29 Dec



:: History being a record of past events shapes the future-Prof Abugu.

:: When did the “company-like” form rear its head and how did it evolve over the years? Some scholars say the history of Company Law is traceable to the practice of Italian Merchants[1] others say it is traceable to 13th Century England. Our discussion shall adopt the latter position.

13th -17th Century.

The following endeavours were accorded “corporate” status during this period.

1 The Church of England, Monasteries and other Ecclesiastical Bodies: Procured charters from the crown for the sole propagation of their objects. These were the earliest forms.

  1. The Borough System: A charter[2] could be obtained from the crown to recognize a particular community/municipality as a corporation. This practice was given legal backing by the Municipal Corporation Act of 1835.
  2. The Guilds: People involved in the same business would come under the auspices/umbrella of the guild. Members contribute/pool money and make bulk purchases and share according to contribution/interest. This united form protected their interests and gave them better bargaining power. Charters were procured in this regard.
  3. Partnerships: not exactly like the ones we have now. This type took two forms viz:
  • The Commenda: a temporary association of two or more people where “A” (called the Commendator) lends money to “B” (his partner called the Commendatarus) to employ in trade and take a percentage of the profit (usually 25 percent) The commendator bears the capital and risk while the commendetaurus deals with the running and administration.
  • The Societas: Here, members conglomerate under the auspices of the societas but each traded with his own stock and on his own account[3]. Charters were obtained to acquire monopoly of trade for members and to give them (their members) power over the territory in which they traded.

:: By this time, international trading began to gain prominence. However, due to the huge risk and capital involved, a single individual found it herculean to undertake. Therefore, “Joint Stock Companies” were formed (and obtained charter[4]) to pursue international and social undertakings. The Muscovy Company was the first joint stock[5], followed by the East Indian Company.

A Joint Stock essentially involves a large number of people pooling money together in common stock. The common stock is divided into units of (readily transferable) shares based on the contribution/interest of each member. The profit is shared to each member based on his interest.

17th – 18th Century:

The Bank of England was formed in 1694. This bank lent money to the State at an interest.

The South Sea Bubble

A group of individuals were in the habit of lending money to the State at an interest. A royal charter was granted to incorporate the group. The South Sea Company[6] emerged on this premise. The company was granted a monopoly to engage in trade with South America. This Company bought over major national debts[7] thereby unburdening the State and acquiring the favour and loyalty of the government and the governed[8]. The South Sea Act was enacted to recognise and legitimate them.

As time went on, the cost of trading skyrocketed. This led to a high demand for Royal Charters to acquire a corporate personality to undertake sophisticated business in the harsh economy. People utilised fraudulent devices to circumvent the difficulty of obtaining a proper charter from the crown.

  • Unscrupulous people enriched themselves by forming sham companies with gross misrepresentation of object and financial projections. This led to the exploitation of the gullible public.
  • Charters of defunct companies were acquired and utilised.
  • Companies undertook businesses outside that for which they were formed.

The parliament intervened with the Bubble Act 1720. This Act prohibited[9] people from saying that they are a corporate body except and until they have been granted a charter to carry out the particular business or purpose they purport to carry. However, this Act did not ameliorate the hardship/difficulty attendant in getting a charter.

Smart lawyers circumvented this inconvenience by executing a deed[10] which established a “corporate-like” relationship. The courts of equity permitted this practice and noted that the Act was not contravened. This is equity’s contribution to the advancement of company law

In 1825, the Bubble (Repeal) Act was enacted. It enabled the crown to grant charters of incorporation to trading companies without giving them limited liability.

In 1834, the Trading Companies Act was enacted enabling the Crown to grant privileges of incorporation without actually granting the Charter or conferring limited liability.

Next came Joint Stock Companies Act of 1844.

  • Regulated Joint Stock Companies and provided for registration[11] of all new companies which must have not less than 25 members.
  • The registration process was in two stages. You first file[12] the name, address, object and place of business… of the company. The second stage is to file the deed of settlement[13] signed by the at least ¼ of the holders.
  • This Act introduced the office of the registrar of companies.
  • There was no limited liability under this Act but each member’s liability was to cease three years after they had transferred their shares (i.e. left)

Next: The Companies Clauses Consolidation Act 1845 which sought to streamline the incorporation process. Standard forms and provisions were set out for promoters to adopt.

Next: The Limited Liability Act of 1855[14].

  • Enacted the Limited Liability Principle[15]. However directors could be liable if they declare and pay any dividend when they know that the company is insolvent or if the dividend (which they paid) causes the company to go insolvent.
  • It prescribed a minimum capital requirement of E250.
  • Provided that the Deed of Settlement had to be executed by at least 25 shareholders.
  • Banking and insurance companies were excluded from the application of this Act[16].

Next: The Joint Stock Companies Act 1856 which eased up the regulation of companies.

  • No minimum amount of shares required, no need for government approved auditors.
  • The Deed of Settlement was replaced with the Memorandum of Understanding and Articles of Association.
  • Reduced the minimum number of Subscribers to the memo from 25 to 7[17].
  • The register of members (which was only open to shareholders) was made available to the public under this Act.
  • Provided for limited liability under Section 60 and Section 61.

In 1857, the Punishment of Fraud Act was enacted to make directors criminally liable for false statements published with intent to deceive or make someone become a shareholder.

Next: Companies Act 1862 which:

  • Consolidated the various extant laws.
  • Recognized Limitation by Guarantee, Limitation by Share and Unlimited Liability.
  • Banking was brought under the operation of this act. This meant that there could now be Limited Liability in banking business.
  • Alteration of object clause was absolutely prohibited.
  • This Act introduced the ultra vires rule.

Then came the 1867 CA… no substantial or overwhelming improvement. Next, the Director’s Liability Act 1890 dealt with Liability of Directors. Then came the 1877 Companies Act. This was followed by the Companies Act of 1890.

Then came Companies Act 1900[18], Companies Act 1907, Companies Consolidation Act 1908[19], Companies Act 1917, Companies Act 1929[20], then Companies Act 1948. With similar provisions.

The Nigerian Perspective

The West discovered the Commercial potential in Nigeria. Charters were granted to certain companies like the Royal Niger Company (RNC), East Indian Company (EIC), United African Company(UAC) and South Sea Company.

From our colonial history, we would remember that Lagos was ceded to the West (British) in 1861. English law was then introduced to govern the territory. In 1876, the Supreme Court Ordnance was promulgated for Lagos. It provided that English Laws existing as at 1874 were applicable in the territory.

After the proclamation of Northern and Southern Nigeria in 1900, the limitation date was made 1st Jan, 1900. The English Companies Act was received.

The Company Ordnance was promulgated in 1912 to provide for incorporation of companies by registration. Then following the amalgamation of the Northern and Southern Protectorates in 1914, The Companies Ordinance 1914 was enacted to regulate the new territory. This Ordinance was followed by the 1917 Companies Ordnance, then the 1922 Companies Ordnance which repealed the former[21].

Nigeria was a unitary State until the Lyttleton Constitution of 1954 introduced a Federal System of Government.

On the 1st of October 1960, Nigeria gained her independence and the power of the British parliament to legislate for Nigeria ceased. The 1960 Constitution was enacted. This constitution divided Nigeria into regions (Northern, Western, Eastern and a Federal Capital Territory). Company matters were contained in the Exclusive Legislative List.

On the 1st of October 1963, Nigeria became a republic and was severed from the British Crown. The Queen’s functions were taken over by the President who became the Constitutional Head of State. This led to the enactment of the Republican Constitution of 1963. Part 1 Item 19 of the 1963 put the regulation of companies within the jurisdiction of the Central Government to the exclusion of the Regions.

After the Military took over power in January 15, 1966. Decree No.1 (Constitution (Suspension and Modification) Decree of 1966 was promulgated. Decree No. 34 of 1966 made Nigeria a Unitary State.  The 1968 Companies Act was promulgated by the Federal Military Government.

The Civilian took over and the 1979 (Presidential) Constitution was promulgated. It still retained incorporation and regulation of companies in within the exclusive (F.G) reserve.

A Law Reform Commission[22] was set up in 1987 to reform the 1968 Act. This ushered in the present Companies and Allied Matters Act 1990. Most notable for establishing the CAC[23], providing a regulatory regime for Unit Trust Schemes and recognising the role of the Securities and Exchange Commission.

Then came the 1999 Constitution which enthroned a Federal[24] Civilian Government[25]. The incorporation, regulation and winding up of companies is still retained in the exclusive legislative list[26]. Furthermore, Section 251(1E) of the 1999 Constitution vests jurisdiction in matters arising out of the Companies and Allied Matters Act on the FHC to the exclusion of the SHC except where a crime is in issue[27]. In Momodu V State, the court held that the exclusiveness of the FHC is only in relation to civil matters.

There were other developments (especially in the banking sector) which indirectly had an impact on the Company Regime[28].

The corporate regime in Nigeria appears to be in the hands of the Federal Government.

Professor Abugu recommends a division of power. He opines that where the activity is Intra-State, the Host State can have jurisdiction… where it is Inter-State, then it would be proper for the FG to handle. Certain advantages were listed in this regard:

  • The States would generate their own revenue which would be applied to development and provision of public facilities in the States.
  • States would encourage businesses to incorporate. This would lead to industrialization.
  • Employment for indigenes their indigenes.
  • Decentralization of commerce and decongestion of commercial areas (like Lagos and Abuja)
  • Easier and effective monitoring.
  • Development of local jurisprudence.

Although the arguments against this position include:

  • The standards may be compromised and arbitrarily set and the regulatory provisions and process for incorporation may vary greatly from State to State. As can be seen with the USA (Blue Sky Laws).




  • Legislations: Like CAMA, BOFIA, CBNAct, NICOMAct, and various Acts and Enabling Statutes.
  • Case Law: both foreign and municipal. Facilitated by staire decisis and judicial precedence.
  • Codes of governance and Listing Rules: Enacted by regulatory bodies like the Nigerian Stock Exchange, Securities and Exchange Commission pursuant to powers derived from their enabling statutes.
  • Books and Academic Writings.


[1] Writers Like Sir William Holdsworth.

[2] To secure the charter of the crown, the town’s men had to diligently perform their civic duties.

[3] They just had to identify with and obey the rules of the societas.

[4] In Edmund v Brown and Tillard, it was recognized that a JSC can own property, survive the lives of its members, sue and be sued, and members may not be liable for debts of the corporation.

[5] Chartered in 1555.

[6] Company of Merchants of Great Britain Trading to the South Sea formed by James Blunt in 1711.

[7] NB: the Co paid E7,500,000. The Company also bribed certain ministers which led to the enactment of the South Sea Act to protect and legitimate them.

[8] The People started investing in them with little or no knowledge of the enterprise or what they undertook (speculative investment).

[9] Specifically Section 18 which declared it illegal and prescribed penalties thereof.

[10] In which the property of the company was vested in the trustees and the members were entitled to the beneficial interest in the company from its shares and profits. This made them seem like companies even if they did not have a separate legal entity. At least people could invest in the undertaking and have “trustees” do the work and at the end of the day; get their profit. These deeds were as comprehensive as today’s memorandum and articles.

[11] This Act provided for incorporation by mere registration. Rather than hoping for a charter or Act of Parliament.

[12] Something similar to today’s Memo.

[13] Something similar to today’s Articles. This deed of settlement contained provisions on internal regulation.

[14] It was enacted following the recommendations of Mr Bellendun in 1837, The Mercantile Law Commission in 1852 and the Resolution of the House of Commons in 1854.

[15] Which provides that the liability of members shall be limited to their interest/share in the company. Their personal assets/properties cannot be touched/used to offset the company’s liability.

[16] The Liability of Banking and Insurance Companies was unlimited until 1862 and 1858 respectively.

[17] It however prohibited a co from carrying on business with less than 7 members for more than 6 months. Else, each shareholder shall be liable for all the debts of the company contracted during that period.

[18] No substantial difference… except that it mandated the Auditing of a company’s account.

[19] This Act introduced the concept of Private Companies.

[20] Was enacted to consolidate the existing laws. It introduced the concepts of redeemable preference shares and minority protection.

[21] Which later became the Companies Act

[22] Headed by his Lordship Hon Justice Dr Olakunle Orojo (Rtd)

[23] Which is the corporate law’s ombudsman.

[24] Section 2(2) provides that Nigeria shall be a federation consisting of states and a Federal Capital Territory.

[25] See Section 1, and 3 of the Constitution relating to its supremacy and prohibition of unlawful takeover.

[26] For FG only. Therefore, no State has the power to make laws regulating companies even those within its territory. This has led to agitations like those evident in the Niger-Delta.

[27] A similar provision can be found in Section 235 of the Investment Securities Act 1999 (Now 2007).

[28] In the Banking Sector: Enactment of CBN Ordinance in 1958, Enactment of the Banks and Other Financial Institutions Decree in 1991, the Nigerian Deposit Insurance Corporation Act 1998… In the Taxation Sector; Enactment of the Tax Ordinances and Acts, Petroleum Profit Tax Act 1959 (which affected companies engaged in upstream petroleum operations), Enactment of the Companies Income Tax Act 1961 (which imposes a certain percentage tax on the profits of companies). In short, Nigeria (just like Britain) is a country of enactments.


Quite eccentric really

Comment (2)
Dr. Ishie-Johnson Emmanuel

Quite impressive, an indept and thorough research work.


Thank you sir.


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