Choice of business and incorporation of companies

Question 1

differences between a private company ltd by shares and a public company ltd by shares

Answer 1

1. a ltd has a minimum issued share capital of #100,000 while a plc is 2,000,000
2. a public company ltd by shares must end with plc while a private company ltd by shares must end with ltd
3. in a plc the shares are open to be bought by outsiders while in an ltd the shares are not open to outsiders
4. ltd minimum is 2 and maximum is 50 plc there is no limit
5. a Itd unless authorised by law cannot invite the public to subscribe to their shares a plc can invite the public to subscribe to its shares S
   67ISA
6. a public company is meant to hold statutory meeting 6 months within it incorporation there is no such meeting for a private company but a written resolution is passed and it must be signed by all members who are qualified to attend the meeting

Question 2

classifications of companies under CAMA

Answer 2

part B - companies
part C - limited liability partnership
part D - Limited partnership
part E - Business names
part F - incorporated trustees

Question 3

What is the minimum number of individuals required to form a company in Nigeria according to CAMA 2020? Are there any exceptions?

Answer 3

the minimus is 20 and the maximum for a private company is 50 522 for a public company there is no limit however according to section 18 (2)
one person may incorporate a a small private company

Question 4

Who can form a company in Nigeria?

Answer 4

Section 18 CAMA, any two or more persons may form and incorporate a company in Nigeria. A single person can also incorporate a small private company. However, individuals classified as infants, undischarged bankrupts, persons of unsound mind, and those disqualified under Section 20 of CAMA 2020 cannot form a company. Foreigners and foreign companies can also participate in forming a Nigerian company, subject to existing regulations on foreign participation in trade or business.

Question 5

What are the steps involved in forming a company in Nigeria?

Answer 5

obtaining client instruction during client interview
2. acquiring and filing form CAC 1 for availability check
3. acquiring and filing FORM CAC 1.1 for registration of name
4. preparation of memorandum and article of association
5. stamping of memart at FIRS
6. payment of prescribesd fee
7. filing incorporation documents at
CAC:
– filled FORM CAC1
–filled and stamped FORM CAC 1.1
–stamped memart
-statement of capital and initial shareholding (for co ltd by shares)
-Statement of guarantee
- statement of proposed directors evidence of payment of prescribed fee

Question 6

Which individuals are prohibited from forming a company in Nigeria based on Section 20 of CAMA 2020?

Answer 6

an infant
an undischarged bankrupt
a person of unsound mind
a person disqualified from being a director 281

Question 7

Explain the purpose and importance of conducting a client interview in the company formation process

Answer 7

Understand the client’s business objectives, available capital, and desired management structure.
Determine the required share capital based on the company type and relevant laws.
Ascertain the need for an ‘official seal’ in addition to the ‘common seal,’ considering the company’s sphere of business.

Question 8

How can I obtain control of my company’s management?

Answer 8

clauses to be included in the articles of association
1. appointment of the founder as a life director
2. appointment as chairman or managing director
3. custody of the company seal
4. power to appoint directors
5. holder of majority shares
6. holder of preference shares

Question 9

features of a company ltd by guarantee

Answer 9

1. they are set up to promote the following agendas ; commerce, art , science,religion etc
2. it is not profit oriented
   the income is directed to obtaining the object of the company
3. they are called members instead of shareholders
4. the consent of the AGF is needed to register the memart and if after 28 day the consent is not gotten the promoter will advertise the name in three national daily newspaper and if no objection is made within 28 days the commission shall register the company and the permission of the AGF is no longer necessary S 26 (5-10)
5. during dissolution or winding up all assets are transferred to bodies with similar objectives
6. during dissolution members have a duty to make a contribution of not less than 100,000
7. they are exempted from paying tax
8. they are the only company allowed to use chamber of commerce in their name s852
9. they do not have a share capital
10. the number of people forming it must be clearly stated in the moa

Question 10

companies or organisations that are not suitable to be registered as a company ltd by guarantee

Answer 10

1. NGOs that are anti government or civill rights activist
2. where it is a matter of urgency

Question 11

instructions to be taken during a client interview

Answer 11

1. proposed name of the company
2. registered address of the company in Nigeria
   3.particulars of members
3. particulars of directors
4. particulars of secretary
5. proposed share capital
6. proportion of share capital
7. object of the company
8. liability of its members
9. date of completion of registration
10. particulars of other people that may join in the formation of a company

Question 12

content of MOA

Answer 12

Heading
name clause
registered office clause
liablility clause
object clause
status clause
shared capital clause
subscription clause
subcription box
date
attestation

Question 13

what is an unlimited company list out the features

Answer 13

an unlimited company is one where the member are liable for the debt of the company where the company is being wound up they are personally liable and their personal asset could be dispensed in the process of dissolution

the features are :
the company must end with (ULTD)
The company does not bear the liablity of its member butthe members bear the liablity of the company
the memart must state that the member have unlimite liablity
it has a minimum share capital of 100k
an unlimited company can only be a private company

Question 14

List the type of business organizations available ot persons desirous of undertaking a business venture within the extant laws in Nigeria.

Answer 14

business name
partnership
sole proprietorship
companies

Question 15

suitability of a private unlimited company

Answer 15

1. where the promoter do not want outsider to subcribes to the shares
2. where the founders wish to be personally liable for the debts accrued by the company
3. it may be imposed by law to ensure probity in the management of public funds
4. its used for proffessional service companies where iintegrity coupled with skill and competence are the core value

Question 16

circumstances when CAC can refuse registration of the memorandum and articles of association of a company

Answer 16

1. where it does not conform to the provisions of cama
2. when the memart violates any law as regard to registration
3. where the name is identical to an existing trademark or business name
4. where the object of the business is illegal
   where one of its subscribers is restricted or incompetent
   infant
   a person of unsound mind
   undischarged bankrupt
   a corporate body in liquidation

Question 17

what is a partnership. list the different types of partnership registerable under CAMA

Answer 17

a partnership is when two or more people come together to carry out business The minimum number of persons required for partnership business is at least 2 persons; Uredi v Dada; while the maximum number is 20 persons except for a firm of legal practitioners or chattered accountants; section 19 CAMA.

TYPES OF PARTNERSHIP UNDER CAMA
1. limited liability partnership
2. limited partnership
3. partnership under business name

Question 18

the differences between partnership under Part D (LIMITED PARTNERSHIP) and
partnership under Part E (BUSINESS NAME)

Answer 18

Limited Partnership must be registered before it can carry on business, while a Business
Name can carry on business for 28 days before registration;
- Limited Partnership must be registered under every circumstance, while there are
instances under which a Business Name does not require registration.
- Limited Partnership has two cadres of partners (General and Limited partners), while
Business Name does not have cadre of partners.
Limited Partnership cannot contain more than 20 persons, while a Business Name can
exceed 20 persons where it is a partnership of professional bodies.
- Under Limited Partnership, the partners are no liable for the debt of the partners except to
the extent of the amount they have agreed to contribute, while in Business Name, the
partners are liable for the debt and liability of the partnership.
- Notice of changes in Limited Partnership is to be filed at the CAC within 5 days of such
change, while notice of changes in a Business Name is to be filed at the CAC within 28
day of such change.

Question 19

the steps to take to register partnership under Part C of CAMA (Limited Liability
Partnership

Answer 19

Obtain the Client’s instructions

acquiring and filing FORM CAC 1 CONDUCTING AVAILABILITY CHECK

and FORM CAC 1 / LLP 01 application for registration
Submit the above forms alongside the following:

professional qualifying certificate if it involves professional service
 Evidence of Registration fees
 2 passport photographs of each partner
 Valid means of identification of the partners
 The CAC shall within 14 days of complying with the above, register the LLP and issue a
Certificate of Registration. S. 754 (1) CAMA

Question 20

The responsibilities of Designated Partners under PART C of CAMA

Answer 20

1. payment of fines imposed
2. filing of necessary document at CAC

Question 21

what are prohibited and restricted names

Answer 21

PROHIBITED NAMES INCLUDE:
1. identical to an existing company
2. misleading offensive or contrary to public policy in the opinion of CAC
3. contains the name chamber of commerce when it is not a company ltd by guarrantee
4. may cause confusion or violate an existing trademark or business name except with the consent of the company owner

RESTRICTED NAMES INCLUDE :
national
nigerian
lagos city
FCT
kwara council
muncipal or chartered
group
holdings
consortium

Question 22

various methods the company can use to offer its shares to the
public

Answer 22

Direct Public Offer
Offer for Sale
Placing
Private Placement
Right Issue
Offer by Tender

Question 23

advantages of doing business as a company other than business name

Answer 23

perpetual succesion
access to funds
legal personality
larger scale of business
The company can own or dispose of in its name interest in both real and personal
properties.

Question 24

features of LLP

Answer 24

A limited liability partnership is a body corporate formed and incorporated under CAMA and is a legal entity separate from the partners. It has perpetual succession and any change in its partners does not affect its existence, rights or liabilities

FEATURES
seperate legal entity seperate from its partners
perpetual succession
profit oriented
must be registered with at least two partners one of which must be resident in nigera
must be registered with CAC before it can carry out business
partners are not liable for other partners misconduct or negligence

Question 25

differences between a limited liablity partnership and a limited partnership

Answer 25

An LLP is a separate legal entity from its partners, meaning it can enter into contracts, own property, and sue or be sued in its own name. An LP is generally not a separate legal entity from the partners. The partnership itself is not distinct from its individual partners for legal purposes

an LP structure involves at least one general partner and at least one limited partner.
IN LLP all partners are simply partner

in LP General partners have unlimited liability while limited partners have limited liability All partners in an LLP have limited liability,

All partners in an LLP participate in the management of the business. Every partner has an equal say in the management
in LP General partners manage the business and have full control over day-to-day operations, while limited partners do not have any say in management. Limited partners are typically investors, and their involvement in the partnership’s decision-making is restricted.

Limited liability partnerships become a juristic person and had perpetual succession while limited partnerships had no juristic personality

Question 26

suitability of business names /advantages of business names over companies

Answer 26

simplicity in registration
ease of dissolution
easy mangaement
less formal
its more private
cheaper
registration is not mandatory in certain circumstances

Question 27

when registration of business name is not compulsory

Answer 27

FULL NAME
SURNAME ONLY
SURNAME AND INITIAL
CORPORATE NAME WITHOUT ANY ADDITION

Question 28

document to file to CAC for accreditation as a legal practitioner

Answer 28

1.pick up and fill accreditation form a and b
2. payment of rgistration fee ;10k
submit the filied accredition form to CAC with the following documents :
call to bar certificate
qualifying certificate
nysc discharge or exemption certificate
receipt of recent practicing fee
reciept of registration fee
2 pass port photograph of applicant

Question 29

consent to use the word group

Answer 29

1. formal application for consent with ;
   evidence of three or more associates companies to form the group
   evidence of common membership of the associate companies
2. a resolution of the associate companies accepting to be a part of the group
3. a statement by majority of the directors of the proposed group stating that the share capital of the company shall not be less than the highest share capital of the associate company
4. annual returns of the associate company

Question 30

consent to use the word holdings

Answer 30

1. formal application for consent with ;
   evidence of two or more subsidiary companies
   evidence of common membership of the associate companies
2. a statement by majority of the directors of the proposed holding stating that the company shall acquire not more than half in the nominal value of the share capital of each of the subsidiaries within 90 days of its incorporation
3. annual returns of the subsidiary company

Question 31

Statutory books to be kept by incorporated trustees

Answer 31

1. Register of trustees
2. Register of member
3. Minutes book
4. Book of account

Question 32

Who may dissolve an incorporated trustee

Answer 32

Body of the trustees
Governing council
CAC
Member of the association

Question 33

Which court has jurisdiction for dissolution of incorporated trustees

Answer 33

Federal High court

Question 34

Grounds for dissolution of incorporated trustee

Answer 34

1. That the aim and objectives the IT was created for has been satisfied
2. That the objective of company has become illegal or contrary to public policy
3. Where it will just and equitable to do so in the circumstances
4. Where it was created for a specific amount of time and the time had expired

Question 35

Procedure for dissolution of incorporated trustee

Answer 35

It is dissolved by an ordinary resolution signed by not less that 50% of the member

Filing a petition to court for a formal and effectual dissolution
(All persons likely to be affected by the dissolution shall be put on notice s608(3)

Question 36

Differences between an incorporated trustee and company Ltd by guarantee

Answer 36

1. A gte needs permission from Agf before it can be registered an IT does not need permission
2. A gte can engage in a little business an IT cannot
3. Gte is regulated by memorandum and article of association while an incorporated trustee is regulated by a constitution

4.for IT there must be evidence of advertisement in 2 national dailies this is not required for gte
5. In IT there must be evidence of land ownership or undertaking in lieu to gain possession of land under two years of incorporation no such thing for gte
6. For IT, the association can carry out its object without registration which a company Ltd by guarantee must be incorporated before it can execute its object

Question 37

Similarities between Incorporated Trustee and Companies Ltd by Guarantee

Answer 37

They are both exempted
They are both set up to achieve object such as ; Conner art religion etc
They both have no share capital
In the event of dissolution both their assets are to be transferred to companies with similar goal
They are both non profit organizations

Both members are expected to contribute at least 100,000 Naira in event of the dissolution

Question 38

What is a partnership agreement and what are the reading or importance of it

Answer 38

Once a business is carried on in partnership, it is advisable for the partners to execute a written partnership agreement or deed.

