CHOICE OF BUSINESS ORGANIZATIONS

Question 1

What are the different types of Business Organizations?

Answer 1

1. Companies
2. Sole Proprietorship
3. Partnership
4. Business names

Question 2

Who may not form a company?

Answer 2

1. An Infant(under the age of 18 except two other adults have subscribed to the memo with him)
2. A person of unsound mind
3. An undischarged bankrupt
4. Persons disqualified under section 281 and 283 of CAMA from being a director
5. A company under liquidation

SECTION 20 CAMA

Question 3

What are the advantages of companies as a business organization?

Answer 3

1. Perpetual Succession
2. Limited Liability
3. Availability of funds
4. Management
5. Legal Personality

Question 4

What are the types of companies?

Answer 4

1. Private Company Limited by shares(Ltd)
2. Public Company Limited by shares(Plc)
3. Private Company Limited by guarantee(Ltd/Gte)
4. Private Unlimited Companies
5. Public Company Limited by Guarantee
6. Public Unlimited company

Question 5

What is a Company Limited by Shares?

Answer 5

A limited liability company is a company having the liability of its members at winding up limited by the memorandum to the amount, if any remaining unpaid on the shares held by
them.

Question 6

What are the features of a Private Company?

Answer 6

1. Limited Liability
2. The minimum issued share capital shall not be less than 100k Section 27(2)a
3. Not required to hold statutory meeting-SEC 235
4. Preemptive rights-S 142
5. Written Resolutions for meetings Section 259
6. A single person may form a private company-S 18(2)
7. The name ends with “ltd”-S 29
8. Appointment of over-age directors-Sec 287
9. No special resolution needed for removal of secretaries
10. Financial statements are not published
    11.Appointment of multiple directors through a single resolution-S 235

SECTION 22

Question 7

What are the features of a public company?

Answer 7

1. A minimum of 2 members to start up-No maximum
2. The minimum issued share capital is N2 million
3. Statutory meeting is compulsory
4. Procedure for removal of secretary-SECTION 333
5. Invitation to the public to subscribe to its shares
6. The name ends with “Plc”
7. Public companies cannot appoint overaged directors without giving special notice
8. Qualifications for secretaries- SEC 332

Question 8

When is a public company suitable?

Answer 8

1. Where 50 persons or more wants to join in the formation of the company
2. Where the public can be invited to subscribe to its shares
3. Where having a close relationship is not the main drive for forming a company
4. Where there is relatively large capital of N2,000,000 to start up.
5. Where the sector requires that the company must be a public company before it can operate
6. Where a growing medium or large-scale business needs to acquire incorporated status

Question 9

DIFFERENCES BETWEEN A PRIVATE AND PUBLIC COMPANY?

Answer 9

1. Written Resolutions
2. Appointment of secretaries(the requirements)
3. Minimum issued share capital
4. Members(1-50)(2-unlimited)
5. Appointment of over-aged directors
6. Transfer of shares to the public
7. Statutory meeting-SEC 235
8. Mode of voting(single resolution for multiple directors)-SEC 287
9. Removal of secretaries
10. Register of secretaries-SEC 336

Question 10

What is the 1st Guarantee clause in a company limited by guarantee?

Answer 10

“The income and property of the company shall be applied solely to the promotion of its objects and no part shall be transferred directly or indirectly except with the permission of the commission”

SECTION 26(1)

Question 11

Features of a company limited by guarantee?

Answer 11

1. There is no share capital
2. They can do business but not with the aim of making profit or capital
3. Consent of the AG is required
4. Amount of liability the members will take in the event of the company being wound up is N100,000
5. Cypress-Transfer the company’s assets to another company in the event of winding up.
6. Ends with “GTE”
7. Must contain Guarantee clauses

SECTION 26 CAMA

Question 12

What is the 2nd liability clause in a company limited by guarantee?

Answer 12

“Each member shall undertake to contribute to the assets of the company in the event of the company being wound up, while he is still a member (or within one year after he ceases to be a member) for the payment of debts and liabilities and the cost of winding up, such amount as may be required not exceeding a specified amount and minimum of 100,000”

Question 13

Difference between company limited by shares and company limited by guarantee?

Answer 13

1. LTD is profit oriented, GTE is not.
2. LTD members are entitled to dividend when declared, GTE dividend goes back to the company.
3. Consent of the AG is not needed to register a LTD, consent of AG is needed to register a GTE
4. GTE members are only liable to contribute to the assets of the company in the event of its being wound up. LTD members are liable at anytime
5. Ends with GTE, ends with LTD
6. LTD pay taxes, GTE do not pay taxes

Question 14

Who can register a company?

Answer 14

1. Chartered Accountants
2. Legal Practitioners
3. Chartered Secretaries
   ALSO by the provisions of companies regulations
4. First subscribers
5. First directors

Question 15

Difference between statement of compliance and statutory declaration of compliance?

Answer 15

Previously, the old CAMA required that a statutory declaration of compliance must be made by a LEGAL PRACTITIONER of a company formally to a notary public
This has been replaced with statement of compliance(that can be made by an applicant or his agent)-SEC 40 CAMA

Question 16

What are the steps for incorporation of a company?

