22 Jan




Company securities consist mainly of shares, stock[1], bonds and debentures which are transferable choses in action-Okoya v Santili


The general rule is one share one vote but such can be varied provided in accordance with the Act S 116[2].

The types of shares include:

Preferential Shares; entitle the holder to a fixed dividend no matter how well or sadly the company has done. Preferential shareholders have priority over other shareholders. Unpaid dividends will roll over/accumulate to the next/subsequent year(s) until dividends are paid as preference shares are considered cumulative.

Ordinary/Equity: and their holders are known as the risk-bearers because they get no dividend when the company has made no profit but get exponential profit if the company has had a very good year.

Deferred/founders share:


Subscription: Signing to the memorandum of association and taking at least one share and having name put in the register of members.

Issue of Shares: by the company in accordance with the articles. The shares may be issued at a premium (price higher than its nominal value) provided such sums received on such issue are transferred to the share premium account to be applied for only the purpose listed in s 120(3). Section 120. The shares may be issued at a discount-121.

Allotment of Shares (124 and 125): by the company after -an applicant has applied for a particular number of shares in writing and signed and -company through its BOD or Allotment Committee considers such applications; –within 42 days notifies applicant of regret/allotment of the said shares to him, -prepares share certificate (which should be ready for delivery within 2 months from allotment) and enter allotee’s name in the register of members. Okoya v Santili.

Company then files Return of Allotments (Form CAC 2.A) within one month of allotment-S 129.

Note that if shares were issued for a consideration other than cash, the consideration should be valued by an independent valuer and CAC 2.5 should be filed which shows the agreement and particulars of valuation, application may also be made under the Industrial Inspectoral Act where consideration is more than 500k.

The directors may call on the allotee to pay full price of shares-S 133. Company can have lien on share not full paid and may sell to another where allotee refuses to honour calls (and he is notified in the calls that he would forfeit). S 140.

Transfer of Shares (151-157): by a holder of the shares to another. Effected by delivery of a proper instrument of transfer (duly executed by the transferor and transferee) alongside the share certificate to the company which registers the transferee in the register of members– Starcola (Nig) Ltd v Adeniji.

Where more than one transferee or a part of the share is given, then “certificate lodged” is endorsed on the instrument. This right may be restricted by articles especially for private companies See Section 22. Okoya v Santili on all on shares.

Transmission of Shares: the shares of a shareholder who dies can be vested in his PR (upon production of probate of will or letters of administration) or on his survivor (in the case of joint ownership of shares. Section 155 Tika Tore Press Ltd v Abina.

The PR would elect (within 90 days) whether to have his name or another person’s name (usually beneficiary) entered in the register of members. Failing which (after due notice) all benefits and dividends on the shares would be suspended until he elects-155 CAMA.

Note PR can collect dividend and sell the shares even when he is not a registered member of the company?

The interest of a beneficiary is equitable until he is registered as a member.

A person claiming interest in the shares can serve upon the company a notice and affidavit of interest and can also petition the FHC for an order of mandamus compelling the company to enter his name in the register.

Share Certificate is evidence of ownership and issued within 2 or 3 months from transfer or transmission respectively.

A person may mortgage his shares legally or equitably. Shares may be attached to satisfy judgment debt of the holder in public company under SCPA.

Classes of Shares (PIA): authorized share is that with which a company is incorporated and its share capital at any given time; issued share (at least 25% of authorized share) is that given to the public[3]; and paid up share (at least 25% of issued share) the part of issued shares that have been paid for fully[4].

:: DEBENTURE: is an instruments/certificate acknowledging indebtedness by a company to the holder[5].

It may be by deed-UBN Ltd v Tropic Foods Ltd. Where the loan is to a large number of people (e.g. issued to the public), it should be done by issue of debenture stock under a trust deed entered into between the company and trustee of the debenture holders. 183.

Issue of debenture should be in accordance with the MEMOART and where issued to the public, it should be accompanied with a prospectus-S 44 ISA.


Perpetual debentures: 171 redeemable only on the happening of a contingency or the expiration of a period however remote or long;

Convertible debentures can be converted into shares of par value instead of redeemed.

Secured debentures: Secured by Charged (fixed or floating).

Naked/ unsecured debentures: not secured by charge.

Bearer debenture repayable only to the bearer of the debenture. It is a negotiable instrument and transferable by mere delivery.

– Registrable debenture repayable only to whoever appears on the debenture certificate and in the register of debenture holders[6].

Redeemeable Debentures: Section 174


Debenture may be secured by fixed or floating charge.

A fixed charge is a mortgage by deed on a specific asset of the company such as a plot of land. The company cannot dispose of such an asset or create other charges ranking higher than the present debenture-holder’s charge in respect of it. On the downside, the debenture—holder cannot proceed against other assets of the company. Siebe Gorman and Co Ltd v Barclays Bank Ltd[7]

A floating charge on the other hand is an equitable charge over the present and future assets and undertaking of the company. It crystalises on the due date or upon liquidation and a receiver can be appointed to possess the assets.

PROCEDURE ON CREATION OF CHARGES: -A board resolution is passed authorizing the loan; – The requisite loan documents (e.g. Deed of mortgage or POA or Debenture Trust deed) are prepared and perfected (e.g. executed, stamped, governor’s consent, registered at lands registry- etc. where necessary); Next;- registration of Charge: within 90 days from creation of charge CAC 3 (Particulars of Charge) and requisite documents are Filed with CAC and Certificate of Registration of Charge is gotten;

Copies of loan Document are to be available for inspection at registered office of the company; – A copy of the Charge is endorsed on every debenture certificate.

Upon satisfaction of the charge, a memorandum of satisfaction of charge Form CAC 6.2  along with deed of release or other instrument would be filed in CAC

– If the loan/charge cannot be repaid (i.e. satisfied) Security can be enforced by appointment of a receiver. CAC is to be notified of appointment of receiver or manager within 7 days.

EFFECT OF NOT REGISTERING CHARGE: renders the charge void against the liquidator and all creditors of the company, but the company becomes obliged to settle the debt immediately Stokes v Capital Finance, Section 197 CAMA.

The company or any person interested can apply to the Federal High Court by originating motion to extend time for registration and rectify any omission in the register of charges.


See Section 209 CAMA, Nashtex Case, Taiwo v Adegboro.

  1. He may sue to recover principal and interest[9].
  2. He may petition for winding up on the ground that the company is unable to pay up its debts See Section 408(d).
  3. May appoint a receiver or manager[10] (where empowered by the debenture deed or FHC) to enforce/realize the security. Nashtex Int’l Ltd v Habib (Nig) Bank Ltd;
  4. May sell the property if authorised by debenture instrument or FHC. Provided the power of sale has arisen and become exercisable. Sale should not be at gross undervalue-Taiwo v Adegboro.

Where sale is done pursuant to order of the FHC, the money is usually paid into court first.

  1. All the Debenture holders of every class may apply to court for foreclosure of the Company’s Right to Redeem the mortgaged/charged property. 209 CAMA. Court may order sale instead of foreclosure.
  2. He may value his security and if it is insufficient, he may prove for the balance like any unsecured creditor.


Register of charges, Record of Instruments, Register of Debenture holders, See Section 190, 191, 193 and 209.


[1] Shares v Stocks: shares are a member’s interest in the company’s capital. Stocks are groups of shares forming the company’s capital.

[2] For example; Section 143 entitles preference shareholders to more than one vote.

[3] Share is issued at a premium when issued above the nominal value, at a discount (subject to resolution) when below the nominal value, and per value when at the nominal value. The total of shares issued at a premium must be transferred to the ‘share premium account’ Section 120 CAMA.

[4] Call on shares (made by directors) is the demand to pay outstanding sums on allotted shares.

[5] Section 168 mandates certain statements like principal amount borrowed, maximum discount, maximum premium, rate of and payment of principal and interest, (for convertible debentures) date and terms of conversion, other modulations thereto. Statements in debentures are binding on the company and prima facie evidence of title, estoppel on the company and liability where relied upon.

[6] Debentures issued to the public must be issued with a prospectus. Debentures are issued within 60 days.

[7] (1979) 2 Lloyds Rep. 142.

[8] Where there are many debenture holders, a representative debenture holders’ action may be brought-209 (a).


[9] When successful, he may levy execution on the property of the company. FIFA on the company’s property

[10] CAC be notified within 7 days



Quite eccentric really

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