TYPES OF BUSINESS ORGANISATIONS THAT CAN BE REGISTERED IN NIGERIA

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.

Participation may be through sole proprietorship, partnerships, and unincorporated joint ventures, limited and unlimited liability companies.

The Company and Allied Matters Act (CAMA) 2004, provides under different parts for the following types of business organizations. Part A provides for the following:

1)      Limited Liability Company.

2)      Company Limited by Guarantee.

3)      Unlimited Liability Company.

Any of the above companies may be a private company or a public company – section 21 of CAMA.

A private company is one which is stated in its memorandum to be a private company – section 22(1) of CAMA. It must by its articles restrict the transfer of its shares – section 22(2) of [CAMA and its total membership must not exceed fifty (50), not including persons who are bona fide in the employment of the company – section 22(3) of CAMA.

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 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 shares while a public company is prohibited.

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

LIMITED LIABILITY COMPANY

A company where the liability of its members limited by the memorandum, as to the amount, if any, unpaid on the 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 authorized minimum share capital – sections 93 and 99 of CAMA which provides for the liability of company debts where membership is below the legal minimum and the authorized minimum share capital respectively, 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 authorized 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 organization). 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). Furthermore, the company and every such member is liable to a daily default fine if it carries out business for profit sake – section 26(6) of CAMA.

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 are 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.

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

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 also like a partnership because every member liable in full for the debts of the company while a member and does not have any limit on the liability of its members. 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 the Act – section 25 and section 567(1) of CAMA.

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.

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, organization, 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 -

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 – sections 29 and 30 of CAMA. The nature of the business or object 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 nature of the business and the availability of other sources of working capital (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 authorized 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 –

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. A P.O Box or private mail bag is not acceptable as an address – section 35(2)(b) of CAMA.

c)      List particulars and consent of the first director – 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)(e) of CAMA.

d)     Statement of the authorized share capital – the statement which is a form must show the authorized 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 a director – section 35(2)(d) of CAMA.

e)      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.

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. 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 on 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 17^th Schedule of the Act.

In addition to the filing fees, registration fees are payable to the Commission for –

a)      Registration of public 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 2.2, 2.3, 2.5

l)        CTC of Forms CAC 2.2, 2.3, 2.5

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.

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 authorized 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 sucession 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.

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

DOCUMENTS REQUIRED TO BE SUBMITTED FOR REGISTRATION OF BUSINESS ORGANISATIONS AT C. A. C

a)      The memorandum and articles of association.

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

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

d)     Statement of the authorized share capital –– section 35(2)(d) of CAMA.

e)      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 REQUIRE FOR REGISTRATION OF BUSINESS ORGANISATIONS

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 authorized 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.