the company
2. The valuer so appointed is entitled to any relevant information required
from the officers of the company
3. WITHIN 3 DAYS of receiving his valuation report, the company must
forward the valuation report to the proposed purchaser informing it of its
acceptance or non-acceptance of the consideration as payment or part-
payment for its shares
4. Such consideration must be of the same value as the shares to be purchased
before the company may accept it.

EFFECT OF FALSE/DECEPTIVE VALUATION by the valuer-It is an offence-12

MTHS/N1000 or both-S.137(5) CAMA
WHO CAN BE A VALUER-An auditor/a valuer/a surveyor/engineer or an
accountant -S.137(6)
WHO CANNOT BE A VALUER- Person in the employment of the company
An agent or associate of the company
Any of the directors or officers of the company-S.137(6)
TYPES/CLASSESOF SHARES
 A company may, where so authorised by its articles issue classes of shares.-
SECTION 118(1)
 Shares shall not be treated as being of the same class unless they rank
equally for all purposes.-S. 118(2)

THE SHARES OF A COMPANY MAY BE CLASSIFIED INTO (Section 119)

1. Preference shares.
2. Equity or Ordinary Shares
3. Founders or Deferred shares

1. PREFERENCE SHARES
 This type of shares entitles the holder to a fixed preferential dividend, this
means that the dividend payable by the company to the holder of such shares
is fixed at a specific figure e.g. 5%, 10% etc.
 It only becomes payable when dividends are declared.
 The dividend must be paid before the ordinary shareholders receive their
own dividends i.e. it has priority over ordinary shares.
 However, they cannot participate in the profit of the company in excess of the
fixed dividend.
Preference shares may be cumulative or non-cumulative.

CUMULATIVE PREFERENCE SHARES:

Here, if the company due to insufficient profits is unable to pay a dividend in
one year, it must accumulative the arrears of dividend to the next year or
subsequent years until they are fully paid from the profit of later years.
NB ==The presumption is that preference shares are cumulative UNLESS it is
specifically stated as non – cumulative.
ii. NON-CUMULATIVE PREFERENCE SHARES: Do not carry the right to roll over
unpaid dividend to the following financial year. Once the dividend is not paid
in a particular year, that is the end of the matter.
iii. PARTICIPATING PREFERENCE SHARES: These are preference shares which
apart from receiving their fixed dividend in the usual way, also have the right
to participate equally with the ordinary shareholders in surplus assets.
iv. REDEEMABLE PREFERENCE SHARES: Generally, shares are not redeemable
by the company without the court’s consent nor can a company purchase
its own shares- S. 160
-The Act however allows a company limited by shares, on the authorisation of its
articles to issue preference shares which are redeemable at the company’s
option.-SECTION 122
The conditions for such redemption by the company are provided in S. 158(2)
CAMA: The shares shall not be redeemed unless they are fully paid, and redemption
shall be made only out of‐ (a) profits of the company which would otherwise be
available for dividend; or (b) the proceeds of a fresh issue of shares made for the
purposes of the redemption.

2. EQUITY/ORDINARY SHARES
Ordinary shares are referred to as the Equity share capital of the company.
They carry the remaining of distributed profits after the preference shares have
been paid their fixed dividend.
They are the risk bearing shares.
They enjoy unrestricted right to participate in the surplus assets of the company.

3. DEFERRED SHARES
This is also referred to as Founders’ shares where they are issued to promoters or
management shares if the issue is made to Directors.
They usually carry the right to the remaining of distributed profits after a certain
fixed dividend has been paid to the ordinary shares.
 4. RIGHTS ISSUE: The existing members of a company have pre-emptive rights
(right of first refusal) in the new issue of shares if it is authorised by the
articles: S117 CAMA

NON-VOTING AND WEIGHTED SHARES

A weighted share carries more than one voting right. A non–voting share carries no
right to vote.
The CAMA has absolutely abolished non–voting shares. Also, the Act prohibits the
issuance of weighted shares.-SECTION 116.The only exception is with reference to
preference shares

CIRCUMSTANCES WHEN PREFERENCE SHARES CAN CARRY MORE THAN ONE

VOTE-SECTION 143 CAMA
Preference shares shall carry a right of more than one vote per share in the
following circumstances, but not otherwise.
a. Upon any resolution during such period as the preferential dividend or any
part of it remains in arrear and unpaid, such period starting from a date NOT
MORE 12 MONTHS or such lesser period as the articles may provide, after
the due date of the dividend or
b. Upon any resolution which varies the rights attached to such shares (e.g.
changing cumulative preference shares to non-cumulative preference shares),
or
c. Upon any resolution to remove an auditor of the company or to appoint
another person in place of such auditor; or
d. Upon any resolution for the winding up of the company or during the winding
up of the company.
e. Any special resolution of a company increasing the number of shares of any
class S. 143 (2)

VALIDATION OF IMPROPERLY ISSUED SHARES-S.123 CAMA

 Non-compliance with the provision of the Act.
 Non-compliance with the provision in the Articles.

ISSUE OF SHARES AT A PREMIUM-S.120 CAMA

Shares can be issued at a premium (i.e. above the nominal amount) in certain
circumstances. The excess amount have to be paid in the Share Premium Account
of the company. S. 120(1)&(2) of CAMA

USES OF THE SHARE PREMIUM ACCOUNT

The amount in the share premium account can be used for: (Section 120(3) CAMA)
 Paying up for unissued shares of the company to be issued to members of the
company as fully‐paid bonus shares,

In writing off:

 The preliminary expenses of the company

  The expenses of, or the commission paid or discount allowed on, any issue
of shares of the company; or
 In providing for the premium payable on redemption of any redeemable
share of the company.

ISSUE OF SHARES AT A DISCOUNT-S.121

Issue of shares at a discount is allowed provided:
1. A Resolution of the company authorising it is passed in general meeting of
the company (the resolution specifies the maximum rate of discount at which
the shares are to be issued)
2. An application is made to the Federal High Court to approve/confirm it
before its issue
3. Shares must be issued within one month after sanctioning by court.
 A share is a chose in action-personal property, which is transferable in the
manner prescribed in the Articles. SECTION 115
 It is a bundle of rights and liabilities as distinct from debt instruments.
 SECTION 567(1) CAMA defines shares to mean the interests in a company's
share capital of a member who is entitled to share in the capital or income of
such company; and except where a distinction between stock and shares is
expressed or implied, includes stock.

TECHNICAL TERMS USED IN RELATION TO SHARES.

CAPITAL GEARING
It is used in describing the proportion of preference shares to ordinary shares
If the percentage of preference shares is higher than that of ordinary shares, it is
said TO BE HIGH GEARED. If percentage is lower, it is LOW GEARED. If it is equal, it
is MEDIUM GEARED.

AUTHORISED SHARE CAPITAL

The authorised share capital is the amount of capital a company proposes to be
incorporated with and the share capital of the company at every material time the
company is a going concern.S.99 CAMA
The authorised share capital should not at any time fall below the authorised
minimum share capital as stipulated by S. 27(2).

ISSUED SHARE CAPITAL

This is the proportion of the share capital actually issued or allotted to
shareholders who have either paid or agreed to pay for it. The issued share
capital shall not be less than 25% of the authorised share capital.

FULLY PAID UP SHARES

This is the portion of the issued share capital, which has been fully paid up or
credited as paid up by members. It should not be less than 25%.
UNPAID CAPITAL
This is the amount still unpaid on the issued capital and which can be called up at
any time when needed.

UNISSUED SHARES
These are the reserved shares, which have not been made available or issued to
members. It is also referred to as reserved capital. It cannot be called except in the
event of winding up or other contingencies as determined by the company

CALL ON SHARES-S.133 CAMA

This is a notice by the directors of a company, which is served on members to pay
up the amount remaining unpaid on the shares subscribed by them. The time
stipulated shall not be less than one month from the last preceding call.

LIEN ON SHARES
The company has first and paramount lien on all its issued shares which have
remained unpaid.-S.139 CAMA
QUERY- WHAT ARE TAKEN UP SHARES

METHODS OF ACQUISITION OF SHARES

It can be by any of the following:
1. Subscribing to the Memorandum and Articles of Association of the company –
S.79 CAMA
2. Allotment of shares S.124,125&129
3. Transfer of shares S.151&157
4. Transmission of shares -S.148&155 CAMA

ALLOTMENT OF SHARES
The power to allot shares is vested in the company, which can delegate same to the
Board of Directors. S. 124 of CAMA.
The shares allotted by a company must not exceed the authorised share capital of
the company.
The procedure for allotment of shares is provided in S.124&125 CAMA as;
1. Board resolution will be passed stipulating the number of shares to be allotted.
2. Issue prospectus and subscription list/register if a public company
3. Receive application for allotment from interested persons and record them
4. Convene a Board (allotment committee) meeting to pass a Resolution
approving the allotment
5. Inform successful applicants of the allotment WITHIN 42 DAYS, while for the
unsuccessful applicants will be issued Letters of Regret with a cheque enclosed
for the payment made on the unallotted shares. –
6. Deal with Letters of Renunciation from those allotted shares-DANGOTE
INDUSTRIES PLC V. BANK PHB PLC S.125 CAMA.
7. Prepare and deliver Share Certificate on shares allotted WITHIN 2 MONTHS
OF THE ALLOTMENT while for shares transferred that should be done
 WITHIN 3 MONTHS OF THE TRANSFER –ALALADE V. NORTHLINE
IND&AGRIC SERV. LTD
8. The allotees name and particulars must be entered in the Register of Members
9. File a duly stamped Form CAC 2- Return of Allotment of Shares within ONE
MONTH of the allotment to the CAC and obtain a CTC-s.129(1)&2) CAMA
10. If the shares are issued for a consideration other than cash –
a) Have the consideration valued and obtain particulars of valuation.
b) If consideration involves capital investment of 20,000 Naira or more
apply under the Industrial Inspectorate Act.
c) Prepare and file along with Form CAC 2
i. Agreement constituting the title of the allottee to the allotment;
ii. Agreement for sale of property or for services of other consideration; and
iii. Valuation report

METHOD OF APPLICATION OF ALLOTMENT

1. In the case of a private company (private placement) or a public unquoted
company, there shall be submitted to the company a written application signed
by the person wishing to purchase shares and indicating the number of shares
required to the company secretary;
2. In the case of a public company, subject to any conditions imposed by SEC there
shall be returned to the company a form of application as prescribed in the
company’s articles, duly completed and signed by the person wishing to
purchase shares.
3. Board of directors will determine whether shares are available and whether or
not shares should be allotted for the applicant
When company advertises for allotment of shares usually for 30 days and subject to
extension
1) Company must open register of allotment
2) The application may be coordinated by stock brokers
3) The company then processes the application
4) When the application list is closed (offer closes) and the register will close
5) When the Register closes, the Board of directors will constitute a board on
allotment. If they have more applications than the shares available on offer,
then they determine how many they can allot and the remainder will get a letter
of regret. This is accompanied by a bank cheque and by SEC Directive,
accompanied by accrued benefit if it exceeds a certain amount of time, back to
the applicant. So where such money attached for payment by a prospective
allottee, such money must be repaid with appropriate bank interest
6) When Board resolves to allot shares to any applicant, within 42 days of taking
this decision, the applicant should receive a letter of notification of allotment i.e.
specifying the allotment of X number of shares. A share certificate must be
issued not less than 2 months
7) From the time applicant is issued letter of notification of allotment, if applicant
changes his mind, the applicant will write a letter of renunciation

ELECTRONIC OFFER AND TRANSFER OF SECURITIES

This is operated by the Central Securities Clearing Systems Ltd (CSCS) as an arm of
the Nigerian Stock Exchange.
It has helped to dematerialise Shares Certificates by using the electronic book entry
and issuing Shares Certificates are now optional.

THE ADVANTAGES OF ELECTRONIC OFFER AND TRANSFER OF SECURITIES

ARE:
1. It simplify transactions
2. Trade alert are given to holders of the securities to check fraudulent dealings on
the securities: SS. 146 & 147 of CAMA and R. 98 of SEC Rules 2011.
• The procedure for subscribing to the electronic offer and transfer of securities
by the CSCS:
1. Verification of the Share Certificate
2. The Certificate if verified to be authentic will be dematerialised by the issue of a
CSCS account to the owner of the securities.

TRANSFER OF SHARES
This is where a shareholder of a company will alienate his interest in his shares to
another. S. 151 of CAMA. Private company restricts the transfer of its shares: S.
22(2) of CAMA.

PROCEDURE FOR THE TRANSFER OF ALL THE SHARES HELD BY A MEMBER

1. The transferor and the transferee execute A Deed of Transfer
2. Stamp the Deed
3. The transferor gives both the original Share Certificate and the Deed of
Transfer to the transferee
4. The transferee will lodge both with the company and he will be registered as
the owner of the shares
5. A new Share Certificate will be issued to the transferee

PROCEDURE FOR THE PART TRANSFER OF THE SHARES OWNED BY A

MEMBER
1. Execute a Deed of transfer between the parties
2. The instrument must be signed by both parties-s.151(1)& (3)
3. Stamp the Deed or Form of Transfer
4. The transferor takes the stamped Deed and his original Share Certificate to the
company
5. The company acknowledges it by endorsing at the back of the certificate “
CERTIFICATE LODGED” –s.157(1) &(2) CAMA
6. The company will issue a new Share Certificate to the transferor to reflect his
remaining shares and another certificate to the transferee within THREE
MONTHS: S.146(1)
7. The transferee will then take his own certificate issued to him to the Secretary
of the company to be registered in the Register of Members of the company. S.
152 of CAMA
NB: If transferor is selling only half of his shares to the transferee, by virtue of s157
CAMA, the procedure is the same with selling all the shares to one person.

EFFECT OF ENDORSEMENT CERTIFICATE LODGED

 The endorsement means that the company has recognised the transfer. S.
157(2) CAMA
 The recognition of instrument of transfer is merely a representation by the
company to anyone acting on the faith of that recognition that there have
been produced to the company such documents as on the face of them show
a prime facie title to the shares in the transferor named in the instrument of
transfer, but not as a representation that the transferor has any title to the
shares: S. 157(3)
 Where a person acts on the faith of a false recognition shown to be made
negligently, the company shall be liable to the person as if its acts were
fraudulent. S. 157(4)(5)

EFFECT OF NON-REGISTRATION OF TRANSFERRED SHARES

Until the name of the transferee is entered in the Register of members in respect of
transferred shares, as far as the company is concerned, the transferor is deemed to
remain a holder of the shares.
Thus, all rights and liabilities of a shareholders would continue to be attached to the
transferor as if the shares are still his own SECTION 151 (3); S. 152(2)

REFUSAL BY THE COMPANY TO RECOGNISE AND REGISTER INSTRUMENT OF

TRANSFER
A company may refuse to register a transfer of shares on the:
a. If the shares is not fully paid up and the company does not approve the transfer.
b. The company has a lien on the shares.
c. Non payment of requisite fees on instrument of transfer.
d. The instrument of transfer is not accompanied by share certificate or other
evidence to show transferor’s to make the transfer.
e. The instrument is in respect of more than one class of shares.-SECTION 152 (3)
(4)
NB ==If a company refuses to register a transfer of shares. It shall WITHIN TWO
MONTHS AFTER THE DATE OF which the transfer was lodged with it, send notice
of refusal to the transferee. S. 153(1) it is an offence to default and company and
every officer of the company who is in default will be liable to a fine of N200.

REMEDIES FOR A PERSON ENTITLED TO SHARES BUT NOT REGISTERED

1. Serve on the company a notice and affidavit of interest in the company’s shares
pursuant to 156 CAMA.
2. Apply to Federal High Court to rectify the company’s register of members in his
favour pursuant to S. 90 CAMA
3. The transferee may bring an action against the transferor to account for the
benefits derived within the period his interest was subsisting esp. dividend paid
out within the period
TRANSMISSION OF SHARES –
This occurs upon the death of a shareholder who may have died intestate or willed
the shares to a beneficiary.- S. 155 and 156 of CAMA
The procedure for transmission of shares
1. The personal representative are to obtain probate /Letters of Administration
2. Write a letter notifying the company of the intention to either be a member of
the company or to transfer same attached with the following:
a. A copy of the Death Certificate of the deceased shareholder
b. Copy of the Probate/Letters of Administration
c. Original Shares Certificate owned by the deceased
3. A new certificate will be issued to the personal representative of the
deceased

SHARE CERTIFICATE
 It is a prima facie evidence of the title of a member to the amount of shares
stated therein. -S. 146 of CAMA
 The company is stopped from denying liability once it is issued to a member.
S. 147 of CAMA.

DEBENTURES
This is a certificate given by a company acknowledging the repayment of a loan
obtained from the holder i.e. a written acknowledgement of indebtedness (a debt
instrument). NB: It could also be a mortgage transaction btw two companies
S. 166 OF CAMA AND
UNION BANK V. TROPICS FOODS LTD
GENERAL AUCTION ESTATE CO. V. SMITH;
INTERCONTRACTORS (NIG.) LTD. V. NPFMB
S38 CAMA, a company acquires the powers of a natural person of full capacity so
the company can borrow money and mortgage its property for the repayment of
such loan (s166 CAMA).

DEBENTURE STOCK CERTIFICATE

The debenture or debenture stock certificate under the company’s common seal
must within 60 days after allotment or after registration of transfer of any
debenture be delivered by the company to the registered holder – section 167(1)
of CAMA.
Where the debenture or debenture stock certificate is lost, defaced or destroyed by
the registered holder, he will be issued at his request, a certified true copy by the
company on payment of N5 (five naira) or less subject to the company’s rights to be
indemnified and payment of out of pocket expenses for investigating evidences
where reasonably required: s167(2)
Default by the company or officer attracts a fine of N25 (twenty five naira) and they
can be compelled by court order to comply, on the application of the registered
holder and can be responsible for all the costs of and incidental to the application –
s167(3)
TYPES OF DEBENTURES
1. PERPETUAL DEBENTURE
Debenture created with the intention that it will not be redeemed or it will only be
redeemed upon the happening of a remote event or contingency. On the face of it,
the concept of perpetual debenture runs contrary to the general principle of
mortgage (i.e. once a mortgage always a mortgage and there must be no clog on the
equity of redemption). S171 CAMA is a statutory exception to these common law
maxims – creates a perpetually irredeemable debenture. People who have high
stakes in certain corporations e.g. Dangote (can afford to stake everything as long as
the company remains a going concern) since he is like the alter ego of Dangote
group of companies
2. CONVERTIBLE DEBENTURE
This is a debenture which is issued upon the terms that in lieu of redemption or
repayment, it may be converted into shares in the company either at the option of
the holder or the company upon terms as stated in the debenture instrument
SECTION 172
3. SECURED or NAKED DEBENTURE
Debentures may either be secured by a charge over the company’s property or may
be unsecured by any charge thus naked: SECTION 173
4. REDEEMABLE DEBENTURE
A company limited by shares may issue debentures which are or at the option of the
company are to be liable, to be redeemed SECTION 174
Thus, it is repayable at a fixed term as per terms of issues. Redeemable debentures
can also be re-issued subject to S. 175(1)
5. BEARER DEBENTURE
This is debenture which is repayable to holder of the instrument. Thus, a bearer
debenture is a transferable negotiable instrument and payable to holder in due
course. It is transferable by mere delivery until due time for redemption.
6. REGISTERED DEBENTURE
This debenture is repayable to only the Registered Holder of Instrument (i.e. the
person whose name appears in Certificate and Register. Unlike bearer debenture, it
is non-negotiable but it is transferable in a manner prescribed by the Debenture
Instrument.
7. SYNDICATED LOAN DEBENTURE/PARIPASSU MORTGAGE DEBENTURE
This involves a consortium of lenders having one asset charged and created in
series, but with a paripassu clause i.e. that the later series created shall share
equally with the earliest.
This is usually created where the value of the asset security outweighs the total loan
advance.
This is usually used to finance mega project which would be difficult and risky for
only one lender to lend such huge sum. They rank equally in sharing in the event of
enforcement of the security.
The separate legal personalities of the individual lenders are subsumed under and
held by the Trustees of the Debenture holders appointed under the Trust Deed
created by the consortium.
Upon creation of paripassu mortgage debenture, the company shall within 90 days
after execution of the Trust Deed file with CAC the following particulars.
 Total amount secured by the whole series,

 Dates of resolution authorising the issue of the series,

 A general description of the property charged,

 Names of the trustees, if any, for the debenture holders; together with the
deed containing the charge, or, if there is no such deed, one of the debentures
of the series: SECTION 197(9)CAMA

DISQUALIFICATION OF TRUSTEE FOR DEBENTURES-S.187

1. Substantial shareholder
2. Disqualified director
3. Person less than 18yrs of age/
4. Person of unsound mind and has been so found by a court in Nigeria or
elsewhere
5. Undischarged bankrupt
6. Officer or employee of the company
7. If disqualified under s257 of CAMA

TIME LIMIT TO ISSUE DEBENTURES

Time limit within which to issue Debenture or Debenture Stock Certificate to
holders is WITHIN 60DAYS whether it is by allotment/transfer: S. 167 of CAMA

THE CONTENTS/STATEMENTS TO BE INCLUDED IN A DEBENTURE DEED-

1 The principal amount borrowed
2 The maximum discount allowed on the issue and the maximum premium at
redemption
3 The date of repayment of the principal sum
4 The rate and the date of payment of interest
5 If a convertible debenture, the date and terms on which it shall be converted
into the shares in the company
6 The Charge securing the debenture and the condition to which the debenture
are subject to. S. 168 of CAMA

TYPES OF SECURED DEBENTURES

Debenture may be secured by fixed or floating charges-s.173(2) CAMA
i. Debenture secured on a fixed Charge e.g. land / machinery of the company
ii. Debenture secured on a floating charge e.g. cash in bank, unpaid shares etc
S. 178 of CAMA

a. FIXED CHARGE
A fixed charge attaches to a particular piece of property when the charge is created.
A fixed charge is normally legal or equitable in nature.
The ADVANTAGE is that the particular asset charged is ear marked and kept
available to satisfy the charge’s claims.
The company cannot dispose of the asset or create other change ranking in priority
to the present charge.
The DISADVANTAGE is that the Debenture holder is confined to the asset charged
in the fixed charge and cannot proceed against other assets of the company.
NOTE-A fixed charge on any property shall have priority over a floating charge
affecting the same property until crystallisation and the person in whose favour the
fixed charge is made has notice of such prohibition.-SECTION 179
b. FLOATING CHARGE
A floating charge means an equitable charge over the whole or a specified part of the
company’s undertakings and assets including cash and uncalled capital of the
company both present and future.

CRYSTALLISATION OF A FLOATING CHARGE

A floating charge shall not preclude the company from dealing with such assets until
a. The security becomes enforceable and the holder appoints a receiver or
manager or enter into possession of such assets; or
b. The court appoint a receiver or manager of such assets on application of the
holder.
c. The company goes into liquidation.
SECTION 178(1) CAMA
On the happening of any of the events stipulated above, the charge shall be deemed
to crystallise and to become a fixed equitable charge on such of the company’s
assets as are subject to the charge.-S. 178(2)

Similarities btw floating and fixed charges: both recognised securities and both
registrable under 197 CAMA. Both floating and fixed charges must be registered in
the appropriate form of CAC (generally CAC 8 for registration and CAC 9 for
discharging the charge) within 90 days

Distinction between floating and fixed charge

 A floating charge does not prevent or preclude the chargor from dealing with
the charged property/asset adversely provided that it is in the normal course
of business whereas the chargor in a fixed charge is precluded from dealing
adversely with the object of a fixed charge in any situation

 In a floating charge, there is no crystallisation until the occurrence of a

certain event(s) e.g. a breach, winding up. The floating charge hovers over
the charged assets until crystallisation. A crystallised floating charge has the
same effect as a fixed charge

REGISTRATION OF CHARGES
 Where a company issues a secured debenture by creating on its property any of
the charges (fixed or floating), the company MUST WITHIN 90 DAYS OF THE
CREATION OF THE CHARGE deliver to CAC certain particulars for registration.-
SECTION 197
 This registration is required even if the property is not situated in Nigeria, and
covers all assets (present or future) inclusive of aircraft, ship and intellectual
property rights.
 The registration is done by filing a harmonised prescribed form: FORM CAC 8
 Upon registration of the charge securing a debenture, the CAC must issue a
Certificate of Registration which serves as a prima facie evidence of compliance
with the requirements of registration SECTION 198 (2)

PROCEDURE ON THE CREATION OF CHARGES/DEBENTURES

1. Convene a Board meeting and pass a Resolution authorising the loan.
2. Preparation, execution and stamping of the loan documents
 Deed of mortgage (charge by way of legal mortgage debenture)
 Power of Attorney (if any).
 Debenture Trust Deed (if it involves series of debenture, also a Trustees of
the Debenture holders)
3. If a debenture secured on the land of the company; obtain Governor’s
consent, stamp and register the Deed at the Lands Registry
4. If the borrower (mortgagor) is a company, register it with the CAC by filing
Form CAC 8- Registration of Charges attached with the following:
 Original Debenture Deed/loan document
 Resolution of the Board approving the Debenture
 Valuation Report of the fixed charge
 Trust deed
5. Collect a Certificate of Registration of Instrument from the CAC
6. Keep copies of the certificate of the registration of Charges at the Registered
office of the company.
7. Enter the details in the Register of Charges and Debenture holders of the
company
11. Obtain Certificate of Registration of charge from the CAC and have a copy of the
charge endorsed on every debenture.
12. On the satisfaction of the charge, file memorandum of satisfaction of charge –
CAC Form 9

FORM CAC 9 along with Deed of Release or other instrument-S.204

13. Notify the CAC of the appointment of a receiver/manager upon enforcement of
the security
Note: the filing of Form CAC 8-Registration of Charges is to be done WITHIN 90
DAYS OF THE CREATION OF A CHARGE.-
S. 197 and 183 of CAMA.

THE EFFECT OF FAILURE TO REGISTER DEBENTURES WITH THE CAC

1. The Debenture becomes void against the creditors and liquidators of the
company
2. The loan agreement is not void ab initio and the mortgagee can recover the loan
3. The loan amount becomes repayable immediately as the debenture is rendered
unsecured. The collateral is lost and the debt becomes a simple debt.
4. The interest of the mortgagee is then equitable and it loses priority over the
debentures registered.
S. 197 of CAMA and CAPITAL FINANCE CO. LTD V. STOKES

EXTENSION OF TIME TO REGISTER/RECTIFY DEBENTURE/CHARGES IF OUT OF

TIME
1. The debenture holder/company may apply to the Federal High Court by
Originating Motion supported by an affidavit to extend the time within which
to register a Charge with the CAC
2. Upon grant, go to the CAC with the Charge, Form CAC 8 and a CTC of the Order
of the Court extending the time for registration
3. Pay the fine or default fees
4. Collect the Certificate of Registration of Charges
MOSES & SONS V. BANK OF THE NORTH

REMEDIES OF DEBENTURE HOLDERS FOR THE DEFAULT IN REPAYMENT OF

THE LOAN
1. Action in Court to recover the principal and interest –AMANDA V.IKOM NIG
PLC
2. Bring a Petition for winding-up of the company on the ground of its inability to
pay its debt –s.408(d)&209(2)(b)(ii)
3. Specific performance
4. Debenture holders action-s.209(2)(a)
S. 208, 209 and 176 of CAMA

ADDITIONAL REMEDIES FOR SECURED DEBENTURES

1 Power of sale if it is a debenture secured on a fixed asset
2 Foreclosure of the security property-s.209(2)b(i) CAMA
3 Debenture holders action to enforce security
4 Appointment of receiver or manager over the company
NASHTEX INTL V. HABIBI NIGERIA BANK
S.209(1) CAMA
5 To take and enter possession of the security used for the loan
6 Valuation of security and providing proof of balance upon winding up.

THE PROCEDURE FOR THE SATISFACTION OF DEBENTURE/CHARGES

RATIONALE-This is to keep the assets free from endorsement of encumbrance
1. Execute a Deed of Satisfaction or Release of Debenture between the parties
2. File Form CAC 9- Memorandum of Satisfaction of Charges to the CAC
attached with the following: Deed of Release of the Debenture
3. Collect a Certificate of Satisfaction of the Charge
4. Keep a copy of the Certificate at the registered office of the company
5. Reflect the changes in the Register of Charges/Debenture.
S. 204 of CAMA

RECORDS KEPT BY THE COMPANY UPON ISSUE OF DEBENTURE

a. Record of Instruments creating charges S. 190
b. Register of Charges S. 191
c. Register of Debenture Holders S. 193

1.Board Resolution allotting shares

BENIDAH TRAVELS AND TOURS LIMITED RC NO: 2345

NO 10 KATAWILI CRESCENT
WUSE II, ABUJA
OUR REF:
RESOLUTION OF THE BOARD OF DIRECTORS APPROVING ALLOTMENT OF
SHARES PURSUANT TO SECTION 124 OF THE COMPANIES AND ALLIED-
MATTERS ACT 2004
At the Board of Directors meeting of the above named company held on the 20 th day
of May 2012 at the company’s conference room, it was proposed and duly resolved
to issue additional shares of N1, 000,000.00 divided into 1, 000,000 ordinary shares
of N1.00 each further allotted to the following persons:
1. Mrs. Ben Idah of……….. (address) 400,000 ordinary shares of N1.00 each

2. Mr. Ben Idah of ………………… 600,000 ordinary shares of N1.00 each

And that the new shares issued will rank at paripasu with the existing shares of the
company.

DATED THE ……………….. DAY OF …………………….. 2012

…………………. …………………………..
Director Director

2.Letter of Allotment

BENIDAH TRAVELS AND TOURS LIMITED RC NO: 2345

NO 10 KATAWILI CRESCENT
WUSE II ABUJA
OUR REF:
DATE: 15 JUNE 2012
Mr. Ben Idah
No. 15 kent
Road Wuse Zone
4 Abuja.

Sir,
 LETTER OF ALLOTMENT OF SHARES
Pleased to inform you that your application for the allotment of N600,000 of
600,000 ordinary shares of N1.00 each in the company has been allotted to you.

You may renounce all or any of the shares in favour of another by filling up the
accompanying letter of renunciation, on the understanding that you are still liable to
pay all sums due on the shares should any of your nominees fail to do so.
Thank you.
Yours faithfully,

Company secretary
3.Letter of Regret
BENIDAH TRAVELS AND TOURS LIMITED RC NO: 2345
NO 10 KATAWILI CRESCENT
WUSE II ABUJA
OUR REF:
DATE: 15 JUNE 2012
Mr. Ben Idah
No. 15 Kent
Road Wuse Zone
4 Abuja.
Sir,
LETTER OF REGRET
I regret to inform you that the directors were unable to allot you any shares in the
above company, and I enclose herewith a cheque for N600, 000.00 being the amount
paid by you on application.
Kindly fill up and return the annexed form of receipt.
Yours faithfully,
Company secretary
Week 16: Company Securities 2
CAPITAL MARKET PRACTICE AND FLOATATION OF SECURITIES
PREAMBLE-Capital floatation is simply the method by which a company can offer
its securities to the public to raise money.
Section 166 CAMA makes provisions for a company to borrow money.

REGULATORY AUTHORITIES
1 Securities and Exchange Commission is the main regulatory authority on
public offer of companies’ securities.
2 Nigerian Stock Exchange (NSE)
3 Corporate Affairs Commission
4 Federal High Court of Nigeria
5 Central Bank of Nigeria
6 Nigerian Investment Promotion Commission

THE APPLICABLE LAWS

 Investment and Securities Act (ISA) 2007
  Securities and Exchange Commission Consolidated Rules 2013
 Companies and Allied Matters Act 2004
 NSE listing rules
 Federal High Court Act

FINANCIAL MARKET
This refers to the avenue by which companies and the government raise funds.
The sources of funds are two
a. The money market
b. The capital market.

A- MONEY MARKET
Money market is the forum where you can access funds from Banks and other
financial institutions through negotiable instruments and bills. It is used to access
short-term funds. Collaterals are usually required.

CAPITAL MARKET
 Capital market encompasses all the arrangements that facilitate the
buying and selling of securities. It is a forum where companies and
governments may raise funds from the general public by trading securities
on the Stock Exchange.
ADVANTAGES
 It is believed that capital market is a better option in terms of providing
funds for companies as there is an unlimited access to funds there.
 There is also the absence of collateralisation-The company gets money from
the public without the members of the public requesting for collateral from
the company.

DIFFERENTIATE BETWEEN CAPITAL AND MONEY MARKET

THE ROLE OF THE CAPITAL MARKET
1. Provides opportunities for companies to borrow funds needed for long-term
investment purposes.
2. Provides facilities that enable foreign businesses to offer their shares to the
Nigerian market.
3. Encourages inflow of foreign capital when foreign companies or investors
invest in domestic securities.
4. Government can carry out its privatisation exercise by offering its
shareholdings in state owned enterprises to members of the public through the
Stock exchange.
5. Creates an avenue for the public to participate in the corporate sector of the
economy and share in its wealth through ownership of securities.
6. Provides employment opportunities for the ever-growing labour force.

LEVELS OF THE NIGERIAN CAPITAL MARKET

The Nigerian capital market exists at two levels
THE PRIMARY MARKET-
RULE 405 SEC RULES
 This is where companies can access funds for their shares, which have been
newly listed or issued to the public.
 It is otherwise known as the new issues market since it provides an avenue
for those wishing to raise funds from the market by selling their securities to
the public.
 i.e. from the company to the general public

FORMS OF PRIMARY MARKET

The primary market may be in the form of
i. Initial Public Offer (IPO)
ii. Public offer

INITIAL PUBLIC OFFER

 INITIAL PUBLIC OFFER (IPO) happens when a company invites members of
the public for the very first time to subscribe for its shares or debentures.
 The offer represents the first entry of the shares or debentures into the
capital market for the purpose of raising funds.

PUBLIC OFFERS:
 Subsequent entries to the capital market to issue shares for the purpose of
raising funds is called public offer. Funds that are raised from the primary
market go directly to the company.

PROCEDURE FOR PUBLIC OFFER OF SECURITIES

1. The bank must demonstrate need for public offer to SEC
2. Board resolution and special resolution authorising the public offer.
3. Prepare draft prospectus in line with R.288 SEC rules; S.73&79 ISA and
submit to SEC and NSE.
4. File an application to SEC for approval in FORM SEC 6 through the issuing
house accompanied by documents specified in Rule 279(2) SEC rules 2013
as required by s.54 ISA.
5. Upon approval, the final copy of the prospectus signed by all the
directors accompanied by a registration statement; certified letters of
consent; sworn declaration of full disclosure will be delivered to SEC
within 48 hours for registration - S.80 ISA;R.279(6);280;354 SEC RULES
2013;
6. The printed copy will be forwarded to NSE and CAC for record purposes.

B. THE SECONDARY MARKET

 The secondary market provides investors the opportunity to buy or sell
securities that were earlier issued in the primary market. Thus, this is a
sale of shares by the shareholder.
==An organised secondary market is a stock market with physical location,
trading in designated (quoted) securities e.g. Nigerian Stock Exchange.
  An unorganised secondary market has no physical trading location but
transactions are conducted mainly through telephone calls and the computer.
It is otherwise referred to as an Over – the Counter Market (OTC). It
trades in unquoted securities - CSCS
NB-Funds raised in the secondary market do not go to the company but the
proceeds go to the shareholder/investor himself.
NB ==S. 157 CAMA (transfer) applies only to sale of shares by private person.
As such, it doesn’t apply to shares sold on the Stock Exchange.

WHO CAN OFFER SECURITIES TO THE PUBLIC

 Only public companies (PLC) can offer its securities to the public, but only
quoted public companies and government issuing Bonds can be listed at
the Stock Exchange.
 Private companies (LTD) and unquoted Plc can offer their securities
through private placement but which must be registered with SEC.

INVESTMENT OPPORTUNITIES IN THE NIGERIAN CAPITAL MARKET

 Investment in Equities/shares
 Investment in Debentures
 Investment in Bonds
 Investment in Collective Investment Schemes
 Investment in mortgage-backed securities

PERSONS MANDATED TO REGISTER SECURITIES WITH SEC

The following persons shall register their securities and reports with SEC in
accordance with the Investment and Securities Act (ISA) and the SEC Rules-RULE
279 SEC RULES; S.54(1) ISA
i. Public quoted companies.
ii. Public unquoted companies.
iii. Government and Government Agencies.
iv. Investment Schemes.

CAPITAL MARKET OPERATORS AND CONSULTANTS

These are key institutions and individuals whose intermediary activities operate the
capital market.
They are professional corporate bodies and individuals registered with SEC.
Capital market operators include issuing houses, securities dealer, stock
brokers, trustees, portfolio managers, underwriters and custodians etc (NB:
the role of all these bodies in the capital market)
Underwriters are insurance companies in the capital market – if the offer to the
public fails, then they underwrite it (a form of insurance)

RULE 45-177 SEC RULES 2013

Consultants are those professionals who render certain experts service in the
capital markets and their opinions impact on capital market.
They include solicitors, accountants, investment advisers, valuers, rating
agencies, engineers etc-

RULE 178-181 SEC RULES2013.

REGISTRATION OF SECURITIES
All securities, bonds and collective investment Schemes must be approved first and
registered by SEC.
S. 54 and 67 of the Investment and Securities Act (ISA),
R. 279&280 SEC RULES 2013-
BLUE CHIP ACQUISITION AND INVESTMENT CO LTD. V. ZENITH BANK PLC.

AIM-The aim of the registration/approval is to approve the price for the securities.
METHODS OF OFFER OF SECURITIES TO THE PUBLIC-RULE 279(1)
1. DIRECT OFFER TO THE PUBLIC
 The company offers its shares to the public through an issuing house.
 The issuing house merely acts as an official agent of the company as it
packages and offers the shares to the public.
 The issuing house is a liaison between the company, the regulatory
authorities and the public.
 The terms and conditions of the offer are all contained in the prospectus.
NB-The risk of failure of the issue is borne by the company and not the issuing
house. Thus, to protect itself, the company usually arranges for the issue to be
underwritten at an agreed commission.

2. OFFER FOR SALE

 The company sells the whole issue of shares to an Issuing House.
 The issuing house then offers the shares to the public at a higher price.
 The issuing house bears the risk of failure of the issue, thus undertakes the
responsibility of under writing the issue. Thus in the event of failure, the
issuing house indemnifies the company
 Prospectus is needed here –S.69(1);70;82;315

DIFFERENCE BETWEEN DIRECT OFFER FOR SALE AND OFFER FOR SALE
i. In a direct offer for sale, the Issuing house gets commission while in offer for
sale, the issuing house gets profits.
ii. In a direct offer for sale, the company undertakes the responsibility for
underwriting the shares; whereas in an offer for sale, the issuing house
undertakes the responsibility of underwriting the shares.

3. PLACING
In placing, invitation is not made to the public whether directly or indirectly. The
shares of a company is allotted to an issuing house who later sells the shares to a
SPECIALISED CLIENT OR INSTITUTIONAL INVESTORS OR PENSION FUNDS,
cooperative bodies
NB-The risk of failure is borne by the issuing house. Thus it sees to the
underwriting of the shares.
4. PLACEMENT (private placements)-RULE 340 SEC RULES 2013
This is usually called private placement. This is a method of offering shares by a
public company which is not quoted on the stock exchange or by a private company
upon application by members subject to its articles and SEC approval. NB- A private
company cannot allow private placements to more than 50 persons.

5. RIGHTS ISSUE-R.324-338 SEC RULES 2013.

 This is the issue of shares by a company, which is directed only to existing
shareholders who are expected to acquire the shares in the ratio at which
they hold shares in the company.
 Rights issue is meant to preserve the leverage or shareholding equilibrium.
NB-No company can have rights issue of shares unless there is pre-emptive rights
clause in its Articles.
 Every company can have a pre-emptive rights clause in its Articles of
Association (i.e. right to offer shares first to existing shareholders before
transferring to the Public).
NB-a rights circular must be registered-S.54 ISA & RULE 326 ISA
NB ==This should not be confused with Restriction of Transfer of Shares by
a private company -S. 22(5) CAMA

DISADVANTAGES OF RIGHTS ISSUE

a. Shares are sold at a lower price than it would have been sold in the market
(could lead to insider trading)
b. There could be the problem of the shareholders not having enough money to
purchase the rights issue.
c. The precarious nature of the capital market or the problems associated with
the management of the companies may make a shareholder reluctant to
purchase new shares in the company.

6. HYBRID OFFER
This consists of rights issue and offer of shares to the public (details and advantages
and disadvantages)

7.DEBT/EQUITY CONVERSION-S.279(5) SEC RULES-(not only issued by

companies)

8.OFFER BY INTRODUCTION-used to get securities admitted to the stock exchange

9.BONUS ISSUE-no prospectus needed-S.69(2) ISA.

DOCUMENTS NEEDED FOR REGISTERATION OF SECURITIES-R. 279(2) SEC

RULES 2013.

1. Duly completed Form S.E.C. 6

2. A CTC of the resolution(s) by the general meeting authorising the offer
3. 2 CTCs of the altered Memorandum and Articles of Association
4. A CTC of certificate of incorporation of the issuer,
5. A signed copy of audited accounts for the preceding five (5) years or number
of years for which the issuer company has been in operation, (if less than five
(5) years) or audited statement of affairs (in the case of a new company) .
6. 2 copies each of the draft prospectus/rights circular/placement
memorandum and abridged prospectus;
7. 2 copies of the draft underwriting agreement and sub-underwriting
agreement, where applicable;
8. 2 copies of draft vending agreement, between issuer and the issuing house.
9. Letters of consent given by the parties to the issue, sworn to before a Notary
Public or Commissioner for Oaths.
10. Evidence of technical agreement (if any) reached between the issuer and
technical partner(s), advisers/consultants;
11. CTC of CAC FORM 7 (particulars of directors)
12. A copy of the mandate letter by the issuer to the issuing house;
13. Evidence of payment of registration and filing fees;
14. A certificate of exemption from a recognised stock exchange (where
applicable

THE PROCEDURE FOR THE ISSUANCE AND PUBLICATION OF PROSPECTUS

1. Prepare a draft Prospectus in Rule 288 SEC rules 2013,S.73 and 79(1) ISA.
2. Submit to the NSE for approval/ listing if it is an initial public offer. If the issuer
of the shares is already listed, obtain an Exemption Certificate from the NSE.
3. File an application to SEC for registration through the issuing house (FORM SEC
6) accompanied by the approved draft prospectus and other documents
prescribed in Rule 279(2) SEC rules 2013
4. Get letters of consent from all the experts involved in preparation of prospectus
and attach to the application.
5. Print the approved prospectus and have it duly executed by all the directors
named in the prospectus accompanied by a registration statement and a sworn
declaration of full disclosure of material facts- S.80 ISA &Rule 279(6);280;354
SEC Rules 2013.
6. Deliver the duly executed printed prospectus to SEC for registration within 48
hours and to CAC and NSE for record purposes.
7. Publish the prospectus in the abridged form specified in Rule 290 SEC rules
2013 and advertise to the public in line with the rules in Rule 284 SEC rules
2013-

DRAFTING OF THE INVITATION AND OFFER COLUMN

Note the rules for drafting the invitation /offer column of an abridged prospectus.-
S. 67, 68 and 71-86 of ISA

ROLE OF SOLICITOR IN PUBLIC OFFER OF SECURITIES-

RULE 180 SEC RULES 2013
1. Ensuring the company is a public company. If it is a private company, the
solicitor must ensure the proper procedures is followed for conversion from
private to public company.
2. Ensure that the shares to be issued are within the nominal share capital of
the company.
3. Ensure that all requirements of the Regulatory bodies are duly complied
with.
4. Make sure the shares to be issued are registered with the SEC.
5. Prepare the appropriate prospectus.
6. Ensure that the Prospectus makes all the required disclosures.
7. Getting all written consents, including his own and that of other experts that
may be mentioned in the Prospectus.
8. Ensuring that the Prospectus carry the signature of all directors named in
the Prospectus as directors.
9. Register the prospectus.
10. Make sure there are no untrue or misleading statements in the prospectus.
11. Advising on the opening of subscription lists before any allotment.
12. Seeking the initial and final approval of SEC and the Stock Exchange to the
issue.
13. Ensuring that the issue conforms to all necessary laws and regulations.
CAN A NEW COMPANY CIRCUMVENT THE RIGOROUS PROCESS OF ISSUING A
PROSPECTUS.
Yes. This is done by delivering a statement in lieu of prospectus signed by all the
named directors in line with the fourth schedule to the ISA for registration by SEC as
authorised by S.84&92 ISA and Rule 291 SEC rules 2013.
NB-S.69(1) ISA prohibits making of a statement upon terms that the person
will renounce benefit of the offer
CONTENTS OF A PROSPECTUS
The contents of a prospectus are specified in s.73 and 79 ISA 2007 and Rule 288
SEC rules 2013 include all documents and reports specified part I &II, 3rd
schedule to the ISA as well as
a. Front cover with details and RC no of the issuing company and issuing house,
amount of shares being offered and other details in rule 288(1) (a)
b. Detailed table of contents of the prospectus
c. Summary of the offer stating details in Rule 288(1)c
d. Details of the authorised share capital and indebtedness of company and
details in rule 288(1)d
e. Date and signature
f. Particulars of directors and parties to the issue
g. Chairman’s letter or statement disclosing the profile of the company and other
matters-rule 288(1)
h. Five (5) year audited financial information comprising accounting policies,
balance sheet, etc.
i. Letter reviewing audited accounts for the period by reporting accountants
j. Rating report (debt issue)
k. Any statutory/general information such as incorporation details, share capital
history, material contract and claims, directors’ interest, subsidiaries and
related companies and other information stated in RULE 288(I&j)
l. Procedure for application and allotment of the securities
m. Particulars of collecting agents
n. Particulars of receiving bank
o. Application form for the offer
p. Revised forecast (oversubscription)
q. Any other information required by SEC

REGISTRATION OF SECURITIES WITH SEC

All securities (shares, debentures, GDR, bonds etc) and Collective investment
schemes to be offered to the public by public companies and government and its
agencies must be approved and registered by SEC and the provision of ISA & SEC
rules duly complied with: s54(1), (5), (6) ISA: RULE 106 SEC RULES
Registrable securities are
 Securities issue (ordinary share, bonus share, debentures, preference shares,
right issue, unit of an investment trust scheme and asset backed securities
 Issue of securities offered to the public, state/LG bonds, investment contracts
or participation in oil or gas
LIABILITY FOR NON REGISTERATION OF SECURITIES
It is provided for in S.54(6) ISA. It attracts a fine of N1m or 3years imprisonment or
both
LIABILITY FOR NON ISSUANCE OF PROSPECTUS- body corporate-N500,00 and
100k(individual): S.67(2) ISA

LIABILITY FOR ISSUING APPLICATION FORM WITHOUT PROSPECTUS

S.71(4) ISA-N100K FINE

NON REGISTERATION OF PROSPECTUS-S.80(6)-

25K FOR COMPANY & 5K for individuals for each day of default

CIVIL LIABILITY FOR MISSTATEMENTS IN PROSPECTUS-S.85 ISA; RULE 292

SEC RULES 2013(liable to pay compensation to aggrieved person)

WHO IS LIABLE-S.85 (2) ISA-director, person consenting to be named, employee,

issuing house and principal officers.

CRIMINAL LIABIILTY-S.86 ISA; R.293 SEC RULES 2013-Fine of N 1 billion plus

3yrs imprisonment
Summary conviction (min) N 1 billion fine/3 months imprisonment or both

EXEMPTION OF EXPERTS
(mere consent does not make him liable -S.85(3)&86(2) ISA

FLOATATION OF BONDS
Bonds are fixed income security issued as debt instrument with low interest yield. It
is a loan instrument used to raise long-term capital for infrastructural development.
Bonds are negotiable debt instruments. There cannot be a perpetual bond –
maximum life span is 25 years. Any amount to be sold through bonds must not be
more than half of the total income of the company in the preceding financial year
TYPES OF BONDS
 Government bonds
 Corporate/company bonds

PARTIES TO A BOND
 ISSUER (BORROWER)
 BONDHOLDER (LENDER)

A.CORPORATE BONDS-
This can be issued by any public company, foreign public companies and
supranational bodies-RULE 567.

CONDITION FOR APPROVAL OF CORPORATE BONDS.

The issuance of bonds by public companies and supranational bodies shall be
subject to the following conditions:-
RULE 568
a. Eligibility of Debt Offering
i. Any public company, foreign public company or supranational body is eligible
to issue
ii. All necessary approvals (where applicable) in relation to the issue, from other
regulatory authorities shall be obtained and filed with the Commission together
with the registration statement.
iii. All issues of corporate bonds shall be rated by a rating agency (optional for
private placements
v. No Issuer shall offer bond if it is in default of payment of interest or repayment of
principal in respect of previous debts issuance for a period of more than six (6)
months.

(b) Mode of issue

Corporate bonds may be issued by way of an offer for subscription, rights issue or
private placement.

(c) Resolution
There shall be a resolution by the board authorising the issue of the bond and a
resolution of the general meeting resolution shall be required where:
(i) The amount to be borrowed is beyond the specified limit on the borrowing
powers of directors in the Memorandum and Articles of Association of the
issuer;
(ii) The bond to be issued is convertible.
(a) Disclosure and creation of charge
PROCEDURE
1. Convene a board meeting and pass a resolution authorising the bond issue.
2. A resolution passed at the General Meeting will be needed if the amount to be
borrowed is beyond the issuing companies borrowing limit or the bond is a
convertible bond.
3. The company will file a registration statement accompanied by the following
documents;
(a) Duly completed form SEC 6;
(b) Appropriate filing and registration fees;
(c) Two (2) copies of the board resolution authorising the issue of the bond or
special resolution if needed
(d) Two (2) copies of the Memorandum and Articles of Association (CTC) of the
Issuer
(e) A copy of certificate of incorporation of the issuer certified by the company
secretary;
(f) A signed copy of the Issuers latest audited accounts for the preceding three (3)
years, with the latest account not more than nine (9) months old at the time
of filing with the Commission;
(g) Reporting accountant report;
(h) Consent letters of the parties to the offer;
(i) Two (2) copies of the draft vending agreement between the issuer and the
issuing house;
(j) Draft underwriting agreement (where applicable);
(k) Rating report by a registered rating agency;
(l) A letter of “No Objection” from the relevant regulatory body (where
applicable);
(m) Two (2) copies of draft trust deed;
(n) A draft prospectus, right circular, placement memorandum or any form of
information Memorandum with specified contents in RULE 567(n)(i-xi)
(o) Declaration by the issuer on compliance with all requirements of the Act;

WHO CAN ISSUE GOVERNMENT BOND-Section 222 ISA 2007

a. The Federal Government
b. Federal Government Agencies
c. State Government and their agencies
d. The Federal Capital Territory and its agencies
e. Local Governments and
f. Any company which is wholly owned by the Federal, State, FCT and Local
Government
NB ==If the Federal Government issues bonds, it is called sovereign bond. States,
local governments, government agencies issue revenue bonds, cities within local
governments issue municipal bonds.

LAW REGULATING GOVERNMENT BONDS

 Trustee Investment Act
  Debt Management Office (Establishment) Act
 ISA and SEC rules 2013
NOTE- The debt management office is part of the Federal Ministry of Finance, which
oversees issue of government securities in collaboration with SEC.

CONDITIONS AND REQUIREMENTS FOR A VALID ISSUE OF GOVERNMENT

BONDS
1 There must be a law passed by the National Assembly, State House of Assembly
or Local Government authorising the issuance of bonds.
2 The bond instrument must bear crest of the government body and be signed by
the minister, commissioner or chairman or other appropriate officer of the
body raising the loan.
S.241(1) ISA
3 The total amount of out-standing loan and the bond of the issuer should not
exceed more than half of its actual revenue for the preceding financial year-
S. 223(1)a ISA;
R.565(2) SEC RULES 2013.
4 The bond issue must be registered with SEC -
Rule 564
;s.224(1) ISA
5 Redemption date shall not exceed 25 YEARS from date of issuance of the bond.
S.226 (2) ISA.
6 Letter of authority of guarantee by the Accountant General of state or
federation stating that the bond shall be paid and to deduct at source from the
statutory allocation due to the issuer in the event of default or failure to meet
its payment obligations.
7 A sinking fund is required to be opened by the Accountant General of the state
or federation to deposit money overtime to make up for the payment of the
bonds at the required date. S. 224(4) ISA.
8 A separate sinking fund shall be established for each loan raised. S. 251 of ISA
9 The bond holders must pay full purchase price before registration- S. 231 of
ISA
10 Bond Certificates must be issued to bondholders by the registrar WITHIN 2
MONTHS of the issue-
S. 232 of ISA
R. 565(5) of SEC Rules 2013.
11 A trustee (usually a company) is to be appointed to act on behalf of the
bondholders –S.224(5) ;
S.245(1)&(2)
S.247 ISA.
12 Registered Bonds may be designated in any denominations approved by SEC-
S.241(2) ISA

THE PROCEDURE FOR THE REGISTRATION OF GOVERNMENT BONDS

1.Fill Application FORM SEC 6with the following attached:
a. A copy of the Law authorising the issue of the bond by the State Government,
etc or a Resolution of either the House of Assembly (or the Senate if it is by
the Federal Government) or the State( Federal) Executive Council in lieu of a
formal Law.
b. Copies of the draft trust deed, where applicable
c. An irrevocable Letter of authority issued by the Accountant-General of the
State to the Accountant General of the Federation to deduct at source from
the statutory allocation to it (the issuer) into the sinking fund(note-waiver)
d. Evidence of technical agreement (if any) reached between the issuer and
technical partner(s), advisers/consultants;
e. A feasibility report on the project to be financed
f. Copies of the draft underwriting agreement and sub-underwriting agreement
g. A copy of a rating report by a rating agency
h. The latest audited accounts shall not be more than twelve months old for
states, local governments and Federal Government agencies and
Supranational bodies.
i. Publication of annual financial statements in 2 daily newspapers
j. Details of sinking fund
k. Evidence of payment of registration and filing fees-
RULE 565(1);
S.224(3) ISA.

REGISTRATION OF GOVERNMENT OWNED COMPANY AND AGENCY BOND

If it is an Agency of the Government or a company wholly owned by the
Government, the procedure for registration will be as follows:
1.Fill and file application Form SEC 6 attached with the following:
a) Copy of the Law or instrument establishing the Agency or company
b) Copy of the Law/Resolution authorising the Agency or company to issue the
bond
c) A rating Report
d) An irrevocable letter of Guarantee of repayment issued by the Federal/ State
Government that owns the Agency or company etc.

GLOBAL DEPOSITORY RECEIPT-

RULE 420 SEC RULES 2O13
 GDR is the acknowledgment of purchase of shares on the floor of the stock
exchange authorising the bond.
 This is the re-issuing of shares of a foreign company already issued in that
country, in Nigeria.
 The country issues receipts to investors who are interested in owing shares
in the foreign company.
 A GDR is denominated in the foreign currency and is listed on the stock
exchange of that foreign country.
 No share certificate is given
 Only LISTED COMPANIES can enjoy the issuance of GDR.
RELEVANCE OF GDR-

COLLECTIVE INVESTMENTS SCHEMES (CIS)

This is a pooled investment by a group of persons with no membership nor
participatory rights. It is under a third party management and control. -S. 152-
154; 315 of ISA ;RULE 450
It is any form of arrangement which may involve the following: where investors
share the risk and benefit of investment in proportion to their participatory
interest; or where investors share the risk and benefit of investment as determined
in the deed.
Therefore, it is a scheme in whatever form, in pursuance of which members of the
public are invited to invest money or other assets in a portfolio – s153 ISA 2007 e.g.
cooperative societies

FEATURES OF A COLLECTIVE INVESTMENT SCHEME

 Through the participants pool funds together for the purpose of sharing
profit and the participants do not have day to day control over the
management of the property underlying the arrangement
 The pooled funds is usually managed by a designated professional fund
manager
 The participants in a CIS merely has a participatory interest in the scheme
and they are not members of any company in which their funds are invested
 They do not enjoy membership rights of a company
 Participants in a CIS are designated as unit holders

TYPES OF COLLECTIVE INVESTMENT SCHEMES

1. Unit trust scheme
2. Open-ended investment scheme
3. Real estate investment scheme
4. Investment trust scheme
5. Co-operative/Community savings scheme
6. Ethical mutual investment
7. And other type designated as collective investment scheme in the Gazette; S.
154 of ISA ;RULE 41 SEC RULES 2011.

INVESTMENT TRUST FUND/ETHICAL MUTUAL INVESTMENT

This is a socially responsive fund which complies with ethical or moral principles of
investment.
It is usually packaged as a specialised unit trust scheme whereby the Unit Holders
define in advance what type of securities their money would be invested in
EXAMPLE: IBTC Ethical Fund which clearly excluded Alcoholic and Cigarette
producing companies from the investments of the trust scheme.

REAL ESTATE INVESTMENT TRUST (REIT)

This is established for the sole purpose of acquiring intermediate or long term
interest in real estate or property development and may raise funds from the
capital market through the issuance of securities in favour of the pooled investors
that contributed to the scheme. S. 193 ISA;r.508-502

Features:
 Presence of unit, unit holders, trustees, fund managers and trust deed.
 Contribution of money and resultance of profit
NB ==The scheme does not envisage the allotting of lands to the unit holders. It is
merely an interest in real estate.

COMMUNITY SAVINGS SCHEME

It involves the pooling of small funds from certain members of a group within a
community.
It needs approval and registration from SEC for statistical purposes.-
Use past question to answer it.

UNIT TRUST SCHEME

This is an arrangement made for the purpose of providing facilities for participation
of the public as beneficiaries under a trust, in profits or income arising from
acquisition, management or disposal of securities or any other property – Sections
152 & 315 ISA.
It is usually administered as a Limited Liability Company (private or public)
approved by SEC with the main object to pool resources of small of small savers in
order to build a portfolio of securities to earn income and capital gains for the
investors (unit holders) and managed by Fund/Portfolio Managers. A Trustee is also
appointed whose responsibility is to register and hold investments in trust for the
unit holders and to ensure that the terms of the trust as contained in the Trust Deed
executed with the Fund Managers are strictly observed.

ESSENTIAL ELEMENTS OF A UNIT TRUST SCHEME-S.152 ISA

1. The Fund: The fund is pooled by all the investors
2. Units: The pooled funds are divided into units of the participatory interest.
3. Unit Holder: The unit holders are the participants in the scheme who are
entitled to a pro rata share of interests or other income of the securities
comprised in the units.
4. Fund Manager: The scheme is managed by Fund Manager who uses the
proceeds of the sale of trust units to invest in other securities in accordance
with the policies and objectives of the trust scheme.
5. Trustee: A Trustee registers and hold investments in trust for the unit
holders and to ensure that the terms of the trust are strictly observed by
the Fund managers. It also makes funds available to the fund manager.
6. Trust Deed: A trust deed is executed between the trustees and the Fund
manager for regulating the operation of the scheme.
NB- CUSTODIAN-15 BILLION SHARE CAPITAL
NB == S. 162 (1) ISA-the manager, Trustee or custodian has no unilateral
power to alter the trust deed any time without prior approval of the SEC.
7. A unit trust scheme is usually administered as a limited liability company
(private or public) which is approved and registered by SEC.
Example of a Unit Trust Scheme is
The UBA Money Market Fund by the UBA Asset Management Fund.
NB == Familiarise yourself with the procedure for the Registration of Unit Trust
Scheme (UTS).

PROCEDURE FOR THE REGISTRATION OF COLLECTIVE INVESTMENT SCHEME

1.An application in Form SEC 6A is made attached with the following:
a. copies of draft prospectus
b. copies of draft Trust Deed
c. The proposed portfolio mix and experts
d. Notarised letters of consent of the prospective parties to the schemes
e. copies of the CTC of the Memorandum and Articles of the Fund
f. Manager company
g. copies of the CTC of the Memorandum and Articles of the Trustee company
h. A sworn undertaken to file evidence of maintenance of a separate fund account
in a reputable Bank
i. copies of the CTC of the particulars of Directors (Form CAC 7) of the managers
and trustees of the company
j. Evidence that the minimum paid-up capital of the managers and trustees of the
CIS complies with the requirements OF SEC as follows:
a. Fund Manager – N150 million(20 million)
b. Trustee company- N300 million (40 million)
R. 41(1) of SEC Rules 2010

CONDITIONS FOR THE AUTHORISATION/LICENCING OF A UNIT TRUST

SCHEME (Use for other schemes)
a. No Unit Trust Scheme (UTS) can be issued or made available unless it is
registered and authorised by SEC: S. 160 ISA; RULE 459; R.466
b. The fund manager must be an incorporated company with a profile of dealing
with business.
c. Independence of the fund manager must be evident on the face of the scheme
d. The share capital of the manager must be in line with the authorised capital
as prescribed by SEC.
e. The Trustee must be an incorporated company with the authorised share
capital.
f. The designation or name of the UTS must not be absurd and must be
acceptable to SEC.
g. There must be evidence of non – interference between the managers and
trustees.

DIFFERENCES BETWEEN A COMPANY AND CIS(exam area)

1. Members of a company are called shareholders while the participants in CIS
are called unit holders.
2. Shareholders have and exercise membership rights while unit holders do not
take decisions in the running of the company.
3. The Board of Directors manage a company while the CIS is managed by the
Fund managers, trustees.
4. Shareholders have a definite numbers of shares as against funds invested
whereas funds contributed by unit holders’ individualism and is not a
representative of individual contributions made.
5. Shareholders are entitled to dividends whereas unit holders are entitled to
profit pro rata.

OPEN-ENDED INVESTMENT COMPANY

This is a company with an authorised share capital whose Articles of Association
authorise the acquisition of its own shares structured in such a manner that it
provides for the reissuing of different classes of shares to investors, each class of
shares representing a separate portfolio with a distinct investment policy –
Sections 152 and 315 of ISA. An investor will generally purchase shares in the
fund directly from the fund itself rather than from the existing shareholders. This
type continually issues and redeems units (shares) after IPO. The price is based on
the net asset value, which is the sum of the fund less all liabilities as at the date of
acquisition or redemption

Closed-ended scheme
This type does not re-issue nor redeem additional issue of new units (shares). Most
times, it is listed and traded on the Stock Exchange and its price is determined by
market forces. It issues all the shares it will issue at the outset, with such shares
usually being tradable between investors thereafter. A closed-end fund is a publicly
traded investment company that raises a fixed amount of capital through an initial
public offering (IPO). The fund is then structured, listed and traded like a stock on a
stock exchange. It raises a prescribed amount of capital only once through an IPO by
issuing a fixed number of shares, which are purchased by investors in the closed-
end fund as stock. Unlike regular stocks, closed-end fund stock represents an
interest in a specialised portfolio of securities that is actively managed by an
investment advisor and which typically concentrates on a specific industry,
geographic market, or sector. The stock prices of a closed-end fund fluctuate
according to market forces (supply and demand) as well as the changing values of
the securities in the fund's holdings.

Venture capital fund

 This is profit seeking scheme by entrepreneurs
 Their primary objective is to provide fund to new and growing businesses
with the sole aim of long term profit
 It is usually an initial stage of financing new and developing companies
seeking to develop quickly
 Institutional investors, affluent individuals etc are sources of the fund
 The risk of return under the scheme is high
Specialised fund
 This is a mutual fund that invest in securities of a particular sector, industry
or geographical location
 This kind is notable for high risks and returns when compared to other funds
due to lack of diversification of the portfolio of investment

CLASS ACTIVITIES
QUESTIONS
1. What is a collective Investment Scheme?
2. List 5 examples of collective investment schemes possible under the ISA.
3. Highlight the essential elements of a unit trust scheme.
4. Enumerate the conditions for the authorization of a unit trust scheme in
Nigeria.
5a. What is a mutual fund?
b. What do you understand by Ethical fund/Ethical mutual investment?
6. Explain the significant of a Real Estate Investment Trust under the ISA.
7. What are the conditions for the issuance of:
a. Federal Government Bonds in Nigeria.
b. State Government Bonds
8. What is Global Depository Receipt (GDR)?
9. Explain the relevance of GDR as a vehicle for capital floatation in Nigeria.
10. What are the differences between investing in a company and investing in a
collective investment scheme?

WHAT IS A QUOTED COMPANY

A QUOTED/LISTED COMPANY is a company which is
a. A public company.
b. has applied to and its shares are registered for trading on the Stock
Exchange.
WHAT KIND OF COMPANY IS NSE?
NB == The Nigerian Stock Exchange (NSE) is an incorporated company limited by
guarantee.
WHAT KIND OF COMPANY IS CSCS
The Central Securities Clearing System (CSCS) is an incorporated company which is
a private company limited by shares (LTD)
The major shareholders of CSCS are the NSE, SEC and Share Holders Association
of Nigeria.
Week 17: CORPORATE RESTRUCTURING I-INTERNAL RESTRUCTURING
APPLICABLE LAWS/AGENCIES-
 CAMA/CAC/
 SEC/ISA/
 FHC/FHCA.
 Any relevant regulatory body in the sector in which the company
operates
Restructuring is designing or repositioning a company either internally or
externally.
Internal restructuring involves the company alone with its members or creditors
while external involves the company and other third parties.
Company in business for a while might need to restructure either to mitigate loss or
stem a downward trend. Could be due to reckless management of resources of a
company by directors.
Reasons for corporate restructuring: To reposition itself to make more profit, to
gain more control in the market, to expand its sphere of coverage, to reduce or
arrest losses and downward sliding.

RATIONALE FOR INTERNAL RESTRUCTURING

a. To survive economic hardship/financial trauma without losing corporate
identity
 b. To eliminate superfluous shares/securities no longer represented by a
company’s assets through negotiation with company’s creditors to accept
money’s worth.
c. To reduce likelihood of fraud

METHODS OF INTERNAL RESTRUCTURING

The options available to the company to salvage the situation and keep the company
afloat as a going concern are:
1. Buy out e.g. shareholders buy out, management /employee buy out-RULE 449
SEC RULES 2013
2. Arrangement and compromise.-S.537;539-540 CAMA
3. Arrangement on sale-S.538 CAMA
4. Increase of share capital: s102 CAMA
5. Share capital reduction: s106 CAMA
6. Share consolidation and reconstruction-s.100 CAMA
7. Conversion and re-registration of the company in order to take advantage of
the capital market.-s.50-53 CAMA
8. Salary Adjustment (Downsizing): This is the latest trend and involves cut
down in salaries. However, it is not popular in Nigeria.
9. Redundancy scheme or voluntary withdrawal. This is a type of labour scheme.
It is an option where there is an effective legal framework. Not ideal in
Nigeria

WHEN IS INTERNAL RESTRUCTURING USED- When a company has a large debt

profile and the company desires that it should not be wound up.

MARKERS FOR DETERMINING BEST INTERNAL RESTRUCTURING OPTIONS TO

ADOPT
1. Determining indebtedness of creditors and preference shareholders and the
company does not want to be wound up-ARRANGEMENT AND COMPROMISE.
2. Solvent company selling whole or part of assets (voluntary winding up)-
ARRANGEMENT ON SALE
3. Bloated shares-REDUCTION OF SHARE CAPITAL (issued shares)
4. Directors/employees intervention-BUYOUT OF controlling shares
5. Increase of share capital (raising money at capital market to settle debts)
6. Share reconstruction-S.100-this will enable them raise value of shares and raise
more capital if it wants to target plenty participants
7. If shares are UNISSUED-CANCELLATION of S.100(1)(d)

A. ARRANGEMENT AND COMPROMISE-SECTION 537,539-540 CAMA

Here the company alters the rights of its members and creditors only; an example of
such is an agreement with the preference shareholders to cancel their dividends in
arrears etc. an arrangement is the alteration of the obligation of a company by
negotiation with those entitled to what the company is owing e.g. members,
debenture holders, creditors or a class of them. A negotiated agreement by a
company for its creditors, members or a class of them to accept an amount less than
what the company is owing or accept a settlement other than cash as full and final
settlement of the company’s indebtedness under the arrangement. This is done
under an instrument (s539 CAMA)
FORMS OF ARRANGEMENT OR COMPROMISE
A. Arrangement/ compromise with creditors
 A proposal to create successive legal mortgages where possible
 An arrangement to accept a lesser amount than that which it is entitled to.
 A compromise with creditors to relinquish their security.
 A compromise to reschedule the time for redemption of the loans.
 Conversion of convertible debentures into shares-S.172 CAMA
 An arrangement to create a high ranking or paripassu charge.
 An arrangement with creditors to accept shares or debt instruments in lieu of
cash payments for satisfaction of debt.

DEBT EQUITY SWAP

 Debt Equity Swap is a mode whereby the company negotiates with its
creditors to propose a relinquishment of their security, or to undertake to
pay them off prior to the reconstruction or convince them to take shares or
part shares or part cash in satisfaction of their debts.
 This can be otherwise called convertible debenture in form of debt equity
swap.

WHEN IT IS RECOMMENDED
 This mode is suitable because the creditors are made to accept less than
what they are ordinarily entitled to as full satisfaction of its obligation.
 It is also suitable because it enables a company to alter the right of its
creditors with the sanction of the court thus modifying the rights of the
creditors involved.

B-ARRANGEMENT/COMPROMISE WITH MEMBERS/SHAREHOLDERS.

1. An agreement for variation of class rights in line with S.141 CAMA as
follows;
a. Persuade the ordinary shareholders to relinquish part of their shares to
preference
b. Propose an agreement with preference shareholders for the
I. cancellation of their dividend arrears
II. reduction of the fixed rate of dividend
III. Conversion of their preference shares to ordinary shares.
IV. Acceptance of ordinary shares in lieu of dividend arrears.
2. Members may be persuaded to pass a resolution for the Increase and
Reduction of Share Capital of the company-S.102-103;S/105-109 CAMA
3. The company can also make call on shares or demand on the shareholder to
pay up for the shares issued to them that have remained unpaid by them-
S.133 CAMA

PROCEDURE FOR ARRANGEMENT AND COMPROMISE: s539 CAMA

1. Board resolution sanctioning proposed scheme of arrangement. The scheme is
the document that embodies the proposed compromise i.e.
variation/reduction of the obligation) – how much the company is owing, who
it is owing, what the company is offering and in what way has the creditors
responded to it
2. When a scheme of arrangement is proposed, either the company or the
creditors may approach Federal High Court for an order to sanction the
scheme of arrangement. When the court is approached, the court will order a
meeting of the creditors, debenture holders, members or a class of them
3. Notice of meeting is served on members accompanied with a statement
showing the effect of the arrangement on the directors as creditors/
shareholders –S.540 CAMA.
4. 75% or ¾ majority of the shareholders/creditors should vote in favour of the
scheme and a written report of it made to the Court.
5. The Federal High Court refers the scheme to SEC to investigate its fairness or
otherwise of the scheme.-S.539(2) CAMA.
6. SEC appoints inspectors to investigate it and reports to the Court
7. If the court is satisfied with the fairness of the scheme, the Court will make an
Order sanctioning the scheme and the scheme becomes binding on all affected
creditors/shareholders-S.539(3) CAMA
8. The order shall have no effect until a certified true copy of the order has been
delivered by the company to CAC for registration and a copy of the Court order
should be annexed to every copy of the Memorandum of the company.

CHECKLIST OF DOCUMENTS TO BE PREPARED

1. Proposed scheme of arrangement
2. Application to FHC for court ordered meeting
3. Notice of general meeting to pass special resolution
4. Application to FHC to sanction scheme of arrangement

DOCUMENTS TO BE SUBMITTED TO CAC

1. A CTC of the court order sanctioning the scheme for registration

B. ARRANGEMENT ON SALE-S. 538 CAMA

This is a process of voluntary winding up of a company and liquidators appointed
and authorised to sell the whole or part of its undertaking or assets to another
corporate body. Here, the consideration for the sale may be cash, shares,
debentures or policies, which would be distributed in species amongst the members
of the companies in accordance with their rights in liquidation.
The money realised can be used in the floatation of new company or as equity
contribution in any scheme of arrangement for restructuring such as merger.

WHEN RECOMMENDED:
Arrangement on Sale is one of the options that could be adopted for the internal
restructuring for a company whose assets outweighs its liabilities
It result to the resurrection of the company in another form either as a new
company or providing fund for another restructuring scheme
The company will not be brought to a permanent end upon winding up as a result of
its liabilities and liquidation.
It will still exist and operate but in another form.
It is also a suitable option to adopt because, where the members do not wish or
desire to restructure a new company, the proceeds from the sale could be
distributed in species amongst them in accordance with their rights in liquidation.

This is an option in corporate restructuring, which may be wholly internal or

commence as an internal restructuring and end as an external restructuring.
Internal restructuring is one that doesn’t require cooperation of more than one
corporate entity. It is used when a company is doing well and has no financial
difficulty in meeting its obligations. An option available to a solvent company (assets
exceeds liabilities). Its board of directors must commence with a declaration of
solvency and subsequent upon that, a meeting of the company is convened and a
special resolution is passed appointing a liquidator to put the company into
voluntary members’ winding up and directing the liquidator on what to do with the
proceeds from the dissolution of the company (in the manner prescribed).
PROCEDURE FOR ARRANGEMENT ON SALE:
1. Board resolution adopting draft scheme of arrangement on sale
2. The directors make a statutory declaration of solvency as the basis for the
voluntary winding-up in line with S.462 CAMA.
3. Notice of Extraordinary General Meeting will be issued to members of the
company
4. Members of the company will pass a Special Resolution authorising members
voluntary winding up (S.457)and to appoint a liquidator to sell the assets to
another company in consideration for cash or shares in the company –s.538(1)
5. The liquidator appointed convenes a meeting of the shareholders/creditors to
approve/consider the scheme of arrangement.
6. A dissenting member can write the liquidator WITHIN 30 DAYS OF THE
passing of the Resolution asking him to either:
a. Abstain from carrying out the Resolution or
b. Purchase his own shares at a price to be determined by-
I. An agreement if it is a private company with no alien or
II. SEC if a plc or a private company with alien participation –
S.538(4)
7. If ALL assets are sold, the proceeds of the sale will be distributed
amongst members in order of priority of a company in liquidation-
S.538(6) CAMA
8. The liquidator will convene a final dissolution meeting where the accounts of
the winding up would be considered by the members in accordance withS.478
CAMA
ii The arrangement will be valid if AFTER 1 YEAR there is no objection under:
a. Unfairly prejudicial and oppressive conduct OR
 b. An order of the Court for a creditors’ winding-up.
NB == Where the mandate is that the liquidator is to sell part of the assets or
undertaking of the company, it is an internal option but where the mandate is to
sell ALL the assets and undertaking and invest it in another company. It is an
External option.
NB-The fact that a company is indebted is not coterminous with insolvency

DIFFERENCE BETWEEN ARRANGEMENT ON SALE AND ARRANGEMENT AND

COMPROMISE
1. In an arrangement on sale, the company is solvent i.e. its assets is in excess of its
liabilities and to demonstrate this, the directors are required to make a solemn
declaration of solvency which is not required in arrangement or compromise.
2. Arrangement or compromise is more suitable where a company is in financial
trauma, where as an arrangement on sale is usually used when a company is
solvent.

C. INCREASE AND REDUCTION OF SHARE CAPITAL

 A company facing financial difficulty may opt to increase its share capital and
then place it on the capital market for purchase.-
Ss 102 CAMA
R.29 CR 2012
 On the other hand, a company which is financially buoyant may opt to
reduce its share capital realised for other investment.-
s.106 CAMA;
R.30 CR 2012
Nb-Checklist of documents-
 BOARD &ORDINARY RESOLUTION;
 NOTICE OF General Meeting;
 ALTERED MEMO &ARTICLES;
 CAC 2A;
 CAC 2.4;
 CERTIFICATE OF INCREASE.

DOCUMENTS(REDUCTION)-
 BOARD RESOLUTION;
 PROPOSED SCHEME OF REDUCTION;
 NOTICE OF General Meeting;
 SPECIAL RESOLUTION
 COURT ORDER;
 EXTRACTS OF MINUTES APPROVING SCHEME;
 CAC 2.4;
 CERTIFICATE OF REGISTRATION OF COURT ORDER

Share capital reduction (s106 CAMA): A company may need to reduce its share
capital if the assets of the company is no longer represented by a portion of its
shares. The shares become superfluous i.e. not proportional to the assets of the
company. Thus reduce the share capital as to what is fully represented. Special
resolution at a general meeting of a company but for private companies, if all
members entitled to attend and vote unanimously by written resolution and
reduction will be approved by the Court. Copy of resolution, order of court and
memo and article as altered will be filed with CAC. Every memo will now bear
indications that the share capital has been reduced

Increase of share capital (s102 CAMA): discrepancy btw Company Regulations 2012
(guidelines released by CAC seems to suggest that the resolution should be special)
but in CAMA, it states ordinary resolution. Law is superior to Internal Guidelines
released by CAC. Thus, the resolution is by ordinary resolution. Injection of more
funds to the capital base of the company so the company can do more business and
make more profit. Done by convening a meeting of the company by the company
secretary. An ordinary resolution is passed at the meeting. File CAC 2.4 for
alteration of share capital (could be increase or reduction). Also under s100 CAMA,
share consolidation and reconstruction

D.SHARE RECONSTRUCTION AND RE-CONSOLIDATION-Section 100 CAMA

Shares can be reconstructed or consolidated, added together and subdivided into
several numbers than they originally were or cancelled entirely. Can cancel issued
but unpaid shares. To dissolve the shares into one whole lump and subdivide the
shares into stocks or shares of larger numbers that it was or subdivide into fewer
numbers of shares provided that in either case, the amount paid by the shareholders
is not tampered with (e.g. 1million shares at N5 into 5million at N1). Thus the total
amount represented by all the shares must be unchanged.

DOCUMENTS-FORM CAC 2A; SCHEME OF RECONSTRUCTION (authorised share

capital and ratio for reconstruction). Notice to CAC within 1 MONTH

E.BUY OUT
This is an agreement or arrangement where certain interest groups within a
company acquire the interest in shares of others in a company. A buy-out is an
acquisition of the totality or a controlling percentage of a company’s equity (shares)
by stakeholders within or outside the company. These stakeholders may be the
employees, management, pension scheme, creditors or other external groups
interested in the equities of the company. They decide to leverage (take advantage)
on the special relationship they have with the company.
a. EMPLOYEES BUY-OUT. The employees can decide to buy out a company
because of their job securities or attachment to the company.
They pool their salaries together and buy out the management of the company.
b. LEVERAGE BUY-OUT/MANAGEMENT BUY OUT-
S. 118 of ISA
R.449 SEC RULE 2013.
It is the acquisition by a management team (directors/employees) of a company of
controlling shares of that company or its subsidiaries by buying controlling shares.
A form of internal restructuring. A restructuring of the ownership of the company –
the shareholders are divested and replaced with the management who also become
the owners of the equity of the company as well as the managers of the company. A
buy-out is regulated by SEC (SEC regulates the amount to be paid as value for the
shares i.e. fixed by SEC as a neutral party)

NB: Where an external company (its management/board of directors) acquires the

controlling equities or all the equities of another company, this is called
management buy-in: external restructuring

PROCEDURE FOR MANAGEMENT BUY-OUT

This is provided for in R.449 SEC RULES 2013
1. An application for the approval of a management buy-out completed by the
management team, attached with
a. A Resolution of the shareholders approving the management buy-out
b. Resolution of the management team to undertake the management buy-out
c. A copy of the Certificate of Incorporation of the company
d. A copy of the Memorandum of Association and Articles of Association of the
company
e. Two copies of the prospectus containing
 Profile of the company;
 Profile of the management team buying over the company;
 Objectives of the management buy-out;
 Five (5) years audited financial statement of the company (or if less
than five (5) years, the statement of affairs for the number of years in
existence);
 Claims and litigation;
(R.449(v)a-e)
f. Sale agreement between the company and the management team containing
the items in R.449 (b) (vi)(a-h) SEC Rules 2013.
 (a)terms and conditions of sale;
 (b) indemnity against contingent liabilities by the seller to:-(1) third-parties;
(2) pay tax not provided for in the account;
 (c) if employees of the target company operate a pension scheme, the
agreement should have a clause on the continuation of the scheme;
 (d) sale and purchase of assets;
 (e) contracts and creditors;
 (f) employees: the liabilities and obligations under the existing contract of
employment will pass to the buyer with accrued contractual and statutory
rights unaffected;
 (g) debtors: the agreement should reflect that monies owed the seller by its
debtors should be paid to the seller unless assigned to the buyer. The
purchase price must reflect the fact that the debts are assigned;
 (h) name: the agreement should state whether the buyer or seller would like
to carry on the business under the existing name. Where a new name would
 be used, it should be so stated and copies of relevant documents shall be filed
with SEC
 (i) Trust Deed (where applicable);
 (j) any other document that may be required by the Commission from time
to time.

ETHICAL ISSUES IN INTERNAL RESTRUCTURING

R.1,3,14,15,16,17 RPC 2007.
1. Duty of competence: The solicitor should advice the company on the best
scheme, prepare the best scheme.
2. Do not aid the company to circumvent the law e.g. where the company is
solvent, you shouldn’t propose that it is insolvent

QUESTIONS ASKED IN CLASS

1. How does the liquidator determine the price for the shares of dissenting
members?
 Private company which has no alien participation ==By private treaty i.e.
between the dissenting shareholders and the liquidators and the price is
fixed based on market.
 If it is a private company which has alien participation or public company
listed or not listed, foreign participation or not, SEC will determine the price.
S. 538
2. If a company is solvent why would it be liquidated?
a. The company is solvent but there are serious crises in the board room, the
centre cannot hold.
b. A company incorporated to last for a period of time, at the end of which they
are not interested in doing business any longer.
The only way the company can be wound up under this head is by member’s
voluntary winding up.
There must be a declaration of solvency.
 NB --Whatever the company pays to the creditors after the process will be
deemed the full and final debt. The creditors will not be permitted to bring
up the debt in the future.

WHAT CAN A PARTY DO IF THE SCHEME IS NOT ACCEPTABLE

If the Scheme of Arrangement is not acceptable, or the parties fail to compromise
their interests or entitlements, the creditors can apply for “Creditors Voluntary
Winding up”.
This process is ideal for a company that has so much debt to settle
 Does a solvent company have no debt at all? No.
 A company is solvent when its assets outweigh its liabilities and not that it
is not indebted at all to another creditor.

CLASS EXERCISES
1. 1. Identify five internal restructuring options and illustrate a scenario for each
on how they may arise using Gold Palms and Wadata Nig. Plc.
2. Explain the procedure for arrangement or compromise.
3. Explain the procedure for arrangement on sale.
4. Distinguish between the procedures in 2 and 3.
5. Highlight factors that may necessitate corporate restructuring generally.

ANSWERS
5 INTERNAL RESTRUCTURING OPTIONS WITH SCENARIOS ILLUSTRATING
THEM.
ARRANGEMENT AND COMPROMISE.
 This is an arrangement by a company with its creditors and or members or a
class of them to accept something less than what they are entitled to or
something different from what they are originally entitled to or something
different from what they are originally entitled to as full satisfaction of its
obligation.
 It involves a business negotiation whereby the company seeks a variation or
relinquishment of its obligations to the creditors’ debenture holders or
shareholders.

SCENARIO
Assuming Gold Palms Nig. Ltd. is undergoing financial distress and as a result has
accumulated a large debt profile, and the company desires that is should not.

SCENARIO
 If Gold Palms PLC is going through difficulties, it may opt to increase its share
capital in accordance with S. 102 CAMA and place such share at the capital
market for purchase or members may also purchase such shares in order to
raise capital to settle the company’s financial obligations.
The company may opt to make call on shares issued but unpaid.-S.133 CAMA
The company may reduce its share capital in line with S. 106 CAMA and funds got
from the reduction used to settle companies debt.
NB: Money is not raised at the capital market solely to settle debts.
NB: Increase to settle debt must be specified to SEC, SEC must approve of it, if not
it may result to share capital depletion.

SHARE RECONSTRUCTION AND CONSOLIDATION

 If the share capital of Gold Palm is 5 billion ordinary shares at N1.00 each,
the company may through a special resolution restructure its share capital to 1
billion ordinary shares at N5.00 each as a means to consolidate its shares
(adding together to raise capital to settle its debts).
 On the other hand, assuming the share capital is 5 million ordinary shares at
N1.00 each, the company may opt to restructure its shares by sub-dividing
the shares into 10 million ordinary shares at 50k each. This is used where
the company intends to get more participants/investors in the company.

BUY OUT
 The management of Gold Palms Ltd buying majority or controlling shares
in the company. The reasoning behind this is that the management being in
control of the day to day running of the company is in a better position to
salvage the situation of the company.

ARRANGEMENT ON SALE
 If Gold Palms Ltd is not interested in doing business any longer or is facing
some set backs, the company may opt to voluntary wind up the company by
way of special resolution and appoint a liquidator, authorising him to sell
whole or part of the asset or undertaking to another company.
 The consideration from the shares will then be distributed in species
(whether cash, shares, debentures or policies) amongst the members of the
company in accordance with their right in liquidation.
 The money realised can be used in floatation of a new company or as equity
contribution in any scheme of arrangement for restructure.
NOTE- FOR EXAMS-there is a difference between documents to be submitted
and documents to be prepared. Know what the documents are to be used for.
NOTE-DRAFT LEGAL OPINION
WEEK 18-EXTERNAL OPTIONS IN CORPORATE RESTRUCTURING
External restructuring options involve the company and other third parties.
Every merger acquisition or external restructuring between or among companies
shall be subject to the prior review and approval of SEC-R.423 SEC RULES 2013.
General requirements for other forms of external restructuring are found in the SEC
rules.
Combination of corporate effort – two or more companies coming together to
collaborate, synergise and combine efforts. Distinction btw takeover and acquisition
is matter of law. Acquisition means the purchase of controlling shares (any number
of shares) by a company A from another company B with the aim of having influence
and control in company B e.g. to have more voting rights to influence decisions of
the company, appoint directors, veto decisions. Takeover is acquisition of not less
than 30% in the share capital of the company.
Before 2007 ISA, a merger can only arise from amalgamation of 2 or more
companies but from ISA 2007, a merger can arise from acquisition of shares. Once
acquisition is up to 51%, SEC will direct that the companies should merge.
Acquisition doesn’t affect the corporate identity of the acquired company. Also
takeover doesn’t affect corporate identity of the offeree.
S117-119 ISA.
S117 definition section
SEC (Consolidated) Rules: Rule 421 – definition section.
These define merger, acquisition.
S119 ISA: defines
S131 ISA – 151 ISA: details about a takeover

EXTERNAL OPTIONS IN CORPORATE RESTRUCTURING

1. MERGERS: the companies are called merged companies
2. ACQUISITIONS: this is an acquisition by one company of sufficient or
controlling shares in another company to give the acquiring company control
over that other company.
3. TAKE-OVERS:
4. MANAGEMENT BUY-IN
5. PURCHASE AND ASSUMPTION: The purchase and assumption is a device in
contemporary corporate investment to save ailing companies so that their
investments will not be totally lost. Purchase the assets and assume the
liabilities.
It allows another company /investors to purchase the liabilities of the failing
company and assume ownership of its assets, usually at auction price.
Acquisition of the assets and liabilities of a moribund company (not dead as
hasn’t been wound up and dissolved but company is not in operation: in legal
comatose) by a company that is a going concern (company is in full operation
and actively doing business)
Purchase and assumption can involve CHERRY PICKING: the healthy
company is not taking up the liabilities of the failed company but is
allowed to inspect the books and assets, operations and business activities
of the failed company with a view to picking out those aspects they could
save by integrating them into its own operations.

PROCEDURE FOR PURCHASE AND ASSUMPTION

1. Board and General Meeting resolution by both assumed and purchasing
company or government whitepaper approving the proposed arrangement
and preparation of deed of purchase and assumption.
2. A licensed valuer to value the assets of the moribund company.
3. Negotiation btw regulatory bodies (e.g. NDIC, CBN) and purchaser company
4. The transaction is perfected (signing of deed by the parties).
5. The perfected documents are filed along with the court process for judicial
sanction at the FHC.
6. The assumed company is dissolved through a judicial sale of its assets and
liabilities to the purchasing company
7. Upon successful purchase, the assumed company takes up the status of the
purchasing company through a judicial assent.
NB: must satisfy the requirements of regulatory bodies (for banks, insurance etc)
before you can purchase. Also the fact that a company is operating but at a loss does
not make it moribund and thus such a company doesn’t qualify for purchase and
assumption.
Purchase and assumption is to protect the integrity of the Nigerian economy by
ensuring investor’s fund is not lost, preventing loss of jobs. Also a lot of discount to
the purchaser company.
DOCUMENTS REQUIRED FOR PERFECTION DURING P& A
1. Duly executed deed of purchase and assumption
2. Board and GM resolutions OR
Government whitepaper (Gov. owned company/company taken over by
regulatory agency (NDIC/CBN).
IMPLICATIONS OF PURCHASE AND ASSUMPTION
The implications of the adopting this option are:
 It serves to save the interest of shareholders or creditors of ailing companies
especially so that they can exercise their rights against the offeror company.
 This option provides a window for investment for both companies,
 However, there is loss of corporate personality of the purchased company.
 Management restructuring is inevitable and in most cases this does not favour
the purchased company
 The purchasing company will inevitably obtain the trade secrets of the
company as well as the assets of the company and liabilities.
Construction: Benue Cement company (a moribund company) and Dangote took
over the company – is it takeover or purchase or assumption
El Rufai as Minister sold ALSCON (Aluminium Smelter Company of Nigeria) sold to
Russian company by government (was a government institution)
Tony Elumelu’s group bought Transcorp when it was in trouble. Transcorp has
acquired Ughelli Power plant when the power plant was in trouble.
Virgin Nigeria (moribund) and purchased by Air Nigeria
All State Trust Bank (moribund) by EcoBank (Togolese company) – NDIC and CBN
stood as representatives of former shareholders of All State Trust Bank
Trade Bank Nig Plc (moribund) by UBA
SCOPE OF THE REGULATIONS ON EXTERNAL RESTRUCTURING-
R.422
S.118 ISA
The provisions of this regulation shall apply to:-
(1) Public or private companies;
(2) Every merger, acquisition or combination between or among companies,
involving acquisitions of shares or assets of another company.
(3) Partnerships;
(4) Any Merger, Takeover, Acquisition or external restructuring undertaken by any
Federal Government owned Agency pursuant to statutory powers vested in it.

EXEMPTED BODIES
1. The provisions of this regulation shall not apply to:-
a. Holding companies acquiring shares solely for the purpose of investment
b. In a small merger, the merging entities shall not be required to notify the
Commission of that merger but shall be required to inform the Commission at
the conclusion of the merger.
2. An acquisition in a private/ unquoted public companies with assets or turnover
below N1 billion (small merger)

THE REGULATORY BODIES

The following regulatory bodies are involved in merger and acquisitions
1. Securities and exchange Commission (SEC)
2. Central Bank of Nigeria (CBN)
3. Federal High Court of Nigeria (FHC)
4. Nigeria Stock Exchange (NSE)
5. Corporate Affairs Commission (CAC)
6. Nigeria Deposit Insurance Corporation (NDIC)
7. Asset Management Corporation of Nigeria (AMCON)

Key Role of SEC

a. It is the apex regulatory body of capital market operations.
b. Grants pre-merger consent, clears scheme document and approves the merger.
c. Grants authority to proceed in a take over bid.

ROLE OF CBN
CBN gets involved in merger and acquisition, where banking institutions are
involved in the merger scheme.
The prior consent of the CBN Governor must be sought and obtained before any
such agreement.-S. 7 BOFIA

KEY ROLE OF FHC

a. Orders separate shareholders’ meetings of merging companies.
b. Deals with objections to shareholders’ meeting or to merger.
c. Sanctions merger – the merger becomes effective from the date the order is
given.

KEY ROLE OF NSE

a. It is a self regulatory organisation.
b. It regulates listed public companies.
c. It regulates secondary market transactions.
d. Must be notified by listed companies of intention to merge.
e. Admits “new shares” to Daily Official List, de-lists “Scheme Shares” of
dissolved companies.

KEY ROLE OF CAC

a. Filing and certification of corporate resolutions and documents to be filed
with SEC.
b. Filing of sanction.
c. De-registration of dissolved companies.

THE LEGAL FRAMEWORK FOR MERGERS

The laws and Rules guiding merger are:
1. Investment and Securities Act 2007
2. CBN Act;
3. Banks and Other Financial Institutions Act 1991 (as amended)
4. Fed. High Court Act.
5. NDIC Act – for banks
6. AMCON Act
7. SEC (Consolidated) Rules 2013
8. Fed. High Court Rules
 Insurance Act
 National Insurance Commission Act
 IST rules
 Arbitration and Conciliation Act 2004

MERGER AND ACQUISITION

Merger: This occurs when a viable company takes over another company or two
companies decide to merge to form a new company or to maintain the earlier names
of one of the company.
An Acquisition is the purchase by one company of all or substantial interest of
another company, such that the acquired company becomes a subsidiary or division
of the acquiring company.

WHEN WOULD AN ACQUISITION AMOUNT TO A MERGER

NB-Acquisition as merger must not be less than 51%.
S.119(3)(A)ISA: S119(3) Acquisition of more than one half of the issued share
capital of a company is a merger

REASONS FOR MERGER AND ACQUISITION

1. Risk Diversification: where a company diversifies into an unrelated line of
business, the costs and risks involved in developing and maintaining a new
product line may be avoided or reduced through the acquisition of the
company.
2. Economies of Scale: The amalgamation of entities brings about expanded
productive capacity in the surviving/evolving entity.
3. Stock Exchange Quotation: A private company desirous of public quotation
may integrate with a publicity quoted company in order to realise its goal.
4. Corporate Leverage: A company seeking to improve its debt/equity ratio may
utilise the option of merging with another company.
5. Technological Drive: A company which is unable to have easy access to the
needed technology to enhance its operations may merge with another which
has the technological advantage over it.
6. Management Expertise: where a company lacks the requisite personnel with
high level, technical or managerial skills to achieve its corporate objective, it
may decide to merge or be acquired by another company.
7. Desire for growth and increased market share.
8. Survival of regulatory requirement for consolidation: The desire to remain
in business in the face of stringent requirement for consolidation in a particular
business line, may force a company to go for merger or acquisition e.g.
recapitalisation policy for banks of N25 billion share capital forced banks to
merge

Categorisation means the statutory thresholds for mergers by the combined effect
of s120 ISA and Rule 427 SEC (Consolidated) Rules 2013. This is a matter of law.
The form/nature of mergers refers to the commercial classification of the nature of
the merger and the merging companies. The first form has to do with horizontal
merger, vertical and conglomerate merger

CLASSIFICATION/ECONOMIC FORMS OF MERGERS-

R.421 SEC RULES 2013
s.117 ISA
Mergers and acquisitions are broadly classified into three types:
1. Horizontal
2. Vertical
3. Conglomerate

HORIZONTAL MERGER involves the combination or fusion of

enterprises/companies operating in the same geographical location, same market at
the same level in the business/market e.g. two banks (both in Nigeria or Africa,
looking for customers and same service to customers) e.g. Stanbic and IBTC

VERTICAL MERGER involves the combination or fusion of companies in the same

market but operate at different levels of production or service provision, they are
complimentary i.e. could have a kind of customer – supplier relationship e.g. a
packaging company and a manufacturing company. E.g. A merger between Backo
Super Sack and Dangote Cement Company

CONGLOMERATE MERGER involves the fusion of two business concerns in

completely unrelated line of operations. This merger is just with the objective to
diversify, dominating the market and expanding their sphere control of the market
e.g. oil company with telecoms or banking; e.g. Dangote Group of Companies

MERGER THRESHOLDS/CATEGORIES OF MERGER

Seems to be contradiction btw the 2 on the threshold for mergers
S120 ISA - threshold of mergers and Rule 427 SEC Consolidated Rules 2013 appears
to contain a different threshold for mergers. ISA states pending the determination of
the threshold for mergers and thus the SEC rules will take precedence

The prescribed THRESHOLDS are based on either a combination of assets and

turnover or combined annual turnover or assets as follows;
1. SMALL MERGER with a capital less than N1 billion (ISA: less or equal to
N500m)
2. INTERMEDIATE MERGER with a capital of N1 billion and up to N 5 billion
(ISA: btw 500million and 5bn)
3. LARGE MERGER with a capital projection of above N5 billion (5bn and
above)
NB: it is the SEC Consolidated Rules that apply
SMALL MERGER: s122 ISA and Rule 424 SEC Rules
No need to notify SEC of the merger and notify SEC on completion of the merger.
1. Parties to a small merger are not required to notify the SEC and may
implement the merger without approval unless the SEC expressly requires
notification.
2. SEC MAY WITHIN 6 MONTHS after a small merger is commenced, require
the parties to notify it of the merger where it forms the opinion that the
merge may substantially prevent or lessen competition or cannot be justified
on public interest grounds: s122(3) ISA

THE PROCEDURE FOR SMALL MERGER

S. 122 ISA
1. Parties notify SEC (if required by SEC) or voluntarily otherwise pre-
merger notice is not compulsory-
S.122(1)&(2) ISA.
2. WITHIN 20 WORKING DAYS of such notification, SEC
a. may extend the period in which to consider the merger by a single period
NOT EXCEEDING 40 WORKING DAYS, and in that case it must issue an
extension Certificate to the parties.
b. after considering the merger in terms of S. 121 shall notify the parties in a
prescribed form of Its approval/conditional approval or prohibition of the
merger.—S.122(5)
3. UPON THE EXPIRATION OF THE 20 WORKING DAYS or the expiration of
the extension, if SEC has not notified the parties of its decision, the merger
shall be deemed to have been approved: s.122(11) ISA
4. SEC shall:
a. publish a notice of its decision in the Gazette; and
b. issue written reasons for the decision if it prohibits or conditionally approves
the merger, or requested to do so by a party to the merger. S. 122 (12)
5. If the merger is approved the parties shall apply to the court for the merger
to be sanctioned and when so sanctioned, it becomes binding on the
companies-S.122(6) ISA
PLEASE NOTE-within 6 MONTHS of the implementation of a small merger, SEC
may require notification on the grounds in s.122(3)

PROCEDURE FOR OBTAINING APPROVAL FOR LARGE AND INTERMEDIATE

MERGER
Rule 425 SEC Rules
The procedure for merger is summarised in the four stages below:
1. Pre-merger notification to SEC for evaluation
2. File application with FHC seeking an order to convene a court ordered meeting
3. Following the resolution of the shareholders after the court ordered meeting,
the applicants shall file with SEC a formal application of the merger
4. Comply with post approval requirements
–R.425 SEC RULES
New name:
 Unipetrol Nigeria Plc and Ocean and Agip Nigeria Plc is now Oando Plc
 Enterprise Bank
  Bank PHB with is now Keystone Bank
 Skye Bank Plc
 First Inland Bank Plc
Mergers and kept their names in the merger:
 Stanbic IBTC
 PricewaterHouse Cooper, Nestle Nigeria Plc
 Transcorp and Hilton
 Sony and Ericcson
Mergers and took name of one company
 UBA and Standard
 Intercontinental and Access = Access
 PHB and Keystone = Keystone

PROCEDURE
1. Both companies pass separate board resolutions agreeing to merge
2. Forward a pre-merger notification for SEC’s review, evaluation accompanied
by clearance of scheme documents with the information set out in Rule
426SEC rules 2013.
3. If it is an intermediate/ large merger, the companies are to inform the Trade
Unions or its employees of the merger-S.123 ISA.
4. Pre-merger notice for large merger will be referred to court-S.126 ISA.
Statement would be made to court within 40 working days.
5. Letters of consent must be written by the merging companies under oath-Rule
428(1)
6. The merging companies will wait for 20/40 WORKING DAYS after submitting
the application for SEC to issue a certificate of approval or refusal.
Nb- If AFTER 20/40 DAYS nothing is heard of its approval from SEC, it is deemed
approved
7. SEC will then give an approval in principle for the companies to proceed
8. An application will be made to the FHC for an order to convene simultaneous
separate meetings of share holders of merging companies.-R.425(b)
9. A special resolution will be passed at the separate court ordered meetings
approving the merger.
10. Go back to court to sanction the merger
11. Both companies make an application to SEC for formal approval attached with
the documents listed in Rule 429;
1) 2 Duly signed copies of the merger scheme documents
2) Extracts of the minutes of the court ordered meeting approving merger
scheme duly signed by director and secretary. The extract shall capture the
consideration as approved by majority shareholders, representing not less
than three –quarters (3/4) in value of the shares of members being present
and voting either in person or by proxy
3) Resolutions passed at the Separate court ordered meetings
4) Scrutineer’s report showing votes for and against the schemes
 5) Stamped Power Of Attorney of absent directors at the separate court-
ordered meetings, where applicable
6) Amended Copy of memoart of the resultant company
7) Clearance letter from Federal Inland Revenue Service
8) FORM CA7/7A- directors
9) FORM CAC2/2A- allotment of share capital
10) Evidence of payment of prescribed processing fees
11) Relevant SEC FORMS.
12. The companies must fulfil all post approval requirements in line with
R.430.
13. A post-merger inspection will be carried out by SEC 3 MONTHS after the
approval to assess how the resultant (merged) company is fairing. –RULE
431
14. The company will forward requisite documents to CAC for registration.
POST MERGER COMPLIANCE-R.430
This usually comes after final SEC approval and court order sanctioning the scheme
a File a copy of the court order sanctioning the scheme WITHIN 7 DAYS.
b File a copy of newspaper publication of court order
c File a Statement of the actual cost of the scheme
d File a notification of completion of merger or otherwise within 3 MONTHS of
court’s order
e File Summary reports of the scheme in respect of the following:
a. arrangement relating to employees of the acquired company; b. settlement of
shareholders; c. utilization of monies injected into the company, if any. d.
Treatment of dissenting shareholders; e. Submission of gazetted copy of the
court sanction; f. Evidence of allotment of shares; g. Evidence of settlement of
severance benefits of employees (where applicable). h. Statement of the actual
cost of the scheme

POST MERGER INSPECTION

DOCUMENTS TO BE INSPECTED
1. The board minutes book;
2. Original certificate of incorporation of the resultant company (where applicable);
3. Copy of the amended Memorandum and Articles of Association (where
applicable);
4. Severance benefits of employees of the dissolved companies;
5. Final settlement of shareholders;
6. Dispatch of share certificates;
7. Settlement of debts;
8. Report of shareholders representatives on the merger;
9. Any other document that may be required by SEC from time to time.

REFUSAL OF MERGER APPLICATION –

This may be done on the grounds of the following:
1. If it will cause a substantial restraint in competition
 2. It tends to create a monopoly in any line of business of the merging companies
3. It is otherwise obnoxious to public policy

REVOCATION OF MERGER APPROVAL-SECTION 127 ISA

The SEC may revoke its own decision to approve or conditionally approve a small,
intermediate or large merger if;
1. The decision was based on incorrect information for which a party to the
merger is responsible.
2. The approval was obtained by deceit
3. A company concerned in the merger has breached an obligation attached to the
decision.

POWER TO ORDER BREAK UP OF COMPANY

S. 128 ISA;
RULE 432 SEC RULES
 SEC may where the business practice of a company substantially prevents or
lessens competition, order the breakup of the company into separate entities
and re-register them.
 The order shall be referred to court for sanctioning.

DUE DILIGENCE IN EXTERNAL RESTRUCTURING.

 Due diligence involves investigation of the target and its business, by the
bidder and its professional advisers, before consummation of the merger.
 It reveals the actual status of the target company.
 The target company also conducts due diligence on the bidder.

Types of Due Diligence Exercises

a. LEGAL DUE DILIGENCE
This covers analysis of several issues such as
1) OWNERSHIP OF THE BUSINESS: this will involve verification of the
authenticity of the certificate of incorporation and any other applicable
business permits as well as any changes to these.
2) BUSINESS PROFILE: the legal due diligence should reveal the following;
a) Key customers and contractual terms entered into by the company.
b) Any disputes arising from contracts or other transactions
c) Description of the nature of operations carried on by the company.
d) Where the company is affiliated to other companies, a legal structural
relationship of the companies in the group which carries on the business
or own assets being used by the company in carrying on its business; and
details of contracts relating to the affiliated companies.
3) EMPLOYEES: it is necessary to examine the updated list of the employees
and reviewed in line with contracts of employment and other significant
agreements, such as collective bargaining agreements and employee share
option schemes, which may affect the finances of the companies.
4) INTELLECTUAL PROPERTY AND TECHNOLOGY ISSUES: the due diligence
exercise should reveal the existence and nature of intellectual property
 assets and trade secrets, of the company, there should also be confirmation
of compliance with regulatory regimes, such as those on technology transfer.
5) LITIGATION ANALYSIS: there is need to determine the validity of an
estimated liability arising from existing law suits and claims. There is also a
need to review insurance policies of the company for the purpose of
ascertaining in cases to be covered by liability insurance indemnities; as well
as evaluation of applicable company law and tort rules concerning successor
liability for contractual and tortuous liability of the target.
6) CORPORATE SEARCHES: it is also necessary to conduct searches at public
offices such as the Lands Registry, Corporate Affairs Commission, Securities
and Exchange Commission, Standards Organisation of Nigeria, FBIR and the
Nigerian Stock Exchange.
b. FINANCIAL DUE DILIGENCE
This will cover the following:
i. Accounting and financial control system of the company.
ii. Comparison of the company’s historic trading result and current trading
position, contrasted with its budgets.
iii. Ability to raise short term and long term capital.
iv. Tax liabilities of the company and tax implications of the proposed deal.
v. Value of assets and liabilities to be acquired.
vi. Product development and competitors.
vii. Capital investments, profitability, margin/price, earning ratio, review of
forecast of trading results.

NECESSARY DOCUMENTS IN PACKAGING MERGER TRANSACTION

i) Exclusivity Agreement: this is executed where the target company agrees not
to sell its assets or shares to anyone else during a period of time set by the
parties. This document is relevant in the purchase of public companies.
ii) Memorandum of Understanding: this document is necessary when parties
reach an agreement about the terms of transaction but before drafting the
binding agreement.
iii) Confidentiality Agreement: this is a document that is primarily binding and it
constitutes the parties agreement in respect of the way information and
document will be handled. It also constitutes issues about disclosure and
disposition after the deal proceeds.
iv) Representation and warranties: these documents are needed to be obtained
in order to indemnify the other party against untrue or false statements upon
which that other party has acted and as a result of which action he has suffered
some loss.
v) The merger agreement: this document provides a mechanism for adjusting
the exchange ratio in the event that at post merger, any of the representations
made by a party is untrue and materially affects the agreed valuation and
exchange ratio.
vi) Technical implementation agreement(TIA).

TAKE OVER-S.130-147 ISA

Take-over is a restructuring process, which results in the acquisition or purchase of
substantial interest (shares) by an individual or company (the offeror) in another
company know as the target company/offeree company sufficient enough to give
the offeror substantial control over either management and/or overall affairs of the
target company-SECTION 131 ISA.

MODALITIES OF TAKEOVER
In a takeover, the Target Company and the Offeror company would form a single
group in which the bigger and stronger company (offeror) becomes the Holding
company and the weaker or smaller (target) becomes the subsidiaries.

WHEN WOULD AN ACQUISITION AMOUNT TO A TAKEOVERR

For acquisition to amount to take over the share acquired must not be less than
30%.
COMPANIES THAT CANNOT BE TAKEN OVER
1. A company with LESS THAN 20 SHAREHOLDERS representing 60 % of the
members of the target company -r.445(3) a SEC RULES
2. Shares of a private company - S. 133(4);r.445(3) b and 104 of ISA
Hostile takeover – systematic takeover to bypass the normal process of going
through BOD and members of the company. Systematically/gradually acquire the
shares of the company in the stock exchange market or purchase shares of existing
shareholders at a premium to acquire 30% -50% of the shares. Another means is to
instigate other shareholders in the company to vote out the Board of Directors and
vote in a Board that the company can persuade to allot shares that would lead
company to takeover the target company.
S131(1)(b) ISA– where any person acquires shares whether by a series of
transactions over a period of time, by the person or with persons acting in concert
carry over 30% or more of the voting rights of the company, and not more than
50%, then this is a takeover
e.g. of takeover is Benue Cement Company taken over by Dangote Group
GLOSSARY –r.421/s.117
In a takeover, note the following terms:
a. Take – over Bid – a document that packages the take – over.
b. Offeror Company – This is the persons or company making the take over
bid.
c. Target company/offeree company – This is the company whose shares are
the subject of a take-over bid i.e. the company that is to be taken over.
d. Dispatch – This is the process of communicating an offer to acquire shares in
another company.

PROCEDURE FOR TAKE OVER:

Takeover is commenced by takeover bid. Takeover bid is an invitation or offer
1. Offeror company will take steps to acquire (30-50) the shares in line with
r.433-439
2. The offerror (acquiring) company passes a board Resolution to bid for the
shares in another company signed by at least one director and secretary as
mandated by Rule 445(2) sec rules 2013;S.137(2) ISA
3. In addition to the take-over bid, other documents to be filed with SEC in
r.447(3) SEC RULES-S.134 ISA
4. If SEC refuses to register the bid, the applicant can within 30 days of the
refusal, by notice in writing, request SEC to refer the fact of the refusal for
review at IST
5. An authority to proceed is issued by SEC TO LAST FOR 3 MONTHS subject to
renewal WITHIN 14 DAYS to the expiration of the authority-
R.447(2);S.134(8) ISA
6. Proposed bid will be registered with SEC before despatch in line with S.135
ISA;R.448 SEC RULES accompanied by documents in R.448(5).
7. Upon the receipt of authority to proceed with a takeover bid, the following
documents shall be filed with the SEC in Rule 448(5):- – 2 draft copies of the
takeover bid, consent letters of directors and other parties to the transaction,
CTC of particulars of directors of offeror company, copy of draft of financial
service agreement and any other agreement btw the financial adviser and
offeror company, annual report and account of offeror company for last 5
years or years in business if less than 5yrs, evidence of payment of application
fees and requisite SEC fees (based on values of shares involved in the
takeover), a draft newspapers publication of the proposed takeover, evidence
of source of funds and any other document that may be required by SEC
8. Upon approval, offeror company will dispatch the bid itself or through a
Capital Market Operator simultaneously to SEC, each director of the offeree
company and each shareholder of the offeree company -s.138 ISA.
BOD of the offeror company will make preparation to dispatch a takeover bid
with contents set out in s.136 ISA&R.446 SEC RULES. Takeover bid must be
simultaneously despatched by the BOD of offeror company to the
directors of the offeree company, shareholders and SEC. This is a
technical area and a ground to invalidate a takeover bod
9. Advertise the takeover bid in at least 2 newspapers –R.445(4) SEC
10. The target company calls a meeting to consider the bid and NOT LESS THAN 90
% OF THE PAID UP SHARES SUBJECT TO ACQUISITION must be accepted.
11. The offeror company must WITHIN 7 DAYS of the conclusion of the offer fill
with SEC forward a schedule of target company shareholders accepting the
offer containing the volume and value of the respective share and settlement of
the consideration-R.448(6) SEC Rules 2013
12. The offerror company is to give notice to dissenting SHAREHOLDERS WITHIN 1
MONTH OF THE ACCEPTANCE OF THE bid to elect either to be paid like other
consenting shareholders or require their shares to be valued-S.146&147 ISA
13. The dissenting shareholders are to communicate their acceptance or otherwise
WITHIN 20 DAYS, if not they would be deemed to have accepted to be paid like
others who accepted the bid.
 14. SEC will carry out a post takeover inspection not less than THREE MONTHS
after registration of the bid-Rule 448(7) SEC RULES
15. Make consequential filings with CAC
TAKE OVER BID
Upon acquisition of the requisite 30 – 50% of the called up shares of the target
company, the Acquirer can proceed with take over bid: R. 235 SEC Rules 2010 as
amended.

PROCEDURE FOR VALID TAKE OVER BID

The procedure required to be taken in order to validate a take-over bid is as
provided under
Rule 445-448 SEC RULES;
S.131-147 ISA
i. The agent who despatches the bid shall be a registered Capital Market
operator-R.445(1)b SEC RULES 2013.
ii. The take-over bid must be dispatched to NOT LESS THAN TWENTY
shareholders representing 60% of members of the target company r.445(3)
(a)
iii. The bid, if done for a corporate body must be approved by a resolution of the
directors signed by at least one director and secretary. R.445(2)
iv. The take-over bid must be advertised in at least two national
newspapers.r.445(4)
v. The authority to proceed with the bid must be obtained from Securities and
Exchange Commission, and the bid dispatched within three MONTHS of
obtaining the authority to proceed –Rule 447 SEC Rules 2013
vi. The bid must contain requisite contents in R.446
vii. The bid must be registered with the Securities and Exchange Commission

LIST OF DOCUMENTS TO BE FILED WITH A TAKEOVER BID-R.447(3) SEC

RULES
1. Application letter
2. 2 Copies of information memorandum
3. Letter of No objection from regulatory body
4. Shareholders and board resolutions of offeror company certified by secretary
approving the takeover
5. Certificate of incorporation of offeror company certified by the secretary
6. Letter from offeror appointing financial adviser to the transaction
7. Copies of memorandum and article of association of the offeror certified by
CAC

LIST OF DOCUMENTS TO BE FILED UPON REGISTERATION OF A TAKEOVER

BID-R.448(5)
Upon the receipt of authority to proceed with a takeover bid, the following
documents shall be
filed with the Commission:-
a. Two (2)draft copies of the takeover bid;
b. Consent letters of directors and other parties to the transaction;
c. CAC form 7/7A containing particulars of directors of the offeror;
d. A copy of draft Financial Services Agreement between the financial adviser and
the offeror, and any other agreement(s) entered into in the course of the
transaction;
e. Annual report and accounts of the offeror for the preceding period of Five
(5)Years or the number of years the company has been in existence;
f. Payment of N50,000 application fee and relevant SEC fee based on the value of
shares to be taken over;
g. A draft newspaper publication of the proposed takeover;
h. Evidence of source of funds;
i. Any other documents the Commission may require from time to time.

CONTENTS OF A TAKE OVER BID-Rule 446 SEC RULES 2013

a. The full names and addresses of the officer. If a corporate body, the name and
current head office address of the company and the date on which the directors
of the company gave their approval.
b. The bid must specify the maximum number and shares proposed to be acquired
during the period specified in the bid.
c. The price and terms on which the shares are to be acquired valuation method
adopted in arriving at the price offered for the shares

CONTENTS OF THE AUTHORITY TO PROCEED WITH TAKE OVER BID-S. 134

ISA; R 447 SEC RULES
An application for authority to proceed shall be made to SEC by or on behalf of the
person proposing bid (DRAFT).
The application shall state the following:
 The name and other particulars of the person making the bid.
 the particulars of the proposed bid with supporting documents.(attach 6
documents above to the letter)
 Any other information or documents as may be required by SEC.

TIME FRAME
The authority to proceed with a bid granted by SEC shall be for a period of 3
months subject to renewal upon application by bidder.
The application for renewal of authority to proceed with a bid shall be made
WITHIN 14 DAYS prior to the expiration of the authority. Such renewal shall be for
a period of NOT MORE THAN 3 MONTHS

REGISTRATION OF A TAKE OVER BID-S. 135 ISA; R.448 SEC RULES

A copy of the proposed takeover bid shall first be lodged with the SEC for
Registration before it is dispatched to the shareholders of the target company. The
aim is to ascertain if the Bid satisfies ISA and SEC Rules. Once SEC is satisfied of the
compliance, it shall register the bid. If not satisfied, SEC would refuse Registration
and notify the applicant.
The applicant of a refusal bid CAN WITHIN 30 DAYS OF THE Service on him of the
Notice of refusal, apply to the IST.

SETTLEMENT OF DISSENTING SHAREHOLDERS.

For settlement of such dissenting shareholders, the guides in SS 146 – 147 ISA must
be followed-R.438
1. The offer by the acquiring company must be accepted to the tune of not less
than 90% in number of shares subject to acquisition.
2. Within one month after acceptance OF 90% WORTH OF SHARES the
acquiring company shall give notice to the dissenting offeree shareholder
asking him to elect how to be paid.
3. WITHIN 20 DAYS OF RECEIVING the Notice, the offeree shareholders is
communicate his election to the offeror/acquiring company, otherwise it
would be deemed that he is to be paid like others.
4. He shall surrender his share certificate to the offeror company WITHIN 20
DAYS OF RECEIVING
5. Within 20 DAYS OF EXPIRATION of the notice, the offeror company shall
pay to the target company the amount it would have paid the dissenting
members.
6. The Offeree company holds such money in trust for dissenting member.
7. Notice sent to dissenting shareholder shall be sent to SEC within one month
of its dispatch.
8. Where the dissenting shareholder elected to be paid a fair value of his shares,
the offeror company shall within 20 DAYS OF SUCH ELECTION apply to
Federal High Court to determine the fair value of his shares.
9. The dissenting shareholders who elected for fair value can all be joined as
parties and the decisions made are binding on all of them.
10. The court may appoint an independent valuer to assist the court in fixing a
fair value.
11. The FHC shall make an order against the offeror company in favour of each
dissenting offeree who made an election.
12. Where the court order payment or transfer to other person to hold money in
trust, this shall operate to divest the offeree company, the money or
consideration subject to the trust and vest it in the person named in the
order.
13. The dissenting shareholder shall not be required to make deposit of security
for costs for his application to court.

THE ROLE OF PROFESSIONAL PARTIES INVOLVED IN CORPORATE

RESTRUCTURING.
1. Investment bank/financial adviser/issuing house:
(a) Formulate effective over all integration strategy for the entities involved.
(b) Conducting and coordinate due diligence on the acquirer and /or target.
(c) Provide fair and accurate information about the entities involved to their
existing shareholders.
(d) Coordinate the roles of all other professional parties to the merger, including
stock brokers, solicitors, reporting accountants and registrars.

2. The Solicitors to the merger

(a) Review legal documentation and provide a legal opinion on actual and/ or
threatened litigation.
(b) Obtain court hearing date for the proposed merger.
(c) Obtain court order sanctioning the scheme.
(d) Conduct the order of proceedings at the court ordered meetings.
3. The Auditor:
(a) Provide historical financial information on the entities involved.
(b) Assist merging entities with the preparation of financial forecasts.

4. The reporting accountants:

(a) They ensure that all material financial facts are fully disclosed clearly and
correctly.
(b) They provide an independent statement and opinion on the financial
information and adjustment (if any)
(c) Review the bases and assumptions underlining the financial projections and
subsequently provide a report on the financial forecasts.
(d) Act as scrutinisers to verify the results of the voting at the court ordered
meetings.

5. The registrars:
(a) Dispatch the scheme documents to all share holders
(b) Establish court ordered meetings voting model.
(c) Establish court ordered meeting voting procedure.
(d) Prepare and dispatch new certificates to shareholders at conclusion of the
mergers.

6. Stock Brokers:
(a) They prepare the application for filing with the Nigerian Stock Exchange.
(b) Facilitate the quotations committee meeting
(c) Engage in sensitising and obtaining shareholder support and consent at the
court ordered meeting.
(d) Obtain Nigerian Stock Exchange approval for scheme of arrangement.

7. Company Secretary/Legal Adviser:

(a) Ensures that all relevant resolutions are passed and drafted and signed.
(b) Organise board meetings for requisite proposals.
(c) They coordinate meetings with various classes of shareholders and third
parties.
(d) Ensure that quorums are formed at the various meetings, court ordered
meetings or convened by the company.
OTHER DRAFTS-special resolution for merger – s121(5) ISA
Application to court for court ordered meeting for merger: petition under
Rule 425b SEC Consolidated Rules 2013, Rule 4k Companies Proceeding Rules
1992
WEEK 19-COMPANY PROCEEDINGS AND INVESTMENT DISPUTE RESOLUTION
A-COMPANY PROCEEDINGS
These are the proceedings of a company. The FEDERAL HIGH COURT has exclusive
jurisdiction on company proceedings and administration of the Companies and
Allied Matters Act - SECTION 251(1)(e) CFRN 1999
All offences under the act may be tried by a Court (Federal High Court) of competent
jurisdiction in the place where the offence is alleged to have been committed –
section 554(1) of CAMA.
FHC’s jurisdiction is under s251(1) CFRN 1999 (as amended). Abiola v FRN and
Ibori v FRN – is one court with judicial division in states of the federation. The
judicial division of FHC that has jurisdiction in any matter is where the registered
office of the company is situated, subject to the overriding interest of forum
convenience

LAWS/RULES GOVERNING COMPANY PROCEEDINGS IN NIGERIA.

1. Companies Proceeding Rules 1992 (as amended);
2. The Companies Winding-Up Rules 2001;
3. Federal High Court (Civil Procedure) Rules, 2009;
4. Federal High Court Act;
5. Investment and Securities Act (ISA), 2007;
6. Companies and Allied Matters Act (CAMA)2004;
7. Securities and Exchange Commission (Consolidated) Rules, 2013; and
8. Investment and Securities Tribunal Procedure Rules, 2003.

COURTS/TRIBUNALS IN COMPANY PROCEEDINGS

1) Federal High Court
2) Investment and Securities Tribunal
3) IST-ADR centre
4) Administrative Proceedings Committee annexed to IST

COMPANIES PROCEEDINGS RULES 1992

The Companies Proceedings Rules 1992 apply to all proceedings taken out or
arising from any provision of any section of Part A of the Companies and Allied
Matters Act – Rule 21(1) of the Companies Proceedings Rules. Where no
provision is made by the Rules, the Federal High Court (Civil Procedure) Rules
shall apply-RULE 19.

MODES OF COMMENCEMENT OF CORPORATE LITIGATION

1. Originating Summons
2. Originating motion
3. Petition
4. Writ of Summons
5. Originating Application – exclusively at IST
NB: various modes of commencing action and the actions that fall under each mode
(minimum 5 per action).
1. ORIGINATING SUMMONS
The default mode of commencement of action in corporate litigation is by
originating summons.
UNIPETROL (NIG.) PLC. V. AGIP (NIG.) PLC
R.2(2)
Summons is “commanding” in nature.
It involves interpretation clarification or declaration of legal/documentary
prescriptions. Actions commenced by originating summons dispense with exchange
of pleadings and calling of witnesses and thus saves time. Application to be
supported by affidavit and all annexures attached together with a written address.
An originating summons under the Rule shall be in FORM 1 as specified in the
schedule to the Rules – Rule 2(2) of the Rules. It can be on Notice or Ex-parte.
Also, an application under section 317 CAMA may be made by ex-parte originating
summons – Rule 2(3) of the Rules.
An application is to be made by originating summons except where
2) It is to be made by originating motions – Rule 3 of the Rules; It is praying.
Contains mixture of law and fact. Generally Used when need to remedy an error or
omission from a set rules
3) It is to be made by petition – Rule 4 of the Rules; and it is to be made in respect
to winding-up of companies and used where no provision is made in Company
Proceeding Rules. Petition is used when described by law. Petition is petitioning
(begging someone to intervene). A prayer to a higher authority

ORIGINATING MOTION(S)
This is “praying” in nature.
It contains mixture of both law and disputed facts.
In corporate litigation, originating motion is mostly used where there is need to
remedy an error or omission or benefit from set rules.
Its aim is to bring an original application in the circumstances specified by statute.

APPLICATIONS TO BE MADE BY ORIGINATING MOTIONS

Under Rule 3(a-g) of the Rules, the following applications under the Act
(Companies and Allied Matters Act) shall be made by originating motion.
a) Relief from consequences of default in complying with the conditions for
LTD-S. 23 (2)
b) Extension of time to file documents at CAC: SS 46(8), 129 (2) 312 (5))
c) Rectification of Company’s Register of Members S. 90(1) CAMA
d) Appointment of Inspector to investigation a company S. 315 CAMA
e) Inquiry into refusal to produce document or respond to summons: S. 319 (3)
&(4)
f) Ceasure of imposition of restrictions on shares S. 329
g) Order for a declaration of dissolution of company which has not been wound
up to have been void: S. 524 (1)
In Form 2 of the Rules, the notice of an originating motion must be given, and it
must include a concise statement of the nature of the claim made or the relief or
remedy required.
PETITION
The nature of petition is “complaining/requesting”. This is brought in the cases
which are specifically provided in the Rules.

APPLICATIONS TO BE MADE BY PETITION

Under Rule 4 Companies Proceedings Rules, the following applications under the Act
(Companies and Allied Matters Act) shall be made by originating petition –
a) An order for cancellation of a company’s amended objects: S. 46(1)&2
b) Cancellation of alteration of memo S. 47 (1)CAMA
c) Cancellation of a special resolution to re-register PLC as LTD S. 53(3)
d) To confirm a reduction of the share premium account of a company: s120
e) Application to confirm issue of shares at a discount S. 121 (2)
f) To confirm a reduction of the capital redemption reserve fund of a company:
s158
g) Confirmation of reduction of share capital S. 107(1)
h) Cancellation of variation of right attached to class of shares S. 142 (1)
i) Relief on ground that affairs of the company are being conducted in an of
illegal and oppressive conduct-S.311(1)
j) Under section 525(6) for an order restoring the name of a company to the
register, when the application is made in conjunction with an application for
the winding-up of the company;
k) To sanction a scheme of merger btw 2 or more companies: s591(3)
l) Under section 641 for relief from liability of an officer of a company or a
person employed by a company as auditor.

PROCEDURE FOR PETITION (FORM 3)

This has to do with summons for direction in regards to petition –
1. Under Rule 4 of the Rules, there shall be a presentation of the petition.
2. After the presentation, the petitioner must, under Rule 5 of the Rules, apply
for direction as in Form 5 EXCEPT where the application is made under
section 121(2) of the Act or section 100(3) of the Investments and
Securities Act (ISA) to sanction a compromise or arrangement except as
provided in rule 52(6), or under section 525(6) of the Act for an order
restoring the name of the company to the register
3. On the hearing of the summons, the court may give such direction, as to the
proceedings to be taken before the hearing of the petition, as it thinks fit –
Rule 5(3) of the Rules.
4. When the application made by the petition is to confirm a reduction of share
capital (section 107 of CAMA), or of the share premium account (section
120 of CAMA) of the capital redemption reserve fund (section 158 of
CAMA) of a company, the court may give additional directions for inquiry as
to debts of and claims against the company, and also as to the proceedings to
 be taken for settling the list of creditors entitled to object to the reduction
and fixing the date of the list – Rule 5(4) of the Rules.
This has to do with inquiry as to debts –
1. Where an inquiry is order as to the debts, the company must, WITHIN
FOURTEEN (14) DAYS, file in the court, an affidavit made by a competent
officer of the company verifying a list of creditors as in Rules 6 and 7.
2. The company must give notice of the list of creditors – Rule 8 of the Rules,
and advertise a notice of the list in the newspaper as required by Rule 9.
3. With regard to claims by creditors, the company must also file an affidavit
made by the company’s solicitor and a competent officer of the company in
the form required in Rule 10.
4. Where there is dispute as to the entitlement of creditors to be entered in the
list, the dispute is to be adjudicated upon and settled by the court as
provided by Rules 11, 12 and 13.
5. The list of creditors entitled to object to the reduction must be certified and
the certificate filed by the Court Registrar – Rule 12 of the Rules.

HEARING THE PETITION

Where a petition is for the confirmation of a reduction under Rule 5(4) and the
court had directed an inquiry as above, the petition shall not be heard before the
expiration of AT LEAST EIGHT (8) CLEAR DAYS after the filing of the certificate –
Rule 14 of the Rules.
Before the hearing, a notice of the day appointed for the hearing must be published
in the newspaper as the court directs – Rule 14(2) of the Rules.

WRIT OF SUMMONS-
R. 19 CPR 1992;
0. 3 r. 1 FHC (Civil Procedure) 2009
This is used for proceedings concerning the operations of the CAMA where no
provision is made by these Rules; hence the Federal High Court (Civil Procedure)
Rules would apply most with Writ of Summons.

ORIGINATING APPLICATION
Rule 5/6(1) IST (Procedure) Rules 2003 prescribes Originating Application as the
originating process for use at the IST.
EFFECT OF COMMENCEMENT OF AN ACTION BY WRONG MODE
It will not invalidate proceedings except it will lead to substantial injustice-AGIP V.
AGIP; YALAJU AMAJU V. AREC

CRIMINAL PROCEEDINGS
By S.554 CAMA, criminal offence resulting from corporate transactions is to be
tried by court of competent jurisdiction in the place of the offence. NB-MOMODU
V. STATE

TITLING/HEADING OF CORPORATE SUIT

Every originating summons, originating motion and petition by which company
proceedings are begun and all affidavits, notice and other documents in those
proceedings shall be entitled.

IN THE MATTER OF COMPANY XYZ

AND
IN THE MATTER OF THE COMPANIES AND ALLIED MATTERS ACT CAP C20 LFN
2004
Rule 1 (1) Companies Proceedings Rule 1992
NB == FRONT LOADING OF PROCESSES
The originating process is supported by a verifying Affidavit as well as other
relevant documents.
SERVICE OF COURT PROCESSES ON A COMPANY
Service of court process on companies is very important to know as this goes to the
jurisdiction.
The legal consequence of non-service or invalid service renders the entire
proceedings null and void.
NB: Non-compliance with the rules of issuance of the process renders
proceedings ineffectual.
- INTEGRATED BUILDERS V. DOMZAQ VENTURES (NIG) LTD
S. 78 CAMA provides that court process is to be served on a company in accordance
with the provisions of the applicable Rule of CAMA.
Court processes to be served on the principal officers of the company: Managing
Director, Directors heading various departments, Company Secretary or by leaving
it at the registered office of the company

SERVICE OF OTHER DOCUMENTS ON A COMPANY

All other documents other than a court processes are to be served by posting it to
the company, leaving it at the registered office of the company or leaving it with a
principal member of the company

ORDER 6 RULE 8 FHC (CIVIL PROCEDURE) RULES 2009

0.7 R 9 & 10 HCCPR LAGOS 2012, originating court process is served on a
company thus:
a. by serving a Director, Secretary or other principal officer of the company.
b. by leaving it at the Registered Office of the company.
IN MTN (NIG.) COMM LTD V. BOLINGO HOTELS & TOWERS Ltd (2004) service
on the security guard of the appellant was held as improper service. MULTI CHEM.
INDUSTRIES V. MUSA

COMMON SEAL
Upon incorporation every company must have a common seal. S. 37; 74 CAMA.
The use of common seal shall be regulated by the articles of association. Section 74
Failure to use the common seal where necessary renders the transaction ineffective.
–AFRICAN DEVELOPMENT CORPORATION V. L.E.D.B
OFFICIAL SEAL
It is used in place of common seal for the company outside Nigeria. It is a facsimile of
the common seal with the addition on the face of it, of the name of every Country
where it is to be used. The company's object must provide for the company to
transact business in foreign countries.

EXECUTION OF COMPANY DOCUMENT BY ATTORNEY

S.76 (1) CAMA a company may by writing under its common seal appoint a
person as its attorney, either generally or for a specified matter, to execute deeds on
its behalf in any place in Nigeria or outside Nigeria.
NB-A deed signed by such an attorney binds the company and have the same effect
as if it had been executed under the common seal of the company.

AUTHENTICATION OF DOCUMENTS
A document or proceeding 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 unless otherwise so required.
S.77 CAMA.;
SPDC V. ALLAPUTA
A. D. R AS AN ALTERNATIVE IN DISPUTE RESOLUTION OF DISPUTES
INVOLVING COMPANIES
Alternative Dispute Resolution (ADR) is a term generally used to refer to informal
dispute resolution processes in which the parties meet with a professional third
party who helps them resolve their dispute in a way that is less formal and often
more consensual than is done in the courts.

ADVANTAGES OF ADR IN COMPANY DISPUTES

1. Alternative Dispute Resolution (ADR) is generally faster and less expensive.
2. It is based on more direct participation by the disputants, rather than being run
by lawyers, judges, and the state.
3. This type of involvement is believed to increase people's satisfaction with the
outcomes, as well as their compliance with the agreements reached.
4. Most Alternative Dispute Resolution (ADR) processes are based on an
integrative approach.
5. They are more cooperative and less competitive than adversarial court-based
methods like litigation. For this reason, Alternative Dispute Resolution (ADR)
tends to generate less escalation and ill-will between parties.

NOTE- REFER TO LIP FOR ARBITRATION

RESOLUTION OF INVESTMENT DISPUTES IN NIGERIA
1. FEDERAL HIGH COURT
The Federal High Court shall have limited jurisdiction in investment disputes except
for enforcement of IST awards and application for an order for the revocation of
registration of a capital market operator- S. 51 & 293(3) of ISA.

2. ADMINISTRATIVE PROCEEDINGS COMMITTEE (APC) OF THE SEC

The Administrative Proceedings Committee of SEC is a body established pursuant to
the Investments and Securities Act for the purpose of resolving disputes between
parties to a capital market dispute.
Any party who is not satisfied with the decision of the Committee as confirmed by
the Commission may WITHIN 30 DAYS OF THE RECEIPT OF the decision appeal
to the Investments and Securities Tribunal (IST)-R.18 of APC rules of procedure

3. INVESTMENTS AND SECURITIES TRIBUNAL (IST)

The Investments and Securities Tribunal (IST) was established under S. 224 of
Investments and Securities Act (ISA) 1999 now S. 274 ISA 2007. The IST is a
tribunal established by an Act of National Assembly to give expeditious hearing of
capital market issues. The IST is deemed to be a civil court. It have both appellate
and original jurisdiction. It has appellate from the administrative proceedings
committee annexed to IST. It has jurisdiction on capital market disputes
AIMS AND OBJECTIVES OF THE IST
1. Expedient and affordable dispute resolution mechanism
2. Protect the integrity of the capital market and stable economy
3. Avoids delays and technicalities.
4. Efficient resolution of investments and capital market disputes with fairness,
flexibility and transparency”. Flexible in adherence to the rules of evidence.

PROCEEDINGS OF THE IST

Proceeding is judicial and shall be deemed to be a civil court-s.290(3)
The IST is flexible in adherence to the rules of evidence, and other technicalities in
proceedings. Note that a party may appear before the Tribunal either in person or
by a counsel-S.291
Onus of proof is on the appellant or applicant-S.292
The judgment or orders of the tribunal shall be in writing-S.293 ISA
Proceedings may be open to the public or in camera-s.290(4)
To appeal a decision of SEC to IST, There must be 14 DAYS PRE-ACTION NOTICE/
INTENTION TO APPEAL given to SEC-S.289(1)(proviso)

MODE OF COMMENCEMENT OF ACTION

The mode of commencing action in IST is by an ORIGINATING APPLICATION.

POWERS OF IST-S.290(2)A-H
1. Power to summon/compel attendance of any person
2. Power to require discovery and production of documents.
3. Power to decide matters ex-parte.
4. Power to dismiss applications in default.
5. Power to call for the examination of witnesses or documents
6. Power to review its decisions

COMPOSITION OF IST
Minimum of 3 members of the tribunal.
Where it is deemed necessary for the purpose of exercising jurisdiction vested in the
tribunal by ISA 2007 or any other act, the chairman must be a lawyer-S.276 ISA.
TENURE- S.277 (5YRS for chairman& 4 yrs for members renewable once for
the respective periods)
TIME FRAME FOR CONCLUDING ACTIONS
Thus, it is required to conclude any proceedings BEFORE IT WITHIN 90 DAYS OF
commencement of the action.

TIME LIMIT FOR FILING APPEALS

30 DAYS from the date of making of the order-S. 289(2)
S.304 ISA

JURISDICTION OF THE IST

 The jurisdiction of the Investment and Securities Tribunal is enumerated in
Section 284/294 of the Investments and Securities Act.
 It has exclusive original jurisdiction over disputes arising from the
administration, management and operation of collective investment schemes.
 The IST is also empowered to adjudicate on pensions disputes in Nigeria-S. 93
Pension Reform Act 2004.
 It has appellate jurisdiction over APC disputes

SCOPE OF THE IST JURISDICTION(s.284)

It may also adjudicate in the following matters:
(a) Interpretation of any law or regulations to which the Act applies;
(b) disputes between SEC and a Securities Exchange or capital Trade Point
(c) disputes between capital market operators and the securities exchange or capital
trade point;
(d) disputes between capital market operators;
(e) disputes between capital market operators and their clients; and
(f) disputes between quoted companies and the regulators of the securities
exchange.

APPEAL OF IST DECISIONS

Any appeal against its judgment lies directly to the Court of Appeal on points of law
only. Any issue of fact is not appellable as deemed to have been resolved by the best
experts in the field.
It can equally go further to the Supreme Court.
S.295 and 297 ISA respectively.
ENORCEMENT OF DECISIONS OF THE IST
The decision of the Tribunal is enforced as a judgment of the Federal High Court
by registering it with the Federal High Court: S.293(2) ISA
IST – ADR CENTRE
This is the Alternative Dispute Resolution Centre of the IST.
It is designed to provide sessions for various ADR options such as Negotiation,
mediation, arbitration and other hybrid processes.
Pursuant to R. 34(1), 3(2) and 4 of IST (Procedure) Rules 2003 the IST issues
directives for the effective management and resolution of dispute brought before it
(i.e. IST issues the rules for the ADR proceedings).

LIMITATIONS OF THE DISPUTE RESOLUTION MECHANISM OF IST.

However, the Rule and laws do not make any express procedural provision as to
resolving investment and securities dispute alternatively rather than resorting to
litigation.
The laws should give effect to the rule of SCOTT v HARVEY clause, which posits that
where parties agree as to ADR, it should be considered before resorting to
litigation. Where ADR fails, the litigation can be regarded as a means of settling
disputes between capital market operators.
ADR should be made compulsory rather than voluntary. Where parties fail in ADR,
then the matter would be taken into litigation at the Investment and Securities
Tribunal
R. 4 IST (Procedure) Rules 2003, the IST is empowered to promote reconciliation
among parties to an action and encourage and facilitate the amicable settlement of
disputes.

THE JURISDICTIONAL CONFLICT BETWEEN THE FEDERAL HIGH COURT AND

THE INVESTMENT AND SECURITIES TRIBUNAL (IST)
 The combined provisions of S. 251(1)(e) CFRN 1999 which gives the FHC
exclusive jurisdiction over matters arising from the operation of CAMA
coupled with S. 251(1)(r) CFRN which gives FHC exclusive jurisdiction on
matters involving challenge of decisions of Federal Government Agency,
clearly raises jurisdictional conflict between FHC and IST.
 This is in view of the matters covered by S. 284 ISA and the exclusive
jurisdiction granted the IST by S. 294 ISA.
 The conflicting jurisdiction was raised in FIS Securities Ltd v. SEC and the
IST held that it has competence to deal with matters contained in CAMA.
There are TWO SCHOOLS OF THOUGHT to this conflict.
1st School of Thought:
 This proponents of this school hinge their arguments on the fact that the
Constitution is supreme. That IST is not a superior court as listed in S.
6(6) CFRN.
 In National Union of Electricity Employees v. Bureau for Public
Enterprises (BPE), consistency Test was laid in relation to S.1(3) CFRN
 IST is not a superior court and as therefore cannot purport to take away
jurisdiction in matters vested in the Federal High Court.
 Also judgment of IST is not enforceable unless it is registered in the Registry
of the Federal High Court
2nd school of Thought
In determining the jurisdiction of the Federal High Court, the Court must look at
both the object and the subject – matter- NEPA v. Edegbenro
The proponents of this school hold the view that IST has exclusive jurisdiction
over capital market and investment disputes.
 In Ajayi v. SEC, the Court of Appeal upheld the decision of the Federal High Court in
declining jurisdiction in a matter bordering on capital market dispute.
IST is established by Act of National Assembly and gives exclusive jurisdiction on
capital market disputes. Thus, it is not an inferior court
COMMENT-origin of the conflict stems from 1973 as IST was supposed to be an arm
of FHC. The argument has no yes/no approach. The court will consider it on a case-
by-case basis. There are pending SC decisions on the point.
FIS Securities Limited v SEC and IST

In resolving this dispute, having gone through the 4 cases above, the conclusion
seem to be that the FHC has jurisdiction for matters emanating from CAMA whereas
as was held in Ajayi v SEC, matters bordering on capital market disputes only shall
go to IST.
Assuming someone suing Nigerian Law School (Council of Legal Education) and a
capital market operator, NEPA v Edegbenro states that it is the FHC because NLS is
an agency of the government. But note should look at the object and subject matter
so I think it should be the IST

JURISDICTIONAL CONFLICT WITH THE NATIONAL INDUSTRIAL COURT

S.254C OF CFRN VESTS exclusive jurisdiction on NIC over employment and
labour matters including pensions. This conflicts with S.93(4) PENSION
REFORM ACT.
4. DISPUTE RESOLUTION MECHANISM OF THE NIPC ACT
This is provided for in S.26 NIPC ACT .
SCOPE-Although section 26(2) NIPC provides for different laws that will apply for
foreign and local investors, Section 26(3) NIPC does not specify whether the
investor would be local or foreign. It therefore affords both foreign and local
investors level opportunities for settling investment disputes.

PROCEDURE
1. Where a dispute arises between an investor and any government of the federation
in respect of an enterprise, all efforts shall be made through mutual discussion to
reach an amicable settlement.
2. If amicable settlement through mutual discussion is not possible, the dispute may be
submitted at the option of the agreed party to arbitration as follows;
a. In case of a Nigerian investor, in accordance with the rules of procedure for
arbitration as specified in the Arbitration and Conciliation Act cap A18 LFN 2004
b. In the case of a foreign investor, within the framework of any bilateral or
multilateral agreement or investment protection to which the Federal Government
and the country of which the investor is a national are parties. Or
c. In accordance with any national or international machinery for the settlement of
disputes agreed on by the parties. Section 26(1)(2) NIPC Act
3. Where in respect of any dispute, there is disagreement between the investor and the
Federal Government as to the method of dispute settlement to be adopted, the
International Centre for Settlement of Investment Dispute Rules shall apply.
Section 26(3) NIPC ACT
2.TAX APPEAL TRIBUNAL-S.59 FIRS (establishment Act 2007)
The Tribunal has jurisdiction over
i. Companies Income Tax Act
ii. Personal Income Tax Act
iii. Petroleum Profit Tax Act
iv. Value Added Tax Act
v. Capital Gains Tax Act
vi. Other Tax Laws

C.NATIONAL INDUSTRIAL COURT

The Court shall have and exercise exclusive jurisdiction in civil causes and matters
relating to labour, including trade unions and industrial relations, environment
and conditions of work, health, safety and welfare of labour-S.254C CFRN 199
Also, it has exclusive jurisdiction in civil causes and matters relating to the grant of
any order to restrain any person or body from taking part in any strike, lock-
out or any industrial action, or any conduct in contemplation or in furtherance
of strike, lock-out or any industrial action.
Other Jurisdiction include civil causes and matters relating to the determination of
any question as to the interpretation of any collective agreement, any award made
by an arbitral tribunal in respect of a labour dispute or an organisational dispute,
the terms of settlement of any labour dispute, organisational dispute as may be
recorded in any memorandum of settlement, any trade union constitution and any
award or judgment of the Court.

Ethical issues
1) Advice client ADR options: Rule 15(3)(d)
2) Not to deal improperly with client’s money: Rule 23(2)
3) Conversant with the company rules: Rule 16
4) Understand the issue of jurisdiction as can be raised for the first time at Supreme
court and can be raised on the court suo motu: Rule 14 & 16
5) Ensure proper service of court services

IN THE FEDERAL HIGH COURT OF NIGERIA

IN THE LAGOS JUDICIAL DIVISION
HOLDEN AT LAGOS
SUIT NO:
IN THE MATTER OF TIMBERWOODS FURNITURE LTD
AND
IN THE MATTER OF THE COMPANIES AND ALLIED MATTERS ACT CAP C20
LFN 2004
BETWEEN:

1.MOJI MODUPE
2.OYIN MODUPE
(Administrators/Personal representative APPLICANTS
of the Estate of Bola Modupe-Deceased)
AND

1.TIMBERWOODS FURNITURE LTD

2.JAMES JOHN (DIRECTOR) RESPONDENTS

ORIGINATING MOTION
BROUGHT PURSUANT TO SECTION 90 OF THE COMPANIES AND ALLIED-
MATTERS ACT, ORDER 3 OF THE COMPANIES PROCEEDINGS RULES 1992 (AS
AMENDED) AND UNDER THE INHERENT JURISDICTION OF THIS HONOURABLE
COURT
TAKE NOTICE that this Honourable Court will be moved on the ……….. day of March
2012 at the hour of 9 O’clock in the forenoon or so soon thereafter as Counsel for
the Defendant /Appellant will be Heard praying this Honourable Court for:
1. AN ORDER mandating the Respondent to rectify the Register of members to
include both the names of the Applicants as owners of the shares owned by
Mrs Bola Modupe now deceased.
2. AND for such orders as the Honourable Court may deem fit to make in the
circumstances.
DATED THIS 22 DAY OF MAY, 2012
…………………….
Ojo Yusuf, Esq.
Counsel to the Applicants
Whose address for service is
No 10 Base Street
Ikoyi
Lagos State
FOR SERVICE ON:
The Respondents
No. 40 Keffi
Street Ikoyi
Lagos.

IN THE FEDERAL HIGH COURT OF NIGERIA

IN THE LAGOS JUDICIAL DIVISION HOLDEN AT LAGOS
SUIT NO:

IN THE MATTER OF TIMBERWOODS FURNITURE LTD

AND
IN THE MATTER OF THE COMPANIES AND ALLIED MATTERS ACT CAP C20
LFN 2004
BETWEEN:
 1. MOJI MODUPE
2. OYIN MODUPE
(Administrators/Personal representative APPLICANTS
of the Estate of Bola Modupe-Deceased)
AND

1. TIMBERWOODS FURNITURE LTD

2. JAMES JOHN (DIRECTOR) RESPONDENTS
AFFIDAVIT IN SUPPORT OF ORIGINATING MOTION
Moji Modupe Adult, Female, Public Servant, Nigerian citizen of No. 15 Broad Street
Ikeja Lagos, do hereby make oath and state as follows:
1. That I am one of the Applicants and by virtue of which I am
conversant with the facts of this case.
2. The applicants in this case are the personal representatives/ Administrators
of the Estate of Mrs. Bola Modupe (now deceased), a copy of the letters of
Administration is attached and marked as Exhibit A.
3. I know as a fact that in 2004 the deceased Mrs. Bola Modupe bought 2, 000
ordinary shares of N1.00 each in the 1st Respondent’s company, a copy of the
Shares Certificate issued to her is attached and marked Exhibit B.
4. That on the 10 day of January 2011, Mrs. Bola Mudupe died survived by the
Applicants; a copy of the death certificate is attached and marked Exhibit C.
5. That the Applicants after been granted Letters of Administration in respect
of the Estate of Mrs Bola Modupe(deceased), wrote to the Respondents
indicating their intention to be members of the 1 st Respondent. A copy of the
letter of intention to be members of the Respondent Company is attached
and marked Exhibit D.
6. The Respondents has since ignored their request to be registered and so a
reminder Letter was sent to the Respondents dated the 15 day of December
2011, a copy of the letter is attached and marked Exhibit E.
7. That up till the time of this action, the Respondents never replied nor did
they register the Applicants as members of the 1st Respondent.
8. That the Applicants pray that the Respondents be ordered to rectify its
Register of members to include the Applicants in the interest of justice.
9. That I make this statement in good faith believing its content to be true and
correct and in accordance with the Oaths Law of Lagos State.
………………
Deponent
Sworn to at the Federal High Court Registry, Lagos
This ….. day of May 2012.
BEFORE ME

COMMISSIONER FOR OATHS

WEEKS 20 & 21-WINDING UP AND DISSOLUTION OF COMPANIES; BUISNESS
AND NON BUISNESS ORGANISATION
WINDING-UP OF COMPANIES
It is the process of liquidation of the assets of a company for the benefits of its (i.e.
distributed to) creditors, members and employees in accordance with certain rules
of priority.
TATE INDUSTRIES PLC V. DEVCOM M.B LTD.

COURT WITH JURISDICTION

The court having jurisdiction to wind up a company shall be the Federal High Court
within whose area of jurisdiction the registered or head office of the company is
situate or where it has maintained registered office for the PAST 6 MONTHS
preceding the presentation of the petition- S. 407 CAMA.

APPLICABLE LAWS
a. CAMA
b. Company Winding up Rules 2001
c. Investment and Securities Act 2007
d. SEC Consolidated Rules 2013
e. NDIC
f. BOFIA
g. National Insurance Commission Act
h. FHCA
i. FHC Civil Procedure Rules 2009

REGULATORY AGENCIES-
a. CAC –It can present petition for winding up. It is a custodian of company
records-A company must file returns during winding up
b. FHC-court with jurisdiction to entertain winding up petition.
c. SEC
d. NSE
e. National Insurance Commission

COMMENCEMENT OF WINDING UP PROCEEDINGS

It depends on the type of winding up as follows: SECTION 415 CAMA
(1) If a members’ Resolution to wind up was passed, it is commenced at the time of
passing the Resolution: i.e. for voluntary members’ winding up
(2) If it is a Petition to wind up that is filed, at the time of presentation of the
Petition: in any other case
- MERCANTILE BANK OF NIGERIA PLC V. NWABUDE.

EFFECT OF COMMENCEMENT OF WINDING UP PROCEEDINGS

1. No attachment of a company’s property is allowed
2. No judgment debt can be claimed
3. No more carrying on of the business of the company
4. Its properties cannot be disposed off nor can its shares be transferred unless
such is sanctioned by the Court S. 413-414 of CAMA
EFFECT OF WINDING UP PROCEEDING ON THE LEGAL PERSONALITY OF A
COMPANY
The winding up of a company or the appointment of liquidator does not by itself
result in the death of the corporate body thereby removing its legal personality.
A company under a winding up proceedings has not died it is still alive though
sick. A company “dies” on its dissolution.- C. S. (NIG.) PLC V. MBAKWE

EFFECT OF A WINDING –UP ORDER

1. Action/proceedings against the company must be with the leave of Court
2. Employees are automatically laid off
3. Any disposition of the company’s property and transfer of its shares after the
commencement of a winding up is void
4. The directors’ power to run the company ceases
NB-if a winding up order is made or a provisional liquidator is appointed, no
action or proceedings shall be proceeded with or commenced against the company
except by leave of the court S. 417 CAMA.
NOTE-However, what the section prohibits is action against the company without
leave of court and not the company proceeding against another person. -
ONWUCHEKWA V. N.D.I.C.

DISSOLUTION OF A COMPANY
The procedure is:
1. Winding up must have been completed.
2. The application is made to court by the liquidator for a dissolution Order
3. Notice of the Order of dissolution made is to be given to the CAC WITHIN 14
DAYS of the Order-S.454(1) CAMA
4. CAC shall record the dissolution of the company in its books – section
454(2) of CAMA.
NOTE-The liquidator or any other interested person may apply to the court to make
an order deferring the date of the dissolution. By virtue of S. 524 even where the
company is deemed to be dissolved, the court may on application by the liquidator
or any other interested person, within 2 years of the dissolution void the
dissolution. That person must deliver the order to CAC within 7 days after making
the order.

EFFECT OF NON COMPLIANCE-Failure to comply with the provision by the

liquidator will attract a fine of N25 (Twenty five naira) daily of the breach – section
454(3) of CAMA.

EFFECT OF DISSOLUTION ORDER

 Once a company is fully wound-up and dissolved, it loses its legal entity and
ceases to exist (DIES) in law –
CBCL (NIG.) LTD. V. OKOLI ;
SECTION 454(1) AND (2)
 The incorporated name cannot be used any longer.
DIFFERENCE BETWEEN LIQUIDATION AND DISSOLUTION OF A
COMPANY
During liquidation, the company can still sue in its corporate name. However, it
cannot be a member of a new company.
Conversely, during dissolution of a company, the company no longer exists in its
corporate entity as it is now dead.

THREE WAYS OF WINDING UP

Basically, there are three types of winding – up
a. Winding up by order of court.
b. Voluntary winding up, members or creditors
c. Winding up subject to the supervision of the court-S.401(1) CAMA
but only 2 modes of winding up

1. COMPULSORY WINDING UP BY THE COURT

The grounds for winding up by the court are provided under S. 408 CAMA viz:
a. The company has by special resolution resolved that the company be wound up
by the court.
b. Default is made in delivering the statutory report to the CAC or holding the
statutory meeting;
c. The number of members is reduced below two
d. The company is unable to pay its debts
e. The court is of the opinion that it is just and equitable that the company should
be wound – up.

A-MEMBERS SPECIAL RESOLUTION FOR COMPULSORY WINDING UP

PROCEDURE-
1. Pass board Resolution and company special Resolution to wind up the company
2.Send Notice of the Resolution to CAC, NSE if it is a quoted company and to SEC
3. Present a Petition for winding up to the Court accompanied with:
i. Verifying affidavit ii. Copy of the Resolution
4.The Court will appoint a liquidator
5.After the liquidation, the Court will give a winding up order
6.The company is dissolved upon application to the Court

B-DEFAULT MADE IN DELIVERING STATUTORY REPORT

This can only be brought by a shareholder and it must be before the expiration of
FOURTEEN (14) DAYS after the last day on which the meeting should have
been held under section 410(2)(b) of CAMA.
The court may, instead of making a winding-up order, direct that a meeting be
held or the report be delivered, and make orders as to costs as it thinks fit – section
411(3) of CAMA.
This ground is only applicable to public companies – section 211(1)& 212 CAMA

C-REDUCTION OF MEMBERS BELOW TWO

A company cannot be incorporated with less than two persons which is the legal
requirement – SECTION 18 OF CAMA.
A company which is in default of this would be wound-up by the court in addition
to other sanctions as to liability – SECTION 93 OF CAMA.
This is one of the cases where a contributory is expressly authorised to bring a
petition for winding-up – SECTION 410(1)(d) OF CAMA.

D-INABILITY TO PAY DEBTS-S. 409

A company would be deemed to be unable to pay its debts if the creditor to whom it
is indebted.
a. in a sum exceeding N2,000(it must exceed N2000); by a notice in writing
demanded for the debt to be paid; the company has for a PERIOD OF 3 WEEKS
thereafter neglected to pay, then the company is unable to pay its debts.-ADO
IBRAHIM & CO LTD V. B.C.C. LTD, or
d. execution or other processes issued on a judgment or order of any court in favour
of a creditor of the company is returned unsatisfied in whole or in part: s409(b), or
e. The court, taking into account any contingent or prospective liability of the
company is satisfied that the company is unable to pay its debts.- S. 409 (c) CAMA

EXCEPTIONS-
S.409;
TATE V.DEVCOM
A company will not be deemed to be unable to pay its debt if:
1. The debt to a creditor is not due
2. No evidence of due demand for payment was made
3. If there is a bona fide dispute of the debt ONOCHIE V. ALAN DICK
& CO. LTD (2003); TATE INDUSTRIES PLC V DEVCOM LTD
(2004) RE LONDON&PARIS BANKING CORP.
4. There is no evidence that the company is insolvent.
s. 409 of CAMA and
NB- demand must be made by an officer of the company-In NIGERIAN
COMMERCIAL & INDUSTRIAL ENTERPRISES LTD. V. REGISTRAR OF
COMPANIES it was held that a demand made by the solicitor to a company for
payment of debt was not a demand by an officer of the company.
NB-the SHC has jurisdiction when the debt claimed is unascertainable or in dispute.
NB-however the denial of debt in bad faith CANNOT STOP PETITION IF AMOUNT
ADMITTED IS MORE THAN 2K
The Demand is a statutory document and not a mere letter of correspondence, and
should be formally titled as a STATUTORY DEMAND FOR PAYMENT, and clearly
set out the amount owed and a request to pay within three weeks and a Notice
that upon expiration, the creditor would take steps to wind up the company.
NB == Draft a Statutory Letter of Demand PURSUANT TO S.409

WINDING UP ON JUST & EQUITABLE GROUNDS UNDER S. 408 (e) CAMA

The grounds upon which the court MAY ORDER winding up under just and
equitable grounds are:
a. The substratum of the company has disappeared, such as the inability of the
company to achieve its object clause or the company is deeply indebted: RE
YENIDIJE TOBACCO LTD
b. The company is formed for fraudulent purpose.
c. The company is a “bubble” as it has no business or asset or never intended to
carry on business in a proper manner.
d. Unfairly prejudicial or discriminatory act against the minority or other
members, culminating in lack of confidence in the management of the company’s
affairs by those in control of the company. IBRAHIMI V. WESTBOURNE GALLERIES
LTD.
e. If the company is small, grounds that would justify dissolution of partnership
on just and equitable ground is enough, such as deadlock. THE MATTER OF THE
STEVEDORING (NIG.) CO. LTD.

FACTORS GUIDING COURTS DISCRETION IN WINDING UP UNDER 408(e)

 Whether it is just and equitable to wind-up a company depends on the facts
which are available to the court at the time of hearing of the application as
set out in the petition – RE WONDOFLEX TEXTILES PROPERTY LTD.
(1951) VLR 458.
 However, a petition on just and equitable ground should not be dismissed
basically because the petitioner has some other remedies since the motive of
the petitioner is irrelevant – OBASI V. PUREWAY CORPORATION (NIG.)
LTD. (1878) 4 FRCR 214.

NOTE-
The petitioner is not entitled to a winding-up order on the just and equitable
ground if his object is not a company purpose but the pursuit of a selfish
advantage in a question between himself and other shareholders –
ANGLO AMERICAN BRUSH CORPORATION LTD. V. SCOTTISH BRUSH CO.
LTD.

WHO MAY PETITION FOR COMPULSORY WINDING UP-S. 410 CAMA

a. The company (by special resolution);
b. A creditor, including a contingent or prospective creditor of the company
(e.g. secured creditor and debt to crystallise at a future date)
c. The official receiver;
d. A contributory (s403: under obligation to contribute to the indebtedness of
the company at winding up – owes debt to the company or has been allotted shares
which is yet to be paid up even though he has parted with the shares)
e. A trustee in bankruptcy, personal representative of creditor, contributory.
f. The CAC under S. 323 CAMA if it is in the public interest (NB: Registrar
General must assent or AGF must be notified and must consent before CAC can
present a petition for winding up of a company)
g. A receiver if authorised by the instrument under which he was appointed; or
h. By all or any of those parties, together or separately.
PROCEDURE FOR COMPULSORY WINDING UP
An application shall be made to the court for the winding up of a company which
must be in the form of a petition. Every petition shall be in any of the Forms 2, 3, or
4 in the Appendix – Rule 15 of the Winding-Up Rules, 1983/2001.
1. Filing of the Petition for winding-up along with a verifying affidavit – Rule 16
and Rule 18 of the Winding-Up Rules
2. Service of the Petition and Affidavit on the respondent with proof of Service –
Rule 17 of the Winding-Up Rules.
3. Obtain leave of court to advertise petition and advertise–Rule 19 of the
Winding-Up Rules.
4. Petitioner will File Memorandum of Compliance.
5. The Respondent will then file a Notice of intention to appear, Memorandum
of Appearance and an affidavit in opposition to the petition-Rule 23 and 25
of the Winding-Up Rule
6. The petitioner files a Reply to the Respondent’s processes –Rule 25
7. Appointment of Provisional Liquidator – Rule 21 of the Winding-Up Rules.
8. Filing and hearing of Summons for Security for Costs.
9. Filing of List of Persons Appearing (creditors) – Rule 24 of the Winding-Up
Rules.
10. Hearing of Petition – Rule 22 of the Winding-Up Rules.
11. Making of winding-up order – section 415 of CAMA.
12. Service of winding-up order to CAC– section 416 of CAMA.
13. Application for dissolution and the order of dissolution made
14. Appeals from the order of dissolution and enforcement

STAYING OF WINDING UP AFTER WINDING UP ORDER

S. 438 (1) CAMA empowers the Federal High Court to stay winding up even after
the order is made.
It is not a form of Appeal, but a review of the entire proceedings leading to the
order.
This may be on the application of either a liquidator or official receiver, a
creditor or contributory.

APPOINTMENT OF LIQUIDATOR
The court may appoint a liquidator for the purpose of conducting the proceedings in
winding-up a company – section 422(1) of CAMA.
On the making up of a winding-up order, if no liquidator is appointed, the official
receiver shall by virtue of his office become the liquidator – section 422(3)(b) of
CAMA.

POWERS OF A LIQUIDATOR IN WINDING UP BY THE COURT

The liquidator, in a winding-up by court, exercises some powers, but the powers
must be sanctioned by the court or the committee of inspection – section 425(1) of
CAMA. These powers include –
a) The power to bring or defend any action in the name and on behalf of the
company; AGBAOYE V. CHIEF FEDERAL LAND OFFICER
b) The power to carry on the business of the company as may be necessary for
the purpose of the beneficial winding-up;
c) The power to appoint relevant professionals or legal practitioner to assist
him in the performance of his duties;
d) The power to pay all classes of creditors in full;
e) The power to make any compromise or arrangement with creditors or
persons claiming to be creditors; and
f) The power to compromise all calls, debts and liabilities capable of resulting
in debts.

VOLUNTARY WINDING UP-SECTION 457 CAMA

WHEN CAN A COMPANY BE WOUND UP VOLUNTARILY
A company may be wound up voluntarily
a. When the period, if any fixed for the duration of the company by the articles
expires, or the event, if occurs, on occurrence of which the articles provided the
company is to be dissolved and the company in meeting has passed a resolution
(ordinary) requiring the company to wound up voluntarily (ordinary resolution
where articles state company is to exist for a fixed period, where the company was
incorporated for a specific purpose and the purpose is fulfilled and when company
was to exist until a particular occurrence/contingency and that contingency
happens)
b. If the company resolves by special resolution that company be wound up
voluntarily.
If a company passes a resolution for voluntary winding up, it MUST WITHIN 14
DAYS AFTER the passing of the resolution
i. Give notice of the resolution by advert in the Gazette, or
ii. Advertise in two daily newspaper and
iii. Give notice to CAC – s. 458

NB-The passing of the resolution is deemed to commence the voluntary winding up

S. 459

TYPES OF VOLUNTARY WINDING-UP

Voluntary winding-up is of two types, namely –
1. Members voluntary winding-up; and
2. Creditors voluntary winding-up.
MEMBERS VOLUNTARY WINDING-UP
This is where a statutory declaration of solvency shall be made by the directors to
the effect section 462(1) of CAMA.

PROCEDURE FOR MEMBERS’ VOLUNTARY WINDING-UP

1. The company pass Board and company Resolution to wind up the company
and to appoint a liquidator to wind up the company
2. It gives notice of the special Resolution and appointment of liquidator passed
to CAC and the public within 14 days of its passage and advertises it in the
Gazette or two daily newspapers – section 457(B)& 458(1) of CAMA.
3. A Statutory Declaration of Solvency that the company can pay its debts within
12 months of winding-up is made by the Directors within 5 weeks of
passing the Resolution to wind up voluntarily and is delivered to CAC –
S.462 CAMA.
4. The liquidator holds meeting if the process of winding-up last more than a
year
5. The liquidator holds meetings to adopt the audited accounts of the winding-
up and send copies to members
6. The liquidator holds final meetings upon liquidation of the company and
send a copy of the accounts/ return of the meeting to CAC WITHIN 7 DAYS of
the meeting–S.468&469 CAMA
7. The liquidator send to the members the audited accounts and he is required
to preserve all the books/papers of the company on his activities as liquidator
for a period of 5 years before destruction.-s.470 CAMA
8. The liquidator apply for dissolution Order and send the Order to CAC. The
company is deemed dissolved after 3 months of the registration of the
accounts/returns with CAC-s.468(4) CAMA.

CIRCUMSTANCES WHERE MEMBERS’ VOLUNTARY WINDING-UP WILL BE

CONVERTED TO CREDITORS WINDING-UP
a. There is no Statutory Declaration of Solvency made and filed in support of the
Resolution for winding-up
b. The liquidator is of the opinion that the company will not be able to pay its
debts within the 12 months stated in the declaration of solvency

CREDITORS’ VOLUNTARY WINDING-UP

This occurs where the directors are not able to make a declaration of solvency at the
CAC – section 471(1) of CAMA.

PROCEDURE FOR CREDITORS’ VOLUNTARY WINDING-UP

1. Both the company and its creditors hold separate meetings to propose for a
winding up of the company. The creditors’ meeting is to be held some days
before the company meeting.
2. The notice of both meetings must be sent simultaneously -section 472(1) of
CAMA. The notice is to be published in the Gazette and two newspapers;
the publication of the notice is tantamount to a declaration of insolvency
– section 472(2) of CAMA.
3. The meeting of the creditors is to be presided over by one of the directors
who shall be appointed from one of them – section 472(3) of CAMA.
4. The directors lay before the creditors’ meeting, a full statement of the
company’s affairs with a list of the creditors of the company. A breach of this
is an offence. S. 472(3) (a) of CAMA
5. The liquidator and a Committee of inspection (5 persons max) is to be
appointed by the creditors and the company, but if the creditors reject the
persons appointed by the company they stand disqualified –S.474(1)
6. Upon appointment of the Liquidator, all powers of the Directors shall
cease except as sanctioned by the Committee of Inspection or in its absence
the creditors. S. 473 (2) of CAMA
7. The liquidator should within 14 days of his appointment, publish it in the
gazette and 2 daily Newspapers and he is to deliver to the CAC for
registration a Notice of his Appointment.- S. 491 of CAMA
8. The resolution to wind-up the company and appointment of liquidator are
given to the Corporate Affairs Commission and published in the Gazette
and two newspapers WITHIN FOURTEEN (14) DAYS
9. A general meeting of the company and creditors is to be summoned if the
winding up continues for more than 1 year within 3 MONTHS of the end of
the first year and every succeeding year.-S. 477 of CAMA
10. The final meeting and dissolution of the company is held to enable the
liquidator lay the account and give explanation.
11. After the meeting, the liquidator MUST WITHIN 7 DAYS send a copy of the
account and return of the holding of the meeting to the CAC for registration-
s.478(3)
12. The company is deemed dissolved AFTER 3 MONTHS of the registration of
the accounts and return to the CAC. S. 478 (4 ) of CAMA
13. However, the Court upon an application by the liquidator or a person
interested (a creditor) can void the dissolution order within 2years: S.524
NOTE-If separate persons are nominated as liquidators at the separate meetings, the
person nominated by the creditors would be the liquidator – S. 473 (1)
However, a director, member or the company may apply to court within 7 days for
an order that the person nominated by the company shall be the liquidator –If the
creditors did not nominate, the company’s nominee would be the liquidator

CONSEQUENCES OF A VOLUNTARY WINDING-UP

The consequences of a voluntary winding-up are –
1. The company shall cease to carry on its business except so far as may be
required for the beneficial winding-up thereof.- S. 460
2. The corporate status and powers of the company shall not withstanding
anything to the contrary in its articles, continue until it is dissolved – Proviso
to S. 460
3. Any transfer of shares not made with the sanction or approval of the
liquidator shall be void.
4. Any alteration in the status of members of the company made after the
commencement of the voluntary winding-up shall also be void – section 461
of CAMA
 5. On the appointment of a liquidator, all the powers of the directors shall
cease, except so far as the company in general meeting or the liquidator
sanctions the continuance thereof – S. 464 (2)
6. In a creditor’s voluntary winding up, the powers of the directors shall also
cease, except so far as the committee of inspection or if there is one, the
creditors sanction the continuance S. 473(2)
7. A voluntary winding up will operate as a discharge of employees of the
company is wound up because it is insolvent just as it will in the case of a
compulsory winding up.

WINDING-UP SUBJECT TO THE SUPERVISION OF THE COURT

This is provided for under sections 486, 488 and 490 of CAMA
This usually occurs when a company passes a special Resolution for winding-up
backed by a Petition filed to the Court to wind up the company subject to its
supervision.
The Court is the one to appoint the liquidator. section 489(1) of CAMA.
A winding-up subject to the supervision of the court is deemed to be a winding-up
by the court for the purposes of sections 413 and 414 – section 488 of CAMA.
Where an order is made for a winding up subject to supervision, the court may by
the same or any subsequent order appoint an additional liquidator– section 489(a)
of CAMA.

 The court is also empowered to remove any liquidator so appointed by the

court and may fill any vacancy, occasioned by the removal, resignation or
death – section 489(3) of CAMA.

THE PROCEDURE FOR A WINDING UP SUBJECT TO THE SUPERVISION OF THE

COURT IS AS FOLLOWS:
1. Pass a special Resolution for winding up of the company
2. File a Petition supported with a verifying affidavit requesting the Court to wind
up the company subject to its supervision

EFFECT OF SUPERVISION ORDER

An order for winding-up subject to the supervision of the court has the following
effects –
1. The liquidator so appointed is free to exercise all his powers without the
sanction or intervention of the court Section490(1) of CAMA.
2. The liquidator shall not exercise the powers specified in paragraphs (d), (e)
and (f) of section 425(1) of CAMA, that is, the power to pay all classes of
creditors in full; the power to make any compromise or arrangement with
creditors or persons claiming to be creditors; and the power to compromise
all calls, debts and liabilities capable of resulting in debts respectively,
EXCEPT with the sanction of the court – proviso to section 490(1) of
CAMA.
3. A winding-up subject to the supervision of the court does not amount to
winding-up by the court for the purpose of the provisions of CAMA as
specified in Schedule 12 – section 490(2) of CAMA.

MAJOR OFFICERS OF WINDING UP

1. Liquidator
2. Official Receiver
3. Provisional Liquidator
4. Receiver/Receiver Manager
5. Special Manager

LIQUIDATOR
 A liquidator is a person appointed by the company or court to wind up the
affairs of the company and to distribute its assets among the creditors and
contributories in accordance with the articles.
 A liquidator represents the interest of the creditors, especially the unsecured
creditors. Thus upon appointment all powers of directors cease.
 The LIQUIDATOR MUST, WITHIN FOURTEEN (14) DAYS AFTER HIS
APPOINTMENT PUBLISH IN THE GAZETTE AND IN TWO (2) DAILY
NEWSPAPERS and deliver to the commission for registration a notice of his
appointment –
SECTION 491 OF CAMA.

DISQUALIFICATION FOR APPOINTMENT AS LIQUIDATOR

The following are persons who are incompetent to be appointed or to act as
liquidator whether in winding up by, or under the supervision of the court or in a
voluntary winding up –
1. An infant.
2. Anyone found by the court to be of unsound mind.
3. A body corporate.
4. An un-discharged bankrupt.
5. Any director of the company under liquidation.
6. Any person convicted of any offence involving fraud, dishonesty, official
corruption or moral turpitude and in respect of whom there is a subsisting
order to restraint fraudulent persons – section 509(1) of CAMA.
NB-Any appointment made in contravention of the above shall be void – section
509(2) of CAMA.
There are also further powers of a liquidator which are provided under section
425(2) of CAMA –
1. The power to sell the property of the company by public auction or private
arrangement.
2. The power to do all acts and to execute in the name and on behalf of the
company, all deeds, receipts and other documents.
3. The power to prove, rank and claim in the bankruptcy, insolvency or
sequestration of any contributory.
4. The power to draw, accept, make and indorse any bill of exchange or
promissory note in the name and on behalf of the company.
5. The power to raise any money required on the security of the assets of the
company.
6. The power to appoint an agent to do any business which the liquidator is
unable to do himself
OFFICIAL RECEIVER-S. 419 CAMA
 An official receiver is the Deputy Chief Registrar to the Federal High Court
or any other officer designated for that purpose by the Chief Judge of the
Federal High Court.
 He is to receive the statement of Affairs of the company and to collate
information about the company in winding up.
== Official Receiver is just a nomenclature given to the Deputy CR of FHC.

PROVISIONAL LIQUIDATOR
He is appointed by the Court before the making of a winding up Order and the
formal appointment of a liquidator. S-S. 422(3) (a) of CAMA
An official receiver may be a PROVISIONAL LIQUIDATOR when the winding up
order is made in a compulsory winding up until the appointment of a liquidator. He
continues to be so act wherever there is vacancy in the office of a liquidator. S. 422
(3)(b)

RECEIVER
A receiver is appointed by the secured creditors under the power contained in the
debenture instrument, executed by the company and the creditors.
A receiver need not get involved in the management of the company. He only has
an eye in the income and expenditure of the company in order to realise assets
and pay off the debt due to the creditors: s389

RECEIVER MANAGER
A Receiver Manager is not only concerned to realise the assets of the company but
takes over the management of the affairs of the company, to stabilise it to make
profit and pay off the creditors and then handover the company to the members. He
stands in a fiduciary relationship to the company and observe utmost good faith
towards it in any transaction with it or on its behalf: s390

SPECIAL MANAGER
He is an officer appointed by the Chief Judge of the Federal High Court to assist the
Deputy Chief Registrar (ie Official Receiver) in the winding up of a company by the
order of the court: s436

POWERS OF THE RECIEVER/MANAGER

1. Power to carry on the business of the company
2. Power to use the company’s seal
3. Power to appoint other professionals to assist him
4. Power to sell and dispose of the property
5. Power to establish subsidiaries of the company
6. Power to raise or borrow money and grant security due over the property of a
company.
NB == Distinguish between a company in Receivership and a company in
liquidation.
A COMPANY IN RECEIVERSHIP is a company which has appointed a receiver to
manage the debts of the company. The company may still bounce back as an
effective going concern. A COMPANY IN LIQUIDATION is a company in the process
of winding up.

THE ORDER/PRIORITY OF PAYMENTS OF LIABILITIES UPON WINDING-UP

OF A COMPANY
1. All costs including the remuneration of the liquidator are paid out: S. 484,
494(5) of CAMA
2. Outstanding local rates and charges due from the company and payable
within 12 months next before the date of the winding-up Order or its
commencement are paid
3. Pay all PAYEE (Pay As You Earn) tax deductions, assessed taxes, land taxes,
properties or income taxes from the company not exceeding 1 year before
the winding-up Order or its commencement
4. Pay salaries of junior staff or servants of the company for services rendered
to the company and deductions under the National Provident Fund Act
5. Settle claims of creditors and members. Secured creditors with fixed/floating
charges are paid first before the unsecured debentures
6. Settle preferential shareholders
7. Distribute the remaining assets to the ordinary shareholders -S. 494 of
CAMA

IN THE FEDERAL HIGH COURT

HOLDEN AT PORT-HARCOURT

SUIT NO:FHC/198/09
IN THE MATTER OF DELTA OIL GROUP PLC

AND

IN THE MATTER OF COMPANIES AND ALLIED MATTERS ACT CAP C20 LFN 2004
BETWEEN:

MR. EMEKA ADE PETITIONER

AND

DELTA OIL GROUP PLC

RESPONDENT
PETITION FOR WINDING UP
The humble petition of Mr. Emeka Ade (Petitioner) of No. 1 Agbani Road, Garki,
Abuja is presented for filing based on the ground that the respondent refused to pay
his professional fees based on the following facts:-
1. The petitioner is a sole Legal Practitioner with his office at FCT, Abuja.
2. The respondent is a company incorporated in Nigeria in accordance with the
provisions of CAMA, 2004.
3. The respondent agreed to pay 5 million dollars as professional fees to the
petitioner.
4. The petitioner has demanded for payment of his professional fee and the
respondent has refused, failed and or neglected to settle his indebtedness.
5. The petitioner prays the winding up of the respondent company.

THE PETITIONER PRAYS AS FOLLOWS:

1. An order for the compulsory winding up of the company by this Honourable Court

DATED THIS 13TH DAY OF AUGUST 2015

……………………………..
Emeka Ade
Petitioner
No 20 Ahmadu Bello Way,
Abuja, FCT
080123456784
northwest.bank@gmail.com
For service on
Delta Oil Group Plc
No 3 Abia Street,
Abuja, FCT
09034576956
deltaoil.group@gmail.com

draft verifying affidavit

 DISSOLUTION OF BUSINESS NAME UNDER PART B OF CAMA
DISSOLUTION OF SOLE PROPRIETORSHIP
Death of the sole proprietor will lead to dissolution of sole proprietor except
provision in his will for a Personal Representatives to carry on the business for a
certain period of time
Procedure for dissolution of a sole proprietorship upon death of sole proprietor
 Evidence of the death of the sole proprietor
 Within a period of 3 months of the death, the PR shall submit to Registrar
General, the evidence of death together with the original certificate of the
business name and particulars of registration for cancellation (also attach
letter of probate/administration)
 Upon the payment of requisite fees, filing fees for cancellation,
 Evidence of payment of annual returns up to date or payment of the annual
returns, if necessary

The procedure for the dissolution of a partnership is as follows: S. 578 of CAMA

1. The business will cease to be in existence by either a Resolution by the partners
or by a Court order or death of a sole proprietor.
2. The partners shall file a Notice to CAC WITHIN 3 MONTHS of the cessation of
the business, stating that the firm/ individual has ceased to do business under a
business name with evidence attached.
a. A copy of the court order or evidence of consent of the partners must be
annexed to the notice.
b. The original particulars of the business registration should be surrendered
for cancellation (certificate of registration and other particulars)
c. Pay the prescribed fees for filing the Notice.
3. Upon delivery of the notice to the Registrar of Business Name, the Registrar
may remove the firm, company or individual from the register.
4. If the Registrar has reasonable cause to believe that the firm, company or
individual is not carrying on business, the Registrar may send a notice to the
firm, company or individual enquiring whether or not the business is being
carried on.
5. Where there is no response WITHIN TWO (2) MONTHS, or the answer to this
is that there is no business being carried on, the Registrar may remove the
business name from the Register
Section 578(3) and (4) of CAMA.
Sometimes partnership business, even though registered under Part B is governed
by the partnership deed (even though this deed is not registered with CAC).
There are several ways of bringing partnership to an end. However, recourse is first
had to the partnership deed. Where the partnership deed is silent: then,
DISSOLUTION OF PARTNERSHIP
This can be caused by any of the partners in the following ways –
1. By act of the parties.
This can be done either –
 (i) By giving notice of intention to dissolve the partnership (could be provided
for in the agreement); or
(ii) By reason of ill-health making a partner permanently incapacitated and the
partnership not being able to continue
(iii) Where a partner creates a charge on his or her share of the partnership
property – section 34(b) of Partnership Law of Lagos; or
(iv) By providing for a clause like power of expulsion in the partnership
agreement/deed

2. By operation of law if –
(i) It is for a fixed term, at the expiration of the term
(ii) It is for an undertaking, at the performance of the undertaking and sharing of
the proceeds– Ureli v. Dada (1988) NWLR (Pt. 69) 237.
(iii) It is supervening illegality
(iv) It is for death or bankruptcy or insanity of a partner (i.e. partner has lost
legal capacity

3. By order of Court, in which a partner can apply that the partnership be dissolved
based on –
(i) Persistent breach of agreement-UREDI V. DADA; or
(ii) Mental ground
(iii) Where it is obvious that a partner is permanently incapable of continuing
with the partnership
(iv) Carrying on the business at a loss or
(v) On any equitable ground

PROCEDURE FOR DISSOLUTION OF THE PARTNERSHIP

1. Notice of requirement, dissolution, or expulsion is served on another partner
referring to the appropriate clause in the partnership agreement.
2. The partners prepare and execute the dissolution agreement.
3. Distribution of assets and liabilities will commence
4. Notice of dissolution/cessation is given to (THIS CAN BE DONE AFTER expulsion)
a) Corporate Affairs Commission, if registered
b) Published in the gazette and national newspapers.
c) Clients or customers.

DISSOLUTION OF NON-BUSINESS ORGANISATIONS (INCORPORATED

TRUSTEES/ ASSOCIATIONS) UNDER PART C OF CAMA
Federal High Court is the court with jurisdiction.
WHO CAN BRING PETITION FOR DISSOLUTION
The Petition for its dissolution can be brought by any of the following persons:
(a) The Governing Body or Board of Trustees
(b) One or more trustees of the association
(c) Members of the Association constituting not less than 50% of the total
membership.
 (d) The Corporate Affairs Commission: as monitoring agency of bodies
registered under Part C can petition for dissolution of IT if there are grounds to
support this. Members of the public can write to CAC if IT is doing something
against public policy etc and CAC will investigate and if the IT is encouraging
something illegal or against public policy, CAC can petition for dissolution
S. 608(1) of CAMA

GROUNDS FOR DISSOLUTION- they are not conjunctively so one ground is

sufficient
S.608(2) CAMA
The grounds for the dissolution of incorporated trustees may be any of the
following:
(a) That the aims and objects for which it was established have been fully
realised and no useful purpose would be served by keeping the corporation alive
(b) That the body corporate is formed to exist for a specified period and that the
period has expired (effluxion of time)
(c) That all the aims and objects of the association have become illegal or
otherwise contrary to public policy; and
(d) That it is just and equitable in all the circumstances that the body corporate
be dissolved (e.g. fraud or crime, oppressive acts by the organisation e.g. trustees
acting in a manner prejudicial to other members, organisation is frustrated by
financial constraints, high indebtedness i.e. liabilities outweighing assets of the
organisation, conflict of interest, rancour and misunderstanding in the board of
trustees)
THE PROCEDURE FOR THE DISSOLUTION
1. It is dissolved voluntarily by an ordinary Resolution passes by not less than
50 % of the members on any of the grounds stated above
2. File a Petition to the Court for a formal and effectual dissolution
3. All the persons likely to be affected by the dissolution (e.g.
creditors/trustees) shall be put on Notice. -S. 608(3) of CAMA.

NOTICE OF DISSOLUTION
At the hearing of the petition, all persons whose interest or rights may, in the
opinion of the court, be affected by the dissolution, shall be put on NOTICE S.
608(3)
A formal advertisement of the hearing of the petition following an Order of Court
will suffice as Notice.

DISTRIBUTION OF ASSETS OF A DISSOLVED INCORPORATED TRUSTEE

The distribution of the assets of a dissolved incorporated trustee is to be done in
accordance with the Special Clauses in its Constitution as follows: s608(4) CAMA
1. Satisfaction of all its just debts and liabilities of the Association
2. If the properties remained after the payment of liabilities, they are not to be
distributed among the members of the Association but to be transferred to
some other institutions having similar objects of the Association as will be
 determined by the members of the association at or before the time of
dissolution
3. If there is no institution with similar objects, the remaining property shall be
transferred to some charitable objects: s608(5)

DRAFTS
1.Statutory Notice of demand

NATWEST BANK LIMITED RC NO. 10145

NO 40 ADEOLA STREET
VICTORIA ISLAND LAGOS
OUR REF:
DATE:

The Board of Directors

Be Come Limited
Ikoyi-Lagos State.
Dear Sir,
STATUTORY NOTICE OF DEMAND TO REPAY N15, 000, 000.00 LOAN
PERSUANT TO SECTION 409 OF THE COMPANIES AND ALLIED-MATTERSACT

I, the Finance Director of the above named bank write to notify your company of
the repayment of a facility advanced to it to the sum of fifteen million naira only
(N15, 000, 000.00) at an interest of 13 percent per annum dated the 18 day of July
2008 with its due date of repayment to be on/ before the 10 day of March 2014.
Please be informed that no amount of the loan has been paid in partial discharge of
the loan sum and interest.

You are hereby demanded to repay the principal loan and interest within twenty-
one (21) clear days of your receipt of this Notice otherwise Legal action will be
taken against your company.
You can kindly make payment into account No 1276589308 at First Bank belonging
to us or account No 4356008693 at Great Bank Ltd.

Yours faithfully,

Finance Director
For: Natwest Bank
Ltd.

WADATA NIGERIA LIMITED

10 IKOYI ROAD IKOYI
LAGOS STATE
OUR REF:
SPECIAL RESOLUTION TO WIND-UP THE COMPANY AND TO APPOINT A
LIQUIDATOR/FIX HIS REMUNERATION PURSUANT TO SECTION 457 OF THE
COMPANIES AND ALLIED-MATTERS ACT 2004
At an Extra-ordinary General meeting of the above named company held on the 10
day of May 2014 at the company’s conference room, it was duly proposed and
resolved as follows:
1. That the company be wound up voluntarily.
2. That Chief Anthony Ibru, an accountant of ……..(address) be and is
hereby appointed liquidator to wind-up the company at a remuneration
of N100,000.00 per annum.

DATED THE 25 DAY OF MAY 2014

…. Director
Director

4.Declaration of Solvency to enable members’ voluntary winding up (should it

before the court or letter head of the company)

WADATA NIGERIA LIMITED

10 IKOYI ROAD
IKOYI
LAGOS STATE OUR REF:

DECLARATION OF SOLVENCY EMBODYING A STATEMENT OF THE ASSETS AND

LAIBILITIES PURSUANT TO SECTION 462 OF THE COMPANIES AND ALLIED-
MATTERS ACT 2004

We, John Bui of ….. and Bamba Audu of …… being all the Directors of the above
company, solemnly declare that we have made a full enquiry into the affairs of this
company and that having done so, we have formed the opinion that the company
will be able to pay its debt in full within a period of twelve (12) months from the
commencement of the winding up, and we append a statement of the company’s
assets and liabilities as at the 10 day of January 2014 being the latest practicable
date before making this declaration.
(Show the assets and liabilities and the assets – liabilities to show that assets exceed
liabilities)
And we make this solemn declaration, conscientiously believing the same to be true
by virtue of the Oaths Act.
1. John Bui ………………….
2. BambaAudu …………………..
Deponents
Sworn to at the Federal High Court Registry, Lagos
This …day of ……. 2014.
BEFORE ME
 COMMISSIONER OF OATHS

NOTICE OF RETIREMENT/RESIGNATION
To (Name of Partner or Partners other than the partner giving notice).
I, (Name of partner giving notice) hereby give you notice under
clause ........................................................... of our partnership agreement (or
deed of partnership) dated the ................................. day of ............................... of my
intention to retire from the partnership subsisting between us as from and
immediately after the ................................................... day of. ...... '" .......... next
Dated the .................. day of ............................
(Signature of Partner giving notice)
NOTICE OF DISSOLUTION
To (Name of Partner to whom notice is given)
Pursuant to clause ................................... of our partnership agreement (or deed of
partnership) dated the .................... day of...................I , (Name of partner giving notice)
hereby give you notice dissolving the partnership subsisting between us under said
agreement (or deed). I hereby exercise my option to purchase on the date of
dissolution your share in the partnership on the terms therein stipulated.
Dated the .................. day of ............... 2004
(Signature of partners giving notice)
NOTICE OF EXPULSION
To (Name of Partner to whom notice is given)
We, (Name of partner(s) giving notice), hereby give you notice that in exercise of the
power for this purpose given us by clause ........................ of the partnership agreement
(or deed of partnership) dated the ......................... day of..................... under which we
have carried on business in partnership with you, we hereby expel you from the said
partnership with effect form the date of service of this notice upon you on the
ground (state the grounds, for example "that you have suffered your share in the
partnership to be charged for your separate debt under the Partnership Law).
Dated the................................. day of........................... 2014
(Signature of partners giving notice)

NOTICE OF DISSOLUTION FOR INSERTION IN THE OFFICIAL GAZETTE OR

NEWSPAPER
Notice is hereby given that the partnership subsisting between (state in full names
of all the former partners) carrying on business as (state nature of business)
at............................ under the style of or firm of................... has been dissolved as from
the ......................... day of.................( or as from the date hereto) so far as concerns the
said (name of retiring partner) who retires from the said firm). All debts due to and
owing by the said late firm will be received and paid respectively by (State by
whom) who will continue to carry on the said business in partnership under the
style or firm of ....................
Dated the......... day of .......... 2014 -(Signature of partners giving notice)