UDOFA, KINGSLEY DAVID

UJ/2005/LW/0096
COMPANY LAW
CONTINUOUS ASSESSMENT

QUESTIONS

1. State the steps leading to formation of a company with relevant provision

of the law and judicial authorities
2. State the differences between limited liability and public liability company
with relevant provision of the law and judicial authorities.

JANUARY 2011
 Table of content

A: FORMATION OF COMPANY
1. Introduction
a. What is a company - - - - - - - -3
b. Types of company - - - - - - - - -4
2. Formation of company
a. Preliminary issues - - - - - - - -4
i. Right to form company - - - - - - -4
ii. Capacity to form company - - - - - -5
iii. Types of company to be incorporated - - - -5
b. Procedure of incorporation - - - - - - -5
i. Particulars of proposed company - - - - -6
ii. Preparation of incorporation documents - - - -6
1. Memorandum and articles of association - - -7
2. Notice of address and registered office - - -9
3. Statement of authorized share capital - - -9
4. Particulars of directors - - - - -10
5. Other necessary documents - - - - -10
iii. Filing of incorporation documents - - - - -11
iv. Registration and incorporation - - - - -11
1. Certificate of incorporation - - - - -12
2. Corporate personality - - - - - -12
3. Effects of incorporation - - - - -13
4. Foreign companies - - - - - - -13
v. Conclusion - - - - - - - - -13

B: LIABILITY OF COMPANY
1. Introduction - - - - - - - - - -13
2. Limited liability - - - - - - - - -14
a. Limited by shares - - - - - - - -14
b. Limited by guarantee - - - - - - -14
3. PLC & LTD distinguished - - - - - - - -15
4. Conclusion - - - - - - - - - -17

2
 A: FORMATION OF A COMPANY
The corporate/commercial sector of any economy is always so vital to the growth of
such economy. It is for this reason that the potential role to be played by companies
becomes imperative. In discussing the several methods and steps before a company can
be set up, we must first and foremost attempt a description of a company and the
implications of such definition or description.
The concept of ‘company’ can easily be termed as an ‘association with business
concerns.’ Prof L.C.B. Gower1 while conceding that the word company has no strictly
legal meaning nonetheless conceived same as an association of a number of people for
some common object i.e. for profit or gain. The important aspects of this definition are
its recognition of company being;
1. an association of people
2. For some common objects, and
3. For profit or economic purposes

This definition implies that all companies must be for the absolute objective of
making profit. However, a company could also be for charitable purpose without any
profit motive. This indeed captures the inadequacies involved with the art of definition
especially of legal concepts.
However, just like other legal concepts, the definition of company in law always
seems to elude permanence and complete acceptability. In law, a reference to company
is a reference to company as defined by statutory law. The Companies and Allied
Matters Act (CAMA)2 is the current statute that regulates the operation of companies
and business concerns in Nigeria. In accordance with the Companies and Allied Matters
Act, a company may be best described as being;
1. A legal framework whereby at least two persons agree to float a business
concern3
2. With some specified objective be it profit or charitable4

1
A renowned English author on company law
2
LAWS OF THE FEDERATION 2004, CAP C20
3
Section 18 CAMA: “as from the commencement of this Act, any two or more persons may form and incorporate
a company by complying with the requirements of this Act in respect of registration of such company.

3
 3. But having complied with provisions of through procumbent of the certificate
of incorporation which gives companies its legal personality.

Basically, there are three varieties of company i.e. a registered company, a chartered
company as well as a statutory company. However, a reference to company law is a
reference to a registered company sometimes referred to as an incorporated company.
A chartered company is one which was granted Royal charter by the crown before
registration of companies was allowed. The word company was first used as a legal term
in connection with the great companies chartered by European nations in the 17th and
18th centuries. These companies grew out of the voyages of discovery and the desire of
these nations for monopolies over the newly opened trade routes. The companies were
given royal charters authorizing them to acquire and administer territory as well as to
direct trade.5 When a company is duly registered and incorporated under the model
companies’ legislation, then such company is regarded as a registered company. On the
other hand, statutory companies are formed under any particular Act of parliament.
Under company law, a reference to the concept of company covers all three types as
described above.

FORMATION OF THE COMPANY

Before any company is registered and is indeed made a distinct legal person with all
the incidental powers and duties, certain questions need to be answered. These questions
would be those to provide answers as to who has a right to form a company, capacity to
form a company, and the type of company that can be incorporated.
i. Right to form a company
Section 18 of the Company and Allied Matters Act provides that “as from the
commencement of this Act, any two or more persons may form and incorporate a
company by complying with the requirements of this Act in respect of registration of
such company. The implication of this is to the effect that any person has the right to
commence the process of formation of a company. Being a right also means that no one
except a court of law can deny this right to form a company.
On the other hand, section 19(1) provides that no company, association or
partnership consisting of more than 20 persons shall be formed for the purpose of
carrying on any business for profit or gain, unless it is registered as a company under the
Act, or is formed in pursuance of some other enactments in Nigeria. However, there are

4
Section 27(1) c: Before any company is incorporated, the nature of business must be specified in its
Memorandum of Association.
5
‘Chartered Companies,’ Microsoft Encarta 2009 [DVD]. Redmond, WA: Microsoft Corporation, 2008 .

4
some exceptions6, for instance corporative societies registered under the provisions of
law, and partnerships for the purpose of carrying on practice as legal practitioners or as
accountants by duly qualified persons.7
ii. Capacity to form a company
According to section 18, any person has the right to incorporate a company.
However, only persons not otherwise disqualified under the Act may join in forming a
company. Section 20(1) therefore provides instances where any person would be
disqualified. It provides thus:
a. He is less than 18 years of age
b. He is of unsound mind and has been so found by a court in Nigeria or
elsewhere
c. He is an undercharged bankrupt; or
d. He is disqualified under section 2548 from being a director of a company.
The only exception is provided in section 20(2) which provides that “a person shall
not be disqualified under the paragraph (a) if two other persons not disqualified under
the subsection have subscribed to the memorandum.9

iii. The types of company

Companies that can be registered under the Act may be broadly classified into two 10
main categories i.e. either private company11 or public company12. The company may
be:
a. Private company limited by shares
b. Private company limited by guarantee
c. Unlimited private company
d. Public company limited by shares
e. Public company limited by guarantee or
f. An unlimited public company

PROCEDURE FOR FORMATION OF A COMPANY

There are several steps which any person seeking to incorporate a company in
Nigeria would have to comply with. These are as follows:-

6
Section 19(2) Companies and Allied Matters Act
7
Orojo, Olakunle, COMPANY LAW AND PRACTICE IN NIGERIA, 1992, LAGOS, Mbeyi & Associates (Nig) pg.29
8
Provides for the restraint of fraudulent persons
9
constitution and charter of a company
10
Section 22(2) CAMA
11
company which is stated in its memorandum to be a private company
12
A company other than a private company, such a company is required to state in its memorandum that it is a
public company.

5
 a. Ascertaining the particulars of the proposed company/ enquiry into the
availability of proposed name
b. The preparation of the incorporation documents
c. The filing of incorporation documents
d. The registration of the company.

Particulars of Proposed Company

Any person who intends to incorporate a company under the Companies and
Allied Matters Act would have to determine the particulars of such company. This is
because particulars such as the type of company to be brought into existence, its
structure, its objective etc have a huge implication and determines a large chuck of
how the company is going to be classed.
Such particulars are absolutely necessary to furnish both the Memorandum of
Association and the Articles of Association with the required content as required by
the Company and Allied Matters Act.13 These particulars would include:-
1. The name of the company
2. The objects of the company
3. The capital
4. The registered office address
5. Limitation of liability
6. The subscribers to the memorandum
7. Issues around borrowing and credit
8. Meetings
9. Directors
10. Secretary
11. Accounts and audits
12. Dividends and others.

Preparation of Incorporation Documents

There are several documents that must be prepared for the purpose of
incorporation. Section 35(2) provides for the following incorporation documents:-
1. The memorandum and articles of association
2. The notice of the address of the registered office
3. Statement of the authorized share capital
4. List, particulars and consent of the first directors
5. Any other necessary document.

13
Sections 27-34 of the CAMA

6
  The Memorandum and the Articles of Association
The memorandum is the fundamental document which sets out the structure and
conditions of the company. The memorandum primarily governs the relationship
between the company and the outside world. In particular it defines the capacity of
the company. The memorandum must state out the matters specified in section 27.
These would include the name of the company, registered office of the company, the
nature of the business, the capital, limitation and subscribers to the memorandum etc.

1. The name of the company

The proposed name of the company is an important requirement. This is because
it is not just any name that can be used. In addition, the Act 14; lays down certain rules
which must be followed in ascertaining the name of the company. It provides thus;
the name of a private company limited by shares shall end with the words “Limited”
while the name of a public company limited by shares shall end with the words
“Public Limited Company” and the name of a company limited by guarantee shall
end with the words (“Limited By Guarantee)” in brackets. All such companies are
allowed to use the abbreviations “Ltd”, “PLC”, “(Ltd/Gte)” and “Ultd”. 15 According
to section 30 of the Act, certain names are prohibited from being used. The following
names are prohibited:-
a. A name which is identical with one already in existence or resembles that
name as to be calculated to deceive except the company in existence is in
the process of being dissolved and gives its consent. In Niger Chemist v.
Nigerian Chemist16, there was a company registered as Niger Chemist
under the Companies Decree and another later registered as Nigerian
Chemist. It was held that the names so resembles the other as to deceive.
Any person aggrieved by the incorporation of a company with a name
which is likely to cause confusion in relation to his goods may be able to
bring proceedings for an injunction to prevent the tort of passing off. It is
not necessary to prove an intention to deceive, at least to obtain an
injunction. The courts may infer such intent.17
b. Names containing the words Chamber of Commerce unless it’s a company
limited by guarantee.
c. Names which, in the opinion of the Corporate Affairs Commission violates
any existing trade mark or business names registered in Nigeria unless with
consent of the owner.

14
Section 29(1),(2),(3) CAMA
15
Section 29(5) CAMA
16
[1961] 1 ALL NLR 171
17
Ewing V. Buttercup Margarine Co Ltd [1917] 2 Ch 1, CA

7
 d. Use of such words as federal, National, Regional, State, Government or
any name which suggests government patronage or containing Municipal,
Chartered, Cooperative or Building Society, group or holding are excluded
except with consent of Corporate Affairs Commission.
The importance of the name of the company is illustrated by the provisions of
section 631 of the Act to the effect that once incorporated, it is required to place its
affix in a conspicuous position outside its offices, its names and must be mentioned
in all the company’s letters, official publications, promissory notes etc. in the English
case of Penrose v. Martyn18, it was held that an omission of an essential part of the
name was a contravention of the provision. Thus, the omission of the word “limited”
when part of the company’s name, will come within the provision.
In order to avoid the inconvenience of a business name becoming unavailable
during the process of the formation of the company, section 32 provides for the
reservation of a name for a maximum of 60 days. A written application is made to the
Corporate Affairs Commission, accompanied with the prescribed fees to be paid; the
Commission may reserve a name for that company, pending registration of that name
or change of name by the company. Reservation has the effect of preventing any
other company from being registered under that name, or any other name close in
resemblance to that which has been reserved, during the period of reservation.

As a matter of practice, the CAC usually requires that a name search be

conducted just before incorporation in order to ascertain the availability of the
proposed business name.
2. The objects of the company
Object has never been defined in legislature but precedents seem to imply some
notion of purpose or the description of the nature of the company’s trade or business.
The objects are therefore the purposes for which it is formed. The statement of the
objects determines the extent of the powers conferred on the company. Section
27(1)c requires the memorandum to state the nature of the business which the
company is authorized to carry on. In view of the wide powers given to the company
under section 3819 and the limitation imposed under section 3920, the person forming
the company should have careful and detailed instructions and knowledge of the
business or objects or the proposed company. In addition to this, section 27(1)c
requires the nature of the business or the object to be stated in the memorandum. In

18
[1858] E.B. & E. 499
19
The provision grants the status of legal personality on such incorporated company. It provides that except to the
extent that the company’s memorandum or any enactment otherwise provides, every company shall…have all the
powers of a natural person of full capacity.
20
Limits the powers of any company to the extent of its memorandum

8
Edokpolor & Co. Ltd. v. Sem-Edo Wire Ind. Ltd 21, the Supreme Court held that
the memorandum of association of a company is an indication of the strong desire by
the contracting shareholders that the proposed company after its incorporation should
execute the terms of the agreement so included but that the company is under the
obligation to execute the agreements. It must also be noted that the object of the
company must be legal. The question of object of the company is a very hot one. This
is because it borders on the matter of exercise of powers and the doctrine of ultra
vires.22 This therefore underlies the importance of the object of the company and the
necessity of it being included in the memorandum. It provides a ready guide to the
outside world as to the powers, boundaries and limits of the company.
3. The capital
This is the sum with which the company is registered. The Act usually requires a
minimum share capital which is dependent on the nature and type of business to be
carried out. The Act requires23 a minimum share capital. This is ₦10,000 in the case
of a private company and ₦500,000 for a public company and of these sums, not less
than 25% must be taken by subscribers.

4. the registered address of the business

5. the liability of the company/the type of company
6. list and signatures of the subscribers
7. an attestation clause
This is usually a declaration by a legal practitioner stating that the memorandum of
association complies with all the statutory requirements.

The article of association is the domestic regulations of the company and governs
its internal administration. They determine how the powers conferred on the
company by the memorandum shall be exercised. The matter was put succinctly by
Lord Cairns LC in Ashbury Railway Carriage and Iron Co. Ltd v. Riche 24 when
he said: “the memorandum is, as it were, the area beyond which the actions of the
company cannot go; inside that area the shareholders may make such regulations for
their own government as they think fit” the articles are subordinate to the
memorandum in the sense that they cannot confer wider powers than the
memorandum. The articles are usually regarded as commercial documents by courts
and usually attract liberal interpretations. Thus it cannot be rectified by a court. The
Act provides four specimen articles for a public company limited by shares, a private
company limited by shares, a company limited by guarantee and an unlimited
21
[1984] 7 S.C. 199
22
Meaning an action beyond the legal capacity of a person or company
23
Section 27(2) CAMA
24
[1875] L.R. 7 HL 653 at 671

9
company in Table A,. Section 33 requires that articles must be registered with the
memorandum. All articles are required to conform to section 34 as to its form and
contents.

 Notice of address and registered office

Section 27(1)b requires the memorandum to state that the registered office of the
company will be situated in Nigeria and to provide the address. In addition to the
above statement, section 35(2)b provides that one of the documents to be delivered
to the Commission for the purpose of incorporation is the notice of the address of the
registered office of the company and of the head office, if different from the
registered office, but a postal box or private mail bag address in not acceptable for
this purpose.

 Statement of authorized share capital

There is a printed form for this and it is obtainable in various stationery stores.
The statement must show the authorized share capital divided into shares of a fixed
amount. For instance, ₦10,000.00 divided into 10,000 shares of ₦1 each, and must
be signed by a director.

 Particulars of directors
Section 35(2)c provides that there shall be delivered to the commission a
statement in the prescribed form containing the list and particulars together with the
consent of the persons who are to be the first directors of the company.

 Other necessary documents

Section 35(2)e provides that any other document may be delivered to the
commission if it is necessary to satisfy the requirements of any law relating to the
formation of a company. Therefore in practice, the commission usually requires some
other documents to be produced and filled. Examples of these documents are;
a. The Tax Clearance Certificate for the preceding three years for each
subscriber and each director. This is required under section 33(4)r of the
Income Tax Management Act 1961. This certificate is obtained from the
Inland Revenue Board of each state and in the case of a company the
Federal Inland Revenue Board.
b. The CAC’s letter or a copy thereof approving the use of the proposed
name. This is done mostly after an enquiry into the availability of the
business name has been completed.

10
 After the production of these important documents to the CAC, there must be a
statutory declaration of compliance25 in a prescribed form made by a legal
practitioner that the requirements for registration have been complied with. The CAC
may accept or decline the declaration. In a case where it does the latter, it must within
30 days of receipt of the declaration inform the person applying to register of such
refusal and the ground for the refusal.
To render the documents acceptable by the CAC, especially the memorandum
and articles of association, certain fees must be paid to the Commission.

Filing of Incorporation Documents

The requisite documents are usually submitted to the commission for assessment
and stamping. When the document has been prepared and duly stamped, they are
submitted to the commission for filing and the appropriate fees paid. The amounts
payable to the CAC are statutorily provided in the ACT.26 The amounts include as
follows;
 Certified true copy of memorandum & articles of association….₦1,500
 Certified true copy of other documents…………………………......₦ 500
 Certified true copy of forms C.O.127, C.O.628 and C.O.729………….₦ 100
 All other documents………………………………………………....₦ 100
In addition to the filling fees required, another set of payments are payable to the
commission. These are the registration fees. These are as follows;
1. Registration of public company having share capital:-
a. Not exceeding ₦1,000,000……………………...…………..₦15,000
b. Exceeding ₦1,000,000…………………………………..…..₦15,000
c. For every ₦1,000,000 after the first………………………₦10,000
2. Registration of private company having share capital:-
a. Not exceeding ₦1,000,000…………………………………...₦5,000
b. Exceeding ₦1,000,000………………………………………..₦5,000
c. For every ₦1,000,000 after the first………………………. ₦1,000
3. Registration of a company not having a share capital………………₦2,000

25
Section 35(3) CAMA
26
FIFTEENTH SCHEDULE: Fees to be paid for matters under part A of the Act.
27
Form C.O.1 : declaration of compliance with requirements of CAMA
28
Form C.O.6 : notice of situation of registered office
29
Form C.O.7 : particulars of directors

11
 Registration and incorporation
Section 35(2) provides that the incorporation documents listed above shall be
delivered to the commission and 36(1) provides that the commission shall register the
memorandum and articles unless in its opinion:
a. They do not comply with the provisions of the Act; or
b. The business which the company is to carry on, or the objects for which it
is formed, or any of them, are illegal ; or
c. Any of the subscribers to the memorandum is incompetent or disqualified
in accordance with section 20 of this Act; or
d. There is non-compliance with the requirement of any other law as to the
registration and incorporation of a company
e. The proposed name conflicts with or is likely to conflict with an existing
trade mark or business name registered in Nigeria.30
In situations where the commission refuses to register a company for any of the
reasons stated above, any person aggrieved by the refusal may give notice to it
requiring it to apply to the court for directions and the commission must within 21
days of receiving the notice so apply.31 In a case of a company to be limited by
guarantee, the memorandum must not be registered without the authority of the
Attorney-General of the Federation.32 On registering the memorandum and articles,
the commission shall amongst other things certify under its seal that the company is
incorporated.
The certificate of incorporation is prima facie evidence that all the requirements
of the Act in respect of registration and all other matters have been complied with. 33
The general effect of incorporation is that from the date of incorporation mentioned
in the certificate of incorporation, the subscribers of the memorandum together with
such other persons as my from time to time become members of the company
become a body corporate by the name contained in the memorandum capable
forthwith of exercising all the functions of an incorporated company and having
perpetual succession and a common seal. The implication of this is that such
company would have continued existence regardless of whether the promoters and
owners of the company are alive or dead. The rational behind this principle was very
well captured in the speech of Lord Diplock in Dimbleby & Sons Ltd v. National
Union of Journalists34 where he said:

30
Lasisi v. Registrar of Companies [1976] 7S.C. 73
31
Section 36(2) CAMA
32
Section 262 CAMA
33
Section 36(6) CAMA
34
[1984] 1 WLR 427 at 435 B-G, HL

12
 “my lords, the reason why English statutory laws, and that of all other
trading countries, has long permitted the creation of corporations as
artificial persons distinct from their individual shareholders and from that
of any other corporation…is to enable business to be undertaken with
limited financial liability in the event of the business proving to be a
failure…”

In outline form, the consequences of incorporation include;

1. Its corporate personality
2. Its liability
3. Its power to sue and be sued
4. Perpetual succession35
5. Power to contract
6. Power to borrow
7. Power to transfer shares
8. Ability to own property

This is simply the hugest implication of the whole process of incorporation of

companies. The individual corporate personality plus the huge benefits that
companies and their activities provide within the any economy cannot be done away
with in the organization and governance of modern societies. The importance is
therefore the main rational justifying the massive government regulation of the
management and running of companies through institutional and legislative
frameworks.

Foreign companies
For foreign companies seeking to do business in Nigeria, the Act is very specific
in providing the need for such foreign corporate bodies to first be registered or
incorporated in Nigeria, as of necessity, before it can legally carry out business
transactions in the country. Section 54 (1), provides that subject to ss. 56 – 59 of the
Act, every foreign company which before, or after the commencement of the Act,
was incorporated outside Nigeria, shall take all steps necessary to obtain
incorporation as a separate entity in Nigeria for that purpose, but until so
incorporated, the foreign company shall not carry on business in Nigeria or
exercise any of its powers of a registered company.

35
According to section 37, once incorporated, a company acquires continued existence and cannot thus become
incapacitated by illness, mental or physical and it need not have an allotted life span.

13
 B: LIABILITY OF A COMPANY
Indeed it has been established that when a reference is made to the concept of
company under the law, it is a reference to an incorporated company otherwise
known as a registered company which has been so registered in compliance with the
relevant laws or statute. The Companies and Allied Maters Act36 (CAMA) is the
current statute that provides for companies, registration of business names and the
incorporation of trustees. The objective of this statute has been identified as evolving
a comprehensive body of legal principles and rules governing companies. The
liability of a company especially where limited is a direct consequence of the
incorporation of a company and its corporate personality.
According to the CAMA,37 companies registered under it may be either public or
private. Whether it is private or public, every company is either a company that is
limited or that is unlimited. A company may be limited by shares or by guarantee.
The liability of a company simply means the liabilities of the members of such
company to the company itself. For instance, in a limited liability company, the
creditors cannot lay claim to the personal assets of the members or shareholders but
only to the assets of the company. This Thereby places the shareholder under no
obligation to the company or to its creditors beyond their obligations on the per value
of their shares.

Limited Liability of a Company

The term limited liability is a broad term which reflects the extent of liability of
the members of a company (whether private or public) to the company itself. The
limitation of the liability of a company is an important ingredient to the
determination of the class or type of the company. The limitation of liability of
members of a company transfers the ultimate risks of business failures to their
creditors. Private and public companies may have limited liability. Such liability may
either be limited by shares or by guarantee.38

i. Limitation by shares
This is where a member’s liability is limited to the amount remaining unpaid on
the shares held by him. If a person subscribes and is issued shares, such person
usually has no further liability to the company or its creditors so long as the full price

