ANSWERS TO THE TASK ON CORPORATE LAW PRACTICE

NIGERIAN LAW SCHOOL

LAGOS CAMPUS

2015/2016 (NOVEMBER) SESSION

ANSWERS TO THE TASK ON CORPORATE LAW PRACTICE

(WEEK 4) GROUP 2

QUESTION 1

a)      The legal practitioner will require the following details:

·         Particulars of the Directors.

·         Information as to the type of the company.

·         The particulars of the objects/business of the company.

·         Address of the registered office.

·         Minimum Authorized Capital of the company.

·         Information of the particulars of the subscribers.

·         Restriction (if there’s any) of the powers of the company.

·         Special provisions on corporate governance and management issues that are to be provided in the Articles of Association.

·         The Share structure of the company.

·         The particulars of the company secretary.

·         Proposed name of company.

b)      The reasons why “China Weaving Manufacturing Company Limited” was not approved by the Corporate Affairs Commission (CAC), are namely:

·         The company having a name which has the word ’China’ included therein, is capable of falsely leading the public to believe that it is associated with the Peoples’ republic of China. This is expressly provided in Section 30 of the Companies and Allied Matters Act, CAP C 20 LFN 2004,(also restated emphatically in section 579 of CAMA) which expressly prohibits companies to have the name of a national within their proposed company names.

·         Also, where a name conflicts with, or is likely to conflict with an existing trademark or business name in Nigeria, it will not be registered under the Corporate Affairs Commission (CAC) -Section 36 (1)(e).

c)      The major steps to be taken to incorporate a company are:

·         Taking instructions and advising the clients on the choice of suitable business or non-business organization to form or register;

·         Conducting searches for the reservation of the name;

·         Preparing registration documents and statutory forms;

·         Stamping of two copies of incorporation documents –memorandum and articles of association–  and also statements of Authorized share capital (form CAC2) for Ltd Plc. and unlimited companies;

·         Filing of the incorporation documents at the CAC;

·         Obtaining the certificate of incorporation; and

·         Registration of the company.

d)      The National Office for Technology Acquisition and Promotion (NOTAP), has the main objective of monitoring on a continuous basis, the transfer of foreign technology into Nigeria. They examine the quality of the imported technology with a view to determine its price, check abuses and discard the use of obsolete technology. NOTAP ensures there is a proper registration of the proposed technology to be transferred. Therefore, in the establishment of the Weaving factory, NOTAP would make sure that it is indeed, foreign technology that has never existed in Nigeria, and also, that it is of good quality and of a reasonable price.

e)      In the event that the company is unable to go into manufacturing of digital weaving equipment after three years of incorporation, it will fall in violation of section 525 of CAMA, and therefore, be susceptible to have its name struck off the register and dissolved.

QUESTION 2

a)      Generally, Section 21 of the Companies and Allied Matters Act (CAMA) provides for three types of companies, which could either be a private or public company [section 21 (2) CAMA]. These are:

i.                    Companies Limited by Shares;

ii.                  Companies Limited by Guarantee; and

iii.                Unlimited Companies.

b)      The following include the differences between a Company Limited by Shares and that Limited by Guarantee. They are:

·         The consent of the Attorney General of Federation must be obtained before incorporation. This is not needed for companies limited by shares.

·         The main aim of a Company Limited by Shares is to make profit for the shareholders. However, companies limited by guarantee can only do very little business and are also, not allowed to share any profit with the members. Money distributed to them should be used solely towards the attainment of its objectives.

·         There is no requirement or a share capital in a Company Limited by Guarantee. The members merely undertake to contribute the subscribed amount (in form CAC2) in the event of its winding up, of a sum not less than N10,000. Companies Limited by Shares must have an authorized share capital of not less than N10,000.

·         The Memorandum of Association of a company Limited by Guarantee must have a special clause as to the transfer of its assets and liabilities to organizations of similar objects in the event of winding up. This is contrary to the winding up of a company limited by shares which can be at the instance of either the directors, creditors or court order.

c)      I would advise him to form a Limited Liability Company because, it is suitable for small to medium size business organizations, and also, requires a relatively small startup capital.

d)      The documents required or stamping, include:

i.                    Statement of authorized Share capital and allotment of shares (form CAC2).

ii.                  Memorandum and Article of Association of the company.

e)      Corporate Affairs Commission (CAC) may refuse to register a company under the provision of Section 36, in the following circumstances, if:

i.                    the Memorandum and Articles of Association do not comply with the provisions of the CAMA;

ii.                  the business which the company is to carry on, or the objects for which it is formed are illegal;

iii.                any of the subscribers to the Memorandum is incompetent or disqualified in accordance with Section 20 of the CAMA;

iv.                 there is non-compliance with the requirement of any other law as to registration and incorporation of a company;

v.                   the proposed name conflicts with or is likely to conflict with an existing trade mark or business name registered in Nigeria.

QUESTION 3

1.      i)          We need to seek clarification as to the object(s) of the business.

ii)                  There is need to seek further clarification as to the particulars of the subscribers thereto, in this case, as to the occupation and address of the other subscribers (Bala and Mariam).

iii)                To also seek clarification about whether it is going to be a Public or Private Limited Company.

iv)                The capacity of the parties.

2.      The name “Wadata & Sons Limited” can be registered, and is available for registration at the Corporate Affairs Commission (CAC) subject to the availability of the name. Section 30 (1)(d) of the CAMA makes it possible for the company to use a name which infringes on a ‘trademark or business name’ so far as the consent of the owner of the trademark or business name is duly obtained. In this instance, the owner of the business name so wishes to use the name, and this consequently, poses no threat.

3.      The following are the advantages of a Private Company over Public Companies:

·         It has no restriction on the age of the Director unlike Public companies, where it is 70 years and below. He would therefore, not be a director if he incorporated a public company.

·         There is no requirement for a private company to have a professional as a company secretary, unlike the public company.

·         Public companies must publish notices of its Annual General Meetings in a newspaper for its members.

·         Private companies are not obligated to hold statutory meetings, unlike public companies which must hold a statutory meeting within 6 months of incorporation.

·         The capital needed to start a private company is not as much as that compared with the public company.

·         Limited companies are ideal for family businesses.

4.      Documents necessary for incorporation are provided in Section 35 of the CAMA. They include:

i.                    Memorandum and Articles of Association complying with the provisions of the CAMA.

ii.                  The notice of the address of the registered office of the company and the head office (if different from the registered office) –Form CAC3.

iii.                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 (FORM CAC7).

iv.                 Statement of share capital and Return of Allotment (FORM CAC2).

v.                   Declaration of compliance with the requirement of CAMA which must be completed by a legal practitioner and sworn to at the High Court Registry (FORM CAC4).

vi.                 Any other documents required by the commission to satisfy the requirements of any law relating to the formation of a company.

B)         Form of Return of Allotment would be included in the list of documents required for incorporation reasons being to ascertain the liability of shareholders of the company.

5.         The following clauses will be inserted in the Articles of Association to give Alhaji Aminu Wada some control over the company,

·         Appointment as Life Director, which means he will not be subjected to the rule of rotation of directors under Section 259 CAMA.

·         Substantial shareholding, the preferred subscriber may need to have majority shares in the capital of the company to give him due advantage during voting on key issues at the General Meeting.

·         He could be appointed as Chairman/CEO so he can be the alter ego of the company. he will take part in key decision making and preside over the company’s meetings (both Board and General Meeting). He also has a right to cast a vote in the event of inequality of votes during voting in resolutions.

·         Pre-emptive right upon transfer of shares. This will ensure that in the event of any shareholders transferring their shares, such shares should first of all be offered to the existing members.

·         Compulsory signatory to all accounts.

·         Power to appoint other directors.

·         Creation of classes of shares with preferential rights.