COMPANY PROCEEDINGS IN NIGERIA

COMPANY PROCEEDINGS

These are the proceedings of a company. The provisions of Companies and Allied Matters Act (CAMA) provides for various applications to be made to the court in respect of a company or for other proceedings to be taken under the general law.

JURISDICTION OF THE FEDERAL HIGH COURT

Section 567 of CAMA defines court in relation to company, to be the “Federal High Court”.

Also, section 251 of the 1999 Constitution gives exclusive jurisdiction to the Federal High Court to hear matters relating to the operation of the Companies and Allied Matters Act inter alia and shall exercise this jurisdiction to the exclusion of any other court.

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.

The governing procedural rules in company proceedings are –

1.      Companies Proceedings Rules 1992;

2.      The Companies Winding Up Rules 2001;

3.      Federal High Court (Civil Procedure) Rules, 2009;

4.      Federal High Court Act;

5.      Investments and Securities Act (ISA), 2007;

6.      Companies and Allied Matters Act (CAMA);

7.      Securities and Exchange Commission Rules, 2007; and

8.      Investments and Securities Tribunal Procedure Rules, 2003.

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.

Rule 21(1) of the Rules provide thus –

“These Rules shall 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 19 of the Rules provide thus –

“Where no provision is made by the Rules, the Federal High Court (Civil Procedure) Rules shall apply”.

Rule 18 of the Rules provide thus –

“A proceeding under the Act is not invalidated by reason only that the Companies Proceedings Rules are not fully complied with or by any irregularity, unless the court before which an objection is made to the proceeding is of the opinion that injustice has been done by non-compliance with the rule complained about or any other irregularity, and that injustice cannot be remedied by any order of that court”.

APPLICATIONS FOR COMPANY PROCEEDINGS

The applications that can be made in respect of company proceedings are made available under Rule 2, 3 and 4 of the Companies proceedings Rules.

Rule 2 of the Rules provides that –

“Except in the case of the applications in rules 3 and 4 and applications made in proceedings relating to the winding-up of companies, every application under the Act may be made by originating summons.” – Unipetrol (Nig.) Plc. v. Agip (Nig.) Plc (2002) 14 NWLR (Pt. 787) 312.

From the above provisions, it means that an application is to be made by originating summons except where –

1.      It is to be made by originating motions – Rule 3 of the Rules;

2.      It is to be made by petition – Rule 4 of the Rules; and

3.      It is to be made in respect to winding-up of companies.

It should, however, be noted that under Rule 1(1) of the Rules, every originating summons, notice of originating motion and petition by which any such proceedings are begun and all affidavits, notices and other documents in those proceedings shall be entitled: in the matter of the company in question and in the matter of the Companies and Allied Matters Act.

ORIGINATING SUMMONS

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.

Also, an application under section 317 or 638 of the Act may be made by ex-parte originating summons – Rule 2(3) of the Rules.

ORIGINATING MOTIONS

This is a motion that is other than an interlocutory injunction. Its aim is to bring an original application in the circumstances specified by statute.

APPLICATIONS TO BE MADE BY ORIGINATING MOTIONS

Under Rule 3 of the Rules, the following applications under the Act (Companies and Allied Matters Act) shall be made by originating motion –

1.      Under section 23(2) for an order that a company be relieved from the consequences of default in complying with conditions constituting a company, a private company;

2.      Under section 46(8), 129(2), or 312(5) for an order extending the time for delivery to the commission of any document required by that section to be delivered.

3.      Under section 90(1) for the rectification of the register of members of a company;

4.      Under section 315 for an order declaring that the affairs of a company ought to be investigated by an inspector appointed by the Commission;

5.      Under section 319(3) and (4) for an inquiry into any such case as is therein mentioned;

6.      Under section 329 for an order directing that shares in or debentures of a company shall cease to be subject to restrictions imposed by that section; and

7.      Under section 524(1) for an order declaring dissolution of a company which has not been wound-up to have been void.

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

This is brought in the cases which are specifically provided in the Rules.

APPLICATIONS TO BE MADE BY PETITION

Under Rule 4 of the Rules, the following applications under the Act (Companies and Allied Matters Act) shall be made by originating petition –

1.      Under section 46(1) and (2) to cancel the alteration of a company’s objects;

2.      Under section 47(1) to cancel the alteration of a condition contained in a company’s memorandum of association;

3.      Under section 53(3) to cancel a special resolution to which that section applies;

4.      Under section 120 to confirm a reduction of the share premium account of a company;

5.      Under section 121(2) to sanction the issue by a company of shares at a discount;

6.      Under section 158 to confirm a reduction of the capital redemption reserve fund of a company;

7.      Under section 107(1) to confirm a reduction of the share capital of a company;

8.      Under section 142(1) to cancel any variation or abrogation of the rights attached to any class of shares in a company;

9.      Under section 311(1) for relief on the ground that the affairs of a company are being conducted in an illegal or oppressive manner;

10.  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;

11.  Under section 100(3) of the Investments and Securities Act (ISA), 1999 to sanction a scheme for merger between two or more companies; and

12.  Under section 558 for relief from liability of an officer of a company or a person employed by a company as auditor.

PROCEDURE FOR PETITION

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, except where the application is made under section 121(2) of the Act to sanction the issue of shares at a discount, 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, apply for direction as in Form 5.

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 accompany, 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.

PROCEDURE FOR ORIGINATING SUMMONS

Under Rule 2(2) of the Rules, the procedure for originating summons must be as specified in the Appendix to the Rules.

An application under section 317 (production of documents and evidence to inspectors) or section 638 (production of books, where offence suspected) may be made ex parte originating summons.

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. While the most common forms of Alternative Dispute Resolution (ADR) are mediation and arbitration, there are many other forms.

Parties in company proceedings who are in disagreement come agree to settle through any of the alternative dispute resolutions like negotiation, etc rather than going through litigation in the court (Federal High Court as regards to company matters) which will be costlier and will also amount to delay.

Alternative Dispute Resolution (ADR) is generally faster and less expensive. It is based on more direct participation by the disputants, rather than being run by lawyers, judges, and the state. In most ADR processes, the disputants outline the process they will use and define the substance of the agreements. This type of involvement is believed to increase people's satisfaction with the outcomes, as well as their compliance with the agreements reached.

Most Alternative Dispute Resolution (ADR) processes are based on an integrative approach. 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. In fact, participating in an Alternative Dispute Resolution (ADR) process will often ultimately improve, rather than worsen, the relationship between the disputing parties.

ETHICAL ISSUES

1.      Rule 14 of the Rules of Professional Conduct (RPC), 2007 – A lawyer shall dedicate and devote his attention to the cause of his client.

2.      Rule 32(1) of RPC – A lawyer in appearing in his professional capacity before a Court shall not deal with the Court otherwise than candidly and fairly.

(SAMPLE DRAFTS)

(SAMPLE OF THE HEADING OF ORIGINATING SUMMONS)

IN THE FEDERAL HIGH COURT

HOLDEN IN THE ............................. DIVISION

                                                                                                            SUIT NO.......................

IN THE MATTER OF ............................................................ LIMITED

AND

IN THE MATTER OF THE COMPANIES AND ALLIED MATTERS ACT, 2004

(SAMPLE PREAMBLE OF PETITION)

“The humble petition of the above-named X Limited (for a company that is the same as one referred to in the heading, or Y Limited for the company that is not the same as one referred to in the heading) whose registered office is not (company) of ...................... (address) states as follows..........................................................................”

NOTE: The body of the petition follows, consisting of a concise statement of the nature of the claim made and the relief or remedy required as indicated as indicated in Form 4 of the Rules.