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29 Dec

COMPANY LAW 1.5 CONSEQUENCES OF INCORPORATION

CONSEQUENCES OF INCORPORATION.

It confers corporate personality-Section 37 CAMA “shall be a body corporate… power to hold land, having perpetual succession and common seal…” The company can sue and be suedNjoku V UAC Foods: Baroda V Iyalabani Ltd: Vulcan V Gessellschaft: Igwe V Kalu and a host of other cases[1]

This “corporate personality” gives the company a legal personality which is separate and different from that of its members-Salomon V Salomon and Co Ltd. In Salomon’s case, Lord Macnaghten reasoned that the company is “different from the subscribers”. Same stand was maintained in Lee V Lee’s Air Farming Ltd. In Dunlop Nigerian Industries Ltd V Forward Nigeria Enterprises, the court upheld the corporate personality principle notwithstanding that the second defendant and his wife held about 90 percent of the company’s shares. Equally in Macura V Northern Assurance Company, notwithstanding that the defendant was the majority shareholder. See also Marina Nominees Ltd V FBIR.

This principle has been expanded to holdings[2]. As in Adams V Cape Industries, the court held that a holding company and its subsidiaries are distinct and separate legal personalities. Same principle reiterated in Williams Cory and Sons Ltd V Dorman Long and Co Ltd and the case of Kanu Sons and Co Ltd V FRN.

From this “corporate personality”, four principles have been established. They include:

  1. The Extent of the Company’s Legal Capacity: The company can exercise its legal capacity only “to the extent provided by the memorandum for the furtherance of the company’s authorised business or objects”-Section 38(1). Therefore it can only do things that are necessary to enable it carry out its objects. Where it goes outside its objects, the ultra vires rule kicks in[3] to invalidate such acts. The company is also limited by various Statutory, common law and equitable stipulations.
  2. Nature of the Company’s Legal Capacity: It is an association of persons but the company is separate from these persons-Salomon V Salomon and Co Ltd, Pan Asian African Co Ltd V Nicon[4]. Lee V Lee’s Air Farming Ltd, Butt V Kelson. With separate personality at law.[5]
  3. The Procedural Capacity of the Company: Who institutes suits for the company? In Foss V Harbottle the court held that it is the company and not the members that should handle the company’s suits. Also, in Mozley V Alston the court held that the proper plaintiff is the company itself. Section 299 CAMA. Though the company would have to engage a legal practitioner-Mode Nig Ltd V UBA Plc. If the legal capacity of the company is challenged, it would have to prove that it is incorporated-Governor of Mid West State V Mid Motors ltd. Where it fails to prove that it is incorporated (maybe by showing certificate), then it cannot sue or be sued as a separate personality-Nduka V Ezenwaku.
  4. The Life of the Company: The Co generally has perpetual succession and lives beyond the life of its members. The company comes to life on the date of incorporation and dies when it has been finally wound up and dissolved in accordance with the law-Section 38(1). Ahmadu Amwa and son V Anthony Ehidiamehen.

[1] The company must however sue and be sued in its correct name-Agbonmagbe Bank Ltd v General Manager, GB Olliavant Ltd

[2] Where one company sets up subsidiaries. E.g. Union Enterprises sets up Union Bank, Union Homes, Union Pension, Union Insure, Union Events and so on. These subsidiaries set up by Union Enterprises are different from it.

[3] This shall be discussed later in this work.

[4] Where the court noted that the company can occupy residential premises in its own right.

[5] In Fact, the court in Onyekwuluje v Benue State Givernment, held that Chapter IV of the 1999 Constitution is exercisable by a company.

Isochukwu

Quite eccentric really

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