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29 Dec

COMPANY LAW 1.7 CAPACITY AND POWERS OF A COMPANY

CAPACITY AND POWERS OF A COMPANY.

On this, we shall be focusing on the Memorandum and Articles of Association. See Part II CAMA.

The memorandum is superior to the Article and the provisions in the Article cannot override the provisions of the memorandum-Guinness V Land Corporations of Ireland.

THE MEMORANDUM

This is the basic document of the company required (under Section 27) to be filed with certain stipulated details[1] and nothing more. Other matters would be regarded as matters of administration to be dealt with in the Articles.

The “memorandum shall be signed by each subscriber in the presence of at least one witness who shall attest the signature”-Section 27(5). It shall be stamped as a deed-Section 27(6).

The Memorandum and Articles (hereinafter referred to as “MEMART”) are public documents-Section 109 EA, NIDB Ltd V Fembo Nig Ltd. Any person can inspect and obtain copies of them after paying the prescribed fee-Section 551.

Schedule 1 of part II CAMA contains three specimen Forms labelled Table B, C and D for companies Limited by shares, companies limited by guarantee and unlimited liability company. These specimens can be adopted with necessary modifications to suit the individual company’s preferences and requirements-Bucknor-Maclean V Inlaks Ltd. Under Section 27(1), the Memo should contain the following.

  1. A Name Clause. The name is the first indication of its personification-Prof Abugu. The name shall end with[2]; Ltd (for Limited) Plc (Public Limited Company) Gte (Limited by Guarante) or Ultd (Unlimited)- Section 29(1a). Actions by and against the company must be instituted in the company’s full and correct name. By Section 30, the company would not be allowed to register an offensive, deceitful or immoral name nor can it register a name which is already being used by another company[3]Niger Chemist V Nigeria Chemist. Ewing V Buttercup Margarine Company Limited. Nor[4] can it register with names containing the words/phrases “chamber of commerce[5]”-(Chamber of Commerce V Registrar of Companies[6]).

A contravener should change the infringing name within 6 weeks or face the penalty.

By Section 30(2), the Consent of the CAC should be obtained before names containing the following words can be used; “Federal”, “National”, “Regional”, “State”, “Government” “Municipal” “Chartered” and other names which suggests government/municipal patronage or affiliation. Also names[7] like “Co-operative” “Building Society” “Group” “Holding”.

  1. Address Clause: which should state that the registered office of the company shall be situate in Nigeria. No particular address needed. Although after incorporation, the co is meant to send a Notice of Address of Registered Office Clause: A registered office is where certain documents[8] of the company are kept. Section 84, 85, 275 and 297 have some provisions in this regard. Under Section 407(1)CAMA, the Jurisdiction for winding up a company is placed on the Federal High Court in the area where the registered office is located. Where the registered office changes, a notice of such change should be given to the CAC within 14 days-547(1)
  2. Object Clause: Section 27(1c). This states the nature/type of business the company is registered to carry on[9]. … This is necessary because Section 38(1) provides that the powers of a company shall be used for the furtherance of its authorised business objects. This means that although the company is a legal entity, it may be incapacitated where it seeks to do acts outside its object. This incapacity is enforced by the Ultra vires rule.

The Statement of the Object informs investors and prospective contractual partners of what they are about to invest in-Attorney Gen V Great Eastern Railway Co[10]. It also  “protects creditors by ensuring that the company’s fund is not dissipated in unauthorised activities”-Ashbury Rly Carriage Co Ltd V Riche[11]. The object clause may be altered in accordance with Section 46 or Part XVI CAMA. This shall be discussed later.

  1. Restriction Clause: Section 27(1d). This clause is optional. If the company wishes to limit its powers. E.g. “this company shall not have an affiliation with Tobacco production”, “This memo cannot be altered” and so on.
  2. Status Clause: Section 27(1e). This clause states whether the company is private or public… whether it is limited by shares, guarantee or of unlimited liability. Technically, if you want to determine whether a company is public or private, you check the status clause in the memorandum.
  3. Liability Clause: Section 27(1f) the memo should state that the liability of the members is limited by shares, guarantee or unlimited. See Section 49. It stands to reason that this is unnecessary since there is already a status clause.
  4. Capital Clause: See Section 35(2(d)) mandates that a statement of the authorized capital of the company be filed at incorporation. #10,000 for private companies, #500,000 for public companies. Some specific institutions are required to have more under their various regulatory legislations like BOFIA (25 billion), Insurance Act, CBN Act (#100 billion), NDIC Act (#5 billion)… subsequent CAMA may require a higher amount.
  5. Subscription Clause: Contains the bio-data (names, addresses, description) of subscribers, identifies the number of shares taken by each, their signatures and signatures of witnesses[12]. Subscription is not the same with allotment. Subscribers can be regarded as the promoters who hold shares in the company. While shareholders are those that just hold share(s) in the company.

Other matters: Initially, some unrequired matters were also included in the Memo to ensure their superiority and permanence. Section 44 seeks to put an end to this. Therefore, unrequired matters should NOT be included in the memo-Section 44.

[1] Name, address, object, restriction clause, status, liability and capital clauses

[2] Although Adekeye JSC in Wahabi Adejobi and Anor v The State, held that failure to put Ltd at the end of the name is not fatal to the status of a company.

[3] In 7-Up v Bubble Up, the court held that the words 7up and Bubble up were similar. In IRC v Jena, the words “Dossex Gossamer” were similar to the plaintiff’s “Durex Gossamer”. In Alban Pharmacy v Sterling Products Casorina was held to be too similar to Castoria and was likely to deceive customers. Parker-knoll v Parker-Knoll International Ltd, both companies were manufacturers of Furniture one based in UK and the other America which just began trading in UK. An injunction was granted to stop further trading as the names were too similar to deceive. In Tussaud v Tussaud, the defendant who had left the plaintiff’s employment still retained the plaintiff’s name. An injunction was granted to prevent usage of the plaintiff’s name. Niger Chemist v Nigerian Chemist; the court held that the defendants would greatly confuse the public if they continue to trade in a name (Nigerian Chemist) so similar to that of the plaintiff (Niger Chemists Ltd).Except the registered company is about to be dissolved and it consents to the other company using its name/a name similar.

[4] See Section 30 for more details.

[5] Unless it is a co limited by guarantee

[6] (1952-55) 14 W.A.C.A 197 where the court affirmed this position.

[7] A name can be reserved (for a company about to be floated by the incorporators) for a duration of 60 days and renewed for another 60 days and no more-Section 32. While the name is reserved, registration of a similar name shall not be allowed.

[8] Like the register of members, directors, secretaries, charges, account records and so on.

[9] A company cannot be formed for illegal purposes-R v Registrar of Compnaies ex p H.M.S Attorney-General.

[10] [1880] 5 A.C 473.

[11] [1875] L.R 7 H.L 653.

[12] Each subscriber must subscribe for a minimum of one share each provided that a quarter of the entire share capital is subscribed.

Isochukwu

Quite eccentric really

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