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22 Jan

CORPORATE LAW PRACTICES WEEK 4 (CHOICE OF BUSINESS AND NON-BUSINESS ORGANIZATIONS 1)

WEEK FOUR.

TOPIC: CHOICE OF BUSINESS ORGANIZATION AND FORMATION (1)- COMPANIES.

Under CAMA, Organizations are broadly classified into business[1] and non-business[2]. CAC registers such except statutory corporations and cooperative societies.

:: STATE THE TYPES OF COMPANIES THAT CAN BE REGISTERED. The types are largely 6.

A company may be a PRIVATE or PUBLIC company in which the liability of members are; 1. Limited by Shares. OR 2. Limited to the amount in which each member guarantees/undertakes to contribute in the event of the company’s winding up. OR 3. Unlimited. Confirm if ultd can be divided into public and private too. If not, then we have private and public limited liability, ultd, and gte.

The type of the company is determined by the MEMO.

A Private Co should have authorised share capital of 10,000, restrict transfer of shares (excluding authorized private banking business) and membership should generally be within 2-50.

:: ADVISE ON SUITABILITY OF EACH. In doing so wo appraise the object, size of members and company, sphere of operation, transferability of shares (Section 22 CAMA), formalities, capital, whether the company would be issuing shares to the public (then better go for public co), and cost of registration.

:: PREPARE A CHECKLIST OF DOCUMENTS REQUIRED FOR REGISTRATION OF COMPANIES. They include:

First, have the requisite CAC form(s). 1. FORM CAC 1 – Availability check and reservation of name. 2. FORM CAC 1.1[3]

  1. The Memorandum of Association (MEMO): Tables B, C, and D of Schedule 1 to the Act could be adopted with necessary and permitted modifications. It should contain the following clauses indicating (Section 27 CAMA) –the Name (which must end with Plc, Ltd, Gte, Ultd, depending), – Registered Office, – Object (precisely stated[4]), – Restrictions if any, – Status (public or private), liability (limited, unlimited, etc.). NRSL.

For Limited Liability Company: add; Capital (10k and 500k for private and public co respectively), Subscription (which should be to at least 25% of the authorised capital).

For GTE: add; undertaking by members to contribute to the tune of their guarantee (which should not be less than #10,000) upon winding up and a special clause that income would be applied to promotion of its objects and not paid to members except as permitted by the act. GTE is suitable for public spirited and CSR undertakings.

  1. The Articles of Association: subject to the Memo-Edokpolor and Co ltd v Sem Edo Wire Industries Ltd[5]. Can be adopted as in Parts I, II, III and IV of Table A Schedule 1 with necessary and permitted modifications-Section 34. The Article … and be divided into paragraphs and numbered consecutively. May contain: interpretation, stipulations on borrowing, meetings of shareholders and directors (quorum, voting, notice, proxy, resolutions…) secretary, shares (like class right, variation, transfer restrictions, transmission, increase, reduction) appointment (duties, remuneration, removal, tenure and vacation of directors and auditors) common and official seal, dividend, financial statements and accounts, winding up, etc.

The MEMO and Articles should be signed by each subscriber in the presence of at least one witness and must be stamped as a deed-Section 27 and 34(4) respectively. Therefore making it binding on the members-Yalaju Amaye v AREC Ltd [1990] 4 NWLR (Pt. 145) 422.

  1. other documents required by the Commission like a copy of the information page of the International Passport or National I.D Card of each director and subscriber, evidence of proficiency, permit or license to operate, letter of consent from the AG where required etc.

:: TAKE INSTRUCTIONS FROM CLIENT AND APPLY THE INSTRUCTION TO PREPARE DOCUMENTS REQUIRED FOR REGISTRATION OF COMPANIES AT CAC.

Note that formation of a company would involve:

Taking instructions from promoters:  The proposed name (and alternative name) and type of company (Ltd, Ultd, Gte, Public or private), – The objects, sector and sphere of operation, proposed address, capital, details of subscribers and first directors (like their capacity, (age, mental, financial, fraudulent) address passport, TCC, professional certificates), (foreigners/expartriates may need some regulatory permits), tax reliefs to be claimed, fees, other matters). If professional, certificate of professional services

Conduct Search in Registry and Reserve name (for 60 days).

– Then prepare the statutory registration and incorporation documents discussed earlier.

– Next Stamp the necessary documents. (2 copies of MEMO, 2 Copies of Article and 2 Copies of the Statement of Authorized Share Capital[6]). Consent of the AG should be obtained for Gte.

– Next you are to file the incorporation documents (together with proficiency/qualifying certificate, means of identification, receipts for payment of stamp duties and other documents) at CAC registry wherein it would be registered by CAC if fees have been paid and the substantive and procedural laws have been complied with (as regards capacity of parties concerned (18+[7], sound mind, not bankrupt or in liquidation or fraudulent, illegal object, conflicting name and so on.

Where CAC refuses to register[8], an aggrieved applicant can ask CAC to apply to the FHC within 21 days for directionsSection 36(2) CAMA. If after 21 days no positive response from CAC, aggrieved can apply to FHC for determination of the complaint. Court orders CAC to register.

This order is annexed to the incorporation documents and CAC is bound to register. Get the procedure-CAC V Ayedun.

– Next you obtain certificate of incorporation from CAC. This certificate is prima facie evidence of registration and compliance with the act.

Registration makes members a body corporate with powers and functions of an incorporated company (perpetual succession, common seal, etc. excluding power to hold land?).

:: Restriction on Choice of Name: Section 30 and 579 CAMA:

The following names cannot be registered (Prohibited) Conflicting names; names that are already in use, misleading, identical, offensive, contrary to public policy, a trademark lacking the owner’s consent and any name showing ‘Chamber of Commerce’;

The following names cannot be registered without the consent of the CAC (Restricted): National, Federal, Regional, Government[9], Chartered, Municipal, Co-operative, Group[10]/Holding[11], Consortium[12] Guarantee, Investment, Insurance are outside the scope of registration.

  • Compulsory Change of Company Name (Section 31 CAMA): – An identical name be changed upon an application by first registerer to CAC within 6 months of second registration. CAC will direct the second company to change its name within 6 weeks of the application or pay N25 every day—same thing for trademarks.

Regulation 10 Compaies Regulation 2012 also provides for power of CAC to cancel name which approval was obtained by fraud.

:: IDENTIFY THE PROFESSIONAL RESPONSIBILITIES AND ETHICAL ISSUES INVOLVED IN THE FORMATION OF A COMPANY.

 

[1] The three business organizations are sole proprietorships, partnerships, and incorporated companies.

[2] The two non-business organizations are incorporated trustees and companies limited by guarantee.

[3] It appears the rest; i.e. FORM CAC 2-10 below are no longer necessary (for only incorporation). The forms shall be discussed at the end.

[4] Could have the main object, Ancillary object, omnibus clause.

[5] [1984] NSCC 553

[6] Although it appears that this one is no longer a part of the pre-incorporation document.

[7] Unless there are two other adults. A corporate personality may join in formation of a company.

[8] Maybe MEMOART does not comply with CAMA, Object is illegal, disqualified members (e.g. minor or company under liquidation), prohibited/restricted names, non-compliance with other requirements of law

[9] and any other name that suggests government patronage

[10] For consent, they need evidence of existence of at least three sister companies associating to form the group.

[11] Applicant should provide evidence of at least two companies which are to become subsidiaries of the holding company-338 CAMA.

[12] Reg 22 Companies Regulation requires evidence of at least three companies forming the consortium with resolution consenting to the consortium.

Isochukwu

Quite eccentric really

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