Answer 16

1. Take instructions from the promoters
2. Log into CAC website(www.cac.gov.ng)
   -Conduct availability of name by submitting two proposed names
3. Reservation of name
4. Preparation of incorporation documents(list them)
5. Payment of stamp duties and filing fees
6. Fill the pre registration forms and upload.
7. Obtain online certificate of incorporation from CAC

Question 17

How do you take instructions from the promoters?

Answer 17

1. Client Personal Details
2. Date for completion of registration
3. Proposed name of the company(2)
4. Type of business
5. Memberships
6. Restrictions
7. Memo and articles
8. Formalities
9. Costs
   10.Sphere of operations
   11.Objects of the company
10. Capital
11. Subscribers

Question 18

What are the documents required to register a company?

Answer 18

1. Form CAC 1-Availability and Reservation of Name
2. Form CAC 1.1-Application for registration
   3.Duly stamped memo and articles of associations
3. ID for director, subscriber and secretary in the company.
4. Electronic signatures of subscribers, directors, secretary and LP
5. Evidence of payment of stamp duties and filing fees
6. Other documents required for incorporation of a company

Question 19

What are the documents you will submit at FIRS for stamping?

Answer 19

1.2 copies of the MEMART
2. Form CAC 1.1 – Application for Registration of Company.

Question 20

Contents of a Memorandum of association?

Answer 20

1. Name of the company
2. Registered office
3. Objects
4. Restriction
5. Status
6. Liability
7. Share capital
8. Subscription clause

Question 21

What is the EFFECT OF THE MEMORANDUM AND ARTICLES?

Answer 21

-When registered, it shall have an effect of a deed between the company and its members, and the officers and between the members and officers themselves.

Question 22

Can the CAC refuse to register the MEMART of a company?

Answer 22

SEC 41 CAMA
NIDE
1. Non compliance with the provisions of the act or any other law.
2. Illegality
3. Disqualified under section 20.
4 Existing trademark or business name
Any aggrieved person can apply within 21 days

Question 23

What is the effect of certificate of incorporation?

Answer 23

The Certificate of Incorporation shall be prima facie evidence of compliance with the Act, that the association is a company authorised to be registered and is duly registered.

Question 24

What’s the effect of registering a company?

Answer 24

Upon registration, it becomes a legal personality

1. Limited Liability
2. Perpetual succession
3. Can sue and be sued.

Question 25

If a person wants to retain control of the company, what clauses should be included in the articles of association?

Answer 25

**1) APPOINTMENT AS CHAIRMAN 2) APPOINT AS MANAGING DIRECTOR 3) APPOINT AS LIFE DIRECTOR 4) HAVE THE POWER TO APPOINT OR REMOVE DIRECTORS 5) He should be a majority shareholder 6) Must be signatory to all documents and accounts of the company**

Question 26

What is a Small company?

Answer 26

1. A private company 2. One whose annual turnover is not more than 120 million 3. Net assets not more than 60 million 4. No alien participation 5. No government agencies or corporation 6. The directors within themselves hold at least 51% of the company’s share capital **SECTION 394(2)**

Question 27

What are the advantages of small company?

Answer 27

1. Exempted from having a company secretary-330 2. They can have an abridged financial statement- 3. Exempted from having two directors-** S 271(1)** 4. Exempted from holding AGM- 5. Exempted from the requirements of having a secretary-**S 330** 6. Exempted from auditors report and audit committee-**S 402(b)**

Question 28

Innovations of BFA on CAMA?

Answer 28

1. Additional grounds for exemption of foreign companies- **S 78** 2. Increase in Share capital- **S127** 3. Pre-Emption clause for private companies(if the offer is not accepted within 21 days, it is deemed declined)-**S 142** 4. Return of Allotment(from 1 month-15 days)-**S 154** 5. Electronic share certificate-**S 171** 6. Electronic meetings- **S 240** 7. Electronic Voting-**S 248** 8. Independent Director-**S 275**

Question 29

When can a public company be recommended?

Answer 29

1. Where the family ties or personal relationships are not the main drive for the business relationship 2. Where there are 50 persons or more interested in the forming of the company 3. Where there is a relatively large capital 4. Where the sector requires that the company should be a public company 5. Where the company plans on offering the shares to the public 6: Where it is envisaged that a small scale business will turn into a large scale business **S 24 CAMA**

Question 30

What are the features of a company limited by guarantee?

Answer 30

**S 26** 1. The members are jointly/severally liable 2. There is no share capital 3. Not entitled to dividend 4. In the event of the company being wound up, the shares shall be transferred cypress. 5. Consent of the AG-**30 days** where it is withheld, publish in **3 newspapers** asking for objections 6. Name

Question 31

What are prohibited names?

Answer 31

**S 852(1) ICMV 1. Identical names 2. Chamber of commerce(except it is a company limited by guarantee) 3. Misleading names 4. Violating names -Nationality, race, religion -Deceