CHOICE OF BUSINESS AND NON BUSINESS ORGANISATIONS Flashcards
Provide 3 examples of business organisations
- Company limited by shares
- Sole proprietorship
- Business name
- Partnership
Provide an example of non-business organisations
- Company limited by guarantee
2. Incorporated trustee
Section 22 CAMA
Restriction on transfer of shares to the public
What does it mean for a company to be limited by guarantee?
There are no shares so the liability is guaranteed and limited to an amount which they respectively agree to contribute to the assets of the company
What is the minimum aggregate amount payable by the subscribers to a company limited by guarantee?
Should not be less than N10,000
Section 26(7) CAMA
Why can a public company not be unlimited?
There is no limit to the liability of members in an unlimited company. IF the company’s assets don’t satisfy any debt owed, the assets of the members can also be used to satisfy such debts owed to the creditors.
How many types of companies are there and what are they? List them with their relevant sections
CAMA lists 6 but there are only 4 possible configurations:
- Private company limited by shares (Ltd.) Section 22
- Public company limited by shares (Plc) Section 24
- Unlimited Company Section 25
- Company Limited by Guarantee (Ltd./Gte.) Section 26
Draft a memorandum of association of a company limited by guarantee
Check your notes for this answer lol
What are the features of a private company limited by shares?
- Must be stated in the MEMART that it is a private company
- Articles must provide limitation on transfer of its shares
- Must have a minimum of 2 members and a maximum of 50
- Must have a minimum authorised share capital of N10,000
- The registered name must end in Ltd.
What are the features of a public company limited by shares?
- Must be stated in the MEMART that it is a public company
- Can offer shares to the public
- Must have a minimum of 2 members, no maximum
- Must have a minimum authorised share capital of N500,000 (in certain highly regulated industries it could be higher - e.g. banking)
- The registered name must end in plc.
- Subscribers can take no less than 25% of the authorised share capital
- Company secretary needs professional qualifications Section 295 CAMA
Section 27 CAMA
Subscribers must take no less than 25% of the authorised share capital
What are the features of a company limited by guarantee?
- Consent of the AG is required
- No share capital
- Must contain a special clause in the MEMART
- May engage in business but profit must be applied towards objects
- The registered name must end in Ltd/Gte.
- Total liability of members to contribute in the the event of winding up cannot be less than N10,000
What are the features of an unlimited company?
- No limit on liability of its members
- Must have share capital
- Registered name must end in Ultd.
What are the documents required for registration of a company limited by shares?
- Form CAC 1 - Availability Check and Reservation of Name
- Form CAC 1.1 - Application for Registration of a Company
- 2xMEMART
- Original receipt of registration fees, stamp duties and compliance oath
- Photo ID of subscribers and directors
- Any other documents required by law/CAC
What are the documents required for registration of a company limited by guarantee?
- Form CAC 1 - Availability Check and Reservation of Name
- Form CAC 1.1 - Application for Registration of a Company
- 2xMEMART
- Original receipt of registration fees, stamp duties and compliance oath
- Photo ID of subscribers and directors
- Letter of consent from the AG Federation
- Any other documents required by law/CAC
How many names should you take from a client when registering their company?
A legal practitioner should take at least 2 potential names in case the first one is not available. The preferred and the alternate name
What section of CAMA deals with the corporate name?
Section 30 CAMA
What section of CAMA prohibits certain names and what names are these?
Section 30(1) CAMA
- Identical names (Niger Chemist v Nigeria Chemist)
- Chamber of Commerce
- Trademark violation (without permission from owner)
- Misleading, offensive, contrary to public opinion
Remember: I.C.T. Me
What section of CAMA restricts certain names and what names are these?
Section 30(2) CAMA
- Federal, National, Regional etc.
- Co-operative/Chartered
- Municipal
- Building Society
- Group
- Holding
Remember: F.C.M.B. G.H.
Who do you address an application at the CAC to?
The Registrar-General of the CAC
What are the requirements/documents for registration of a Holding company?
- Formal application to CAC for consent
- Evidence of not less than 2 subsidiaries
- Statement by majority of the directors of the proposed holding company
- Updated annual returns
- Updated Section 553 CAMA filing by subsidiary companies (if bank/insurance company)
What are the requirements/documents for registration of a Group of companies?
- Formal application to CAC for consent
- Evidence of not less than 3 associate companies to form the Group
- Updated annual returns of associate company
- Updated Section 553 CAMA filing where applicable (if bank/insurance company)
- Evidence of common membership of the associates companies
- Resolutions of the associate companies consenting to the Group relationship
What are the requirements/documents for registration of a Consortium of companies?
- Formal application to CAC for consent
- Evidence of not less than 3 companies to form the consortium
- Evidence of registration in home country in case of a foreign company
- Resolutions of each company consenting to the arrangement and stating the object of the consortium
- Statutory declaration to wind up consortium in accordance with the provisions of CAMA upon completion of its object
- Statement of the object of the consortium in the memorandum of association
- Inclusion of a clause to wind up the consortium in the Articles of Association
- Updated section 553 CAMA filing by companies forming the consortium (if bank/insurance company)
Section 18 CAMA
Rights to form a company
What section of CAMA deals with who has capacity to form a company?
Section 20 CAMA
Who does not have capacity to form a company?
- A Minor except with 2 other competent adults who have subscribed
- A person of unsound mind
- An undischarged bankrupt
- A person disqualified under Section (254 CAMA)
- A corporate body in liquidation
When can CAC refuse to register a company?
- Failure to comply with CAMA
- Objects of the company are illegal
- Use of prohibited name or restricted name without prior consent.
- Incompetence or disqualification of any subscribers
- Non-compliance with any law in respect of the registration and incorporation of a company
What can aggrieved person do if CAC refuse to register their company?
- Give notice to CAC to apply to FHC for directions within 21 days
- If CAC fails to make this application to the FHC within 21 says, aggrieved can proceed with application
- Court after deterring the matter may make an order directing CAC to register the company or it may uphold CAC’s refusal with good cause
Section 36(2) CAMA
DRAFT a sample articles of association
Main Body
PURSUANT TO SECTIONS 33 AND 34 OF THE COMPANIES AND ALLIED MATTERS ACT 2004
The form and content of Articles of Association are in accordance with Part II (private company limited by shares), respectively of Table A, Schedule I of this Act, with omissions, additions and alterations as may be required in the circumstances
What is the procedure for registering a company?
- Take instructions from your client
- Obtain the CAC forms (CAC 1; CAC 1.1)
- Prepare 2xMemorandum & Articles of Association
- Take numbers 2 and 3 to FIRS to be duly stamped as a deed
- Take CAC forms and stamped documents for submission to CAC for registration
- After application is accepted, a certificate of incorporation is issued as prima facie evidence of registration of the company
What is a sole proprietorship?
Where an individual carries on business on his own without associating with anyone
What are the benefits of a sole proprietorship?
The SP takes all the profit
Decisions can be reacher quickly
Doesn’t bear liability for anyone else
What are the disadvantages of sole proprietorship?
The SP bears all the risks
His business usually dies along with him
When does a business name not need to be registered?
When the person uses a variation of his name:
- Atoyebi
- T. O. Z. Atoyebi
- Tirenioluwa Atoyebi
How long do you have to register a business name?
28 days
Section 574(1) CAMA
What is a partnership?
Two or more people carrying profit making business
Section 19 CAMA
Cannot have more than 20 partners except in the cases of a firm of solicitors or accountants
Can a minor register a business name?
No a minor cannot register a business name but can be a partner as long as the application is countersigned by a magistrate, legal practitioner or police officer above the rank of Cadet ASP
Where the application is permitted it will appear with ‘(a minor)’ written by the name of the minor
When must a registrar refuse to register a business name?
If it was previously involved in fraud
Section 579(4) CAMA
What does the case of Nwankwo v Nwankwo say?
Registration of a business name raises a rebuttable presumption of the existence of a partnership
Why should a partnership agreement be in writing?
- Ease of official transactions
- Ease of dispute resolution
- For clarity regarding the rights and obligations of partners
- To minimise the incidence of bad faith
- To avoid common law presumptions
What documents are needed to register a business name?
- Form CAC/BN/1 Application for registration of business name
- Form CAC 1 Availability check and reservation of name
- Evidence of change of name (for married women)
- 2 x Passport photo/partner
- Evidence of payment of filing fees
- Certificate of proficiency in relevant field
What instructions do you take from a client when registering a business name?
- Name of the business
- Nature of the business
- Full postal address of the principal place of business
- Full names of the partners
- Nationality, age and sex of partners
- Residential address of partners
- Date of commencement of business
- Particulars of husband (for married women)
- Full particulars of principal
- Particulars of corporation
What terms must you include in a partnership agreement to negate common law presumptions?
- Form of partnership
- Withdrawal from Account
- Partnership property
- Profit sharing
- Death of partner
- Suspension/Removal
What is the common law presumption in relation to form of partnership?
Generally partnership is in common by all partners
What is the common law presumption in relation to withdrawal from the company account?
There is generally limitless withdrawal but adding a withdrawal from account clause can fix this
What is the common law presumption in relation to partnership property?
There is a presumption of equal contribution to the partnership property
What is the common law presumption in relation to profit sharing?
There is a presumption of equal share.
What is the common law presumption in relation to death of partner?
Death of a partner usually terminates the partnership
What is the common law presumption in relation to suspension/removal?
Generally, one partner cannot remove another partner
What is the governing document of an Incorporated Trustee?
A constitution
What is an incorporated trustee?
A non-profit making organisation formed by a community of persons bound together by custom, religion, nationality etc.
What is the effect of registration of an incorporated trustee?
It leads to the vesting of legal personality on the trustees of the association
Can a minor be a trustee in an incorporated trustee?
No a minor cannot be a trustee
What clause must be contained in the constitution of an incorporated trustee?
A special clause which expressly prohibits the distribution of profit to members and provides for the transfer of the assets of the body to another organisation with similar objectives
Who is disqualified from being a trustee?
- A person of unsound mind
- An undischarged bankrupt
- A person convicted of an offence involving fraud or dishonesty within 5 years of his proposed appointment
- A minor
Section 592 CAMA
What documents are needed to register an incorporated trustee?
- Form CAC/IT1 Incorporated Trustees Application Form
- Form CAC 1 Availability check and reservation of name
- Minutes of the meeting where trustees were elected and special clauses adopted?
- Two printed copies of Constitution
- Impression of the common seal of the association on the application
- Evidence of ownership of land
- Evidence f publication of advertisement in 2 national newspapers
- Two passport photos of each trustee
- Trustee declaration form sworn before the commissioner of oaths
- Resolution adopting special clause
What instructions do you take from a client wanting to register an incorporated trustee?
- Name of proposed corporate body
- Aims and objectives
- Particulars of Incorporated Trustees
- Particulars of Secretary
- Constitution
- Particulars of minutes of meeting where ITs were elected
- Propose impression of the common seal
Name 5 articles in the Constitution of an incorporated trustee
Any 5 from this list:
- Name
- Address
- Aims & Objectives
- Trustees
- Common Seal
- Meetings
- Sources of Income
- Disbursement and application of funds
- Keeping of Account
- Special Clause
Name 4 similarities between an incorporated trustee and a company limited by guarantee
Any 4 from the list below
- Not for profit
- No share capital
- Exempt from taxation
- They both possess legal personality
- In the event of dissolution/winding up, the remaining assets must be transferred to an association with similar objects
Name 4 differences between an incorporated trustee and a company limited by guarantee
Any 4 areas from the list below
- Advertisement
- Common Seal
- AG Consent
- Governing Document
- Engaging in business
