Incorporation of Companies and Registration of Corporate Organizations in Nigeria
“Procedures of economic participation in Nigeria by Chinese Nationals”, Doing business in Nigeria: Pocket Guide for Foreigners, 2023, Issue 2. The Doing business in Nigeria: Pocket Guide for Foreigners is an e-newsletter run by the Law Firm of CJP OGUGBARA & Co. (SUI GENERIS AVOCATS) and Beijing Yu Du Consulting.
Most businesses and enterprises are pioneered and propelled by natural human beings. However, for the purpose of common interest and expansion, businesses can also be advanced through artificial entities; companies or corporate bodies. Just like global best practices, Nigeria as a sovereign nation has its own domestic needs and requirements for the integration of such entities. These regulatory requirements and the attendant procedures of registration, especially as they relate to non-Nigerians are what this exercise has undertaken to explore. Efforts would also be made to give adequate information with regards to sustenance and the sustainability of these entities. It is fragmented into four headings for ease of understanding so as to assist every player.
Companies and Corporate Organizations are entities that galvanizes the collective interest of an association of individuals both natural and artificial with an identifiable goal of either profit making or the promotion of some other inherent interests. While there is no identified difference between company and corporations, the Blacks’ Law Dictionary, 9th Edition has defined a company as a corporation or association, partnership or union that carries on a commercial or industrial enterprise. In Nigeria, a company is registered and regulated under the Companies and Allied Matters Act (CAMA) and the regulatory institution is the Corporate Affairs Commission (CAC). It is important to state that there are also entities which enjoy legal personality status that are not incorporated under the CAMA but established by various Statutes enacted by the Legislative arm of any of the Local, State and Federal Governments in Nigeria. The statement of law providing for such bodies in any of such statutes has conferred the status of legal personality on it. The Companies and Allied Matters Act under Section 852 (1), stipulates the categories of acceptable and registrable business enterprises in Nigeria as follows: Companies, Limited Liability Partnerships, Limited Partnerships, Business Names or Incorporated Trustees.
Categorizations of Corporate Entities in Nigeria:
The first is a Limited Liability Company which are all provided for under Part A and Part B of the CAMA. According to the Act, they are such class of companies having the liability of its members limited by the memorandum of association to the amount, if any, unpaid on the shares respectively held by them. This means that those who subscribed to be members of the company can only be liable to a third party, creditor or even an undertaker, only to the very amount which is equivalent to the shares they have in the company. Thus, a third party is expected to conduct due diligence to know the extent of the exposure in terms of equity liability. This class of companies are abbreviated as ‘Ltd’.
The second category is the Company Limited by Guarantee. According to the Act, having the liability of its members limited by the memorandum of association to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up. It should be noted that the company limited by guarantee usually is not a profit-making enterprise. They are usually set up to promote sociocultural and educational activities as well as Research and Development. Owing to this reason, any profit made by such companies is reinvested for its activities and payment of salaries for its employees. In Nigeria, due to the object purpose, there is usually the need for the consent of the Attorney General of the Federation. It is abbreviated as Ltd/Gte.
The third classification of companies under the Nigerian CAMA is according to Unlimited Liabilities. Under this category, there is no limit to the liabilities to which the members of the company can be exposed. Thus, irrespective of the share capital, once the companies run into liabilities, the shareholders are collectively accountable to the extent of the exposure irrespective of their equity contribution. This classification is further subclassified into Private and Public Companies. Simply put, the Private Company is not allowed to offer its shares or debenture to the public without authorization. Whereas the Public company is quoted publicly and its shares are offered to the public for subscription.
The Act in Part C provides for the registration of a Limited Liability Partnership to the effect that it is a body corporate formed and incorporated with the CAC to stand independent of the partners. Whereas Part D, stipulates for a Limited Partnership. One important distinguishing factor of Limited Partnership from Limited Liability Partnership is the fact that the latter is independent of the Partner whereas the former is attached to the Partners. Also in the former, an individual can constitute a duly registered Limited Partnership whereas in the latter, it is an association or more than one person.
The Act also recognizes Foreign Limited Liability Partnership registered elsewhere outside Nigeria. However, under Section 788 of the Act, it is compulsory for such foreign limited liability partnership to be registered in Nigeria.
Apart from Companies and Partnerships, Part E, sections 11 – 13 of the CAMA, provides that Business Names can be registered through the various business registries operated by the CAC in each State of the Nigerian Federation. This business enterprise covers firms, individuals or corporations.
Some other means by which an enterprise can be pursued in Nigeria as provided under the CAMA are: Incorporated Trustees/Registered Trustees, Business Name and Partnership. Part F, section 823 of CAMA requires that an association or community of people with a common interest, religion, nationality, kinship or customs can be registered as a corporate entity through trustees nominated or appointed by the said body of persons. Under the Act, it appears that the said registrable association must be limited to any religious, educational, literary, scientific, social, development, cultural, sporting or charitable purpose.
Formation of Companies and Corporations:
Section 18(1) of the Companies and Allied Matters Act, 2020 provides that any two or more persons may form and incorporate a company by complying with the requirements of the Law as regards to registration of the company. It went further to state that one person may form and incorporate a private company by complying with the requirements of the Law. It need to be stated that an association does not have to be registered as a company simply because it is composed of persons of common interest or carryout corporate and commercial activities. However, section 19 of the Act makes it imperative for such association of persons exceeding 20 to be registered as a company or such an association to be established under a statute enacted by a legislative arm in Nigeria. This provision must not be construed or interpreted to imply the minimum or maximum threshold required for the incorporation of companies in Nigeria. Rather the provision seeks to outlaw the incidents of unincorporated entities. Meanwhile in any case, under section 22(3) of the Act, the Law provides that the membership of a private company must not exceed Fifty (50).
In the case of a Limited Liability Partnership, Section 748(1) of the Act stipulates that the same must have at least two Partners and where there is just one partner, that surviving partner is bound by law to be liable for all liabilities arising from the activities of the partnership. Whereas in the case of Limited Partnerships, the maximum number required is 20 persons with a minimum of one person. Furthermore, a Business Name can be duly registered as an individual, firm or even corporation. Finally, the Incorporated Trustees, have a minimum of two trustees.
Capacities to Form a Corporate Entity in Nigeria:
As stated above, the categories of registrable business enterprises are: companies, limited liability partnerships, limited partnerships, business names or incorporated trustees. In all the enterprises, the common capacities required for the Directors, Trustees, Partners and Proprietors to be registered under the Law are clearly stated in the CAMA Act. The first is that such a person is not of unsound mind and has been so found by a court in Nigeria. The second is that such person is not an undischarged bankrupt. The person must also not be less than 18 years of age. The final point is that the person must not have been convicted for dishonesty or fraud.
There is nothing that completely extinguishes the possibility of having businesses through an unregistered organization. In CARLEN vs. UNIVERSITY OF JOS (1994) 1 NWLR (Pt 323) 631 the highest Court in Nigeria has held that: “But it is not only a corporation (aggregate or sole) apart from natural person that has the attribute to sue and be sued. There are bodies generally regarded as quasi or near corporation on whom statutes expressly or impliedly confer a right to sue or be sued though unincorporated. They are not legal personae strictu sensu but have a right to sue or be sued by a particular name.” Also, in ANYAEGBUNAM vs. PASTOR OKUDILI OSAKA (2000) 5 NWLR (Pt 657) Pg 386 the same Court enunciated further that: “it seems clear to me that the above provisions shows that an unincorporated body or association of persons is a factual reality. The association though unregistered must appoint Trustees or a Trustee who will apply for registration. Thus the law takes into cognisance the fact that before the Application is made i.e. while the association is not registered in law, certain persons may be appointed Trustees who may act in that capacity” At page 657 the Supreme Court went further to say that: “an unincorporated association does not legally exist and must of necessity act through its appointed representatives.” However, it can safely be said that it is better to have a business enterprise registered, before using the same to prospect businesses.
The Law Firm of CJP OGUGBARA & Co. (SUI GENERIS AVOCATS) was established in December, 2014 as a Partnership Law Firm. The Firm has its Head Office at No. 16B, Lalubu Road, Oke-Ilewo, Abeokuta, Ogun State bordering Lagos State to the South. The Law firm is technology driven with global presence. The essence is to ensure adequate presence in consolidating the interests, instructions and briefs of its well cherished clients.
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