36
LAWS OF THE FEDERATION 2004, CAP C20
37
Section 21(2)
38
Section 21(1) CAMA

14
of the shares was paid for. However, a shareholder who did not pay the full
subscription price for newly issued shares is liable for the balance due.
ii. Limitation by guarantee
When a company is formed for the purpose of promoting arts, science, religion,
sports, culture, education, research, charity etc and the income and property of the
company are to be applied solely towards the promotion of its objects and no portion
is to be paid directly or indirectly to its members except as permitted by the decree,
the company shall not be registered as a company limited by shares but as a company
limited by guarantee. A company is limited by guarantee where the liability of its
members is only limited to amounts as the member may respectively undertake to
contribute to the assets of the company in the event of its being wound up.39

Both public and private companies may be registered as being limited by shares
or by guarantee. Basically a private company is one which is stated in its
memorandum to be a private company while a public company is any other than a
private company. However, there are some differences between private companies
and public companies that are limited (either by shares of by guarantee).

Private Limited Company (LTD) and Public Limited Companies

(PLC) distinguished
1. The name of the Company contained in the memorandum:
The Act40 requires that the name of the company be stated in the memorandum
of association. Section 29 specifically provides how the companies limited, whether
public or private, must be named. Usually, the memorandum of a Private company
with limited liability must state specifically that it is one, i.e. the name of the
company must end with the words “Limited Liability Company”. While this is so, the
name of a public company on the other hand, must end with the words “Public
Liability Company.”
2. Authorized Share Capital:
The authorized share capital is the share capital of a company at any given
time.41According to section 27(2)a of the Act; the authorized share capital for a
private company is a minimum of ₦10,000. This Section also provides that of a
public company as being not less than ₦500,000.

39
Section 21(b)
40
Section 27
41
Section 650

15
 3. Transferring Shares:
Section 22(2) of the Act provides that every private company shall by its
Articles restrict the transfer of its shares, and this it may do in two ways, either by
a. a pre-emption clause (these restrict the right of a shareholder to transfer
his shares to an outsider unless and until the existing shareholder has
first been given the right to take up those shares at fair prices) they are
valid once stated in the Articles,
b. The Director’s power to control transferability of shares, usually
drafted like this “Directors may in their absolute discretion and without
giving any reason refuse to register any transfer of any share, whether
or not it is a fully paid share.”
Public liability companies are not restricted from transferring their shares like
limited liability companies are, thus they can very well do so without being in breach
of any statutory violation.
4. Statutory Meetings:
Public companies are required by law, in accordance with Section 211, to hold
Statutory Meetings. This must be held within six months from the date of its
incorporation. The directors are required to forward to every member of the
company, Statutory Reports at least 21 days before the meeting. Failure by a public
company to comply with Section 211 of the Act shall make both the company and
any officer guilty of the default liable to a fine of ₦50.00 for every day during which
the default continues.
A private company is not required by law to hold statutory meetings at any point
in time, except it chooses so to do. Private companies can only hold Annual General
Meetings or Extra-Ordinary General Meeting.
5. Company prospectus:
Section 559(1) states that; “where a company allots or agrees to allot any
securities in the company with a view to all or any of those securities being offered
for sale to the public, any document by which the offer for sale to the public is made
shall for all purposes be deemed to be prospectus issued by the company.” However
the proviso to S. 545 (1) is to the effect that;
a. invitation is not made to the public if it is the ‘domestic concern’ of
those making and receiving it,
b. In the case of private companies, an invitation shall not be regarded as
one made to the public, rather as one of DOMESTIC CONCERN.
6. Issuing paid up Shares on the Stock Market:
The Nigerian Enterprises Promotion Decree 34 of 1987which came into force on
th
4 November 1987, and now referred to as CAP 304 Laws of the Federation of

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Nigeria 1990, in its Section 116 allows Public companies quoted on the Nigerian
Stock Exchange to issue, through the Exchange, non-voting paid up shares for the
subscription of persons which shares are to be paid for in foreign currency. The Act
only makes provision for this to be done by public companies, thus private or limited
liability companies cannot issue non-voting paid up shares for public subscription on
the stock market.

CONCLUSION

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