The reasons/Importance of Written Partnership Agreement

It helps to avoid common law presumptions on partnership.

For ease of official transactions.

For ease of conflict resolution.

Obligations, liability and privileges can be determined easily.

It will be binding on the parties.

The terms of the partnership will be clearly stated.

Question 39

Clauses in a partnership agreement

Answer 39

Important Clauses that should be in A Partnership Agreement:
Profit sharing equilibrium
Capital contribution ratio
Partnership property
Remuneration of partners
Suspension/Expulsion of partners
Dispute resolution
Death of partner
Dissolution of partnership

Question 40

Dissolution of partnership

Answer 40

A partnership may be dissolved in 3 ways; which are:
Express acts or agreement of the parties.
By order of the court;
By operation of law for e.g. death of a partner where there is no agreement.

Procedure for Dissolution of the Partnership
Notice of retirement, dissolution, or expulsion is served on other partners referring to the appropriate clause in the partnership agreement.

The partners prepare and execute the dissolution agreement.

Distribution of assets and liabilities will commence

Notice of dissolution/cessation is given to:
Corporate Affairs Commission, if registered

Published in the gazette and national newspapers.
Clients or customers

Question 41

Instructions to be take for the formation of a limited partnership

Answer 41

Proposed name of business
Objectives of the business
Principal place of business
Particulars of all general partners
Particulars of all limited partners
The term and duration for which it is entered into and Date of commencement
Statement that the partnership is a limited partnership
The sum contributed or agreed to be contributed by all limited partners and whether paid or is to be paid in cash or another specified form

Question 42

Instructions for limited liability partnership

Answer 42

Proposed name
Proposed business
Address of the registered office
Particulars of persons who are partner
Particulars of persons who are to be designated partners of the LLP upon incorporation
The information as the commission may prescribe

Question 43

Steps for online registration

Answer 43

Log into www.cac.gov.ng
Check the form cac 1 for availability of name and forward the form cac1.1 with the preferred name and substitute
Check for correctness
Apply online
Download the acknowledgement form from the email app
Check within 24 to 48 hrs for a printout of the result of the search to know whether the name is available
Filing of relevant documents at CAC and Payment of registration fee
Download the certificate of incorporation

Question 44

Advantages and disadvantages of E registration

Answer 44

ADVANTAGES :
1. It is cheaper
2. It is faster
3. More convenient
4. It reduces corruption
5. It increases productivity

Disadvantages

Low level of computer expertise with the legal practitioners
Lack of steady power supply
Absence of legal frame word for online stamp and E signature

Question 45

Provisions that must be contained in the constitution of incorporated trustee

Answer 45

a) name
b) time and objective
c) common seal
d) special clause
e) trustees
f) governing body
g) meeting
h) accounts

Question 46

Documents Required for Registration of Incorporated Trustees

Answer 46

1.Form CAC I-Availability check and reservation of name with the name stated as “Incorporated Trustees of …”
2.Duly filled CAC form I.T 1
3.Copy of the resolution adopting the special clause into the constitution signed by the chairman and secretary.
4.Two printed copies of the Constitution of the organization
5.Impression of the proposed common seal of the body.
6.Evidence of ownership of land or an undertaking in lieu to own a land within two years of incorporation.
7.A copy of the Newspapers advertisement in three National dailies calling for objections to the registration of the Association within 28 days.
8.Two passport photographs of each of the Trustees
9.Copy of the extract of the minutes of the meeting where the Trustees were appointed, having the list of members present.
10.Trustees Declaration Form duly sworn to by each trustee

Question 47

Contents of The Constitution of Incorporated Trustees

Answer 47

1. Name of the Association
   2.Aims and objectives
   3.Qualification for membership
   4.Common seal
   5.Special Clause
   6.Appointment of trustees (qualification)
   7.Governing body and its powers
   8.Sources of fund
   9.Meetings
   10.Accounts
   11.Audit and disbursement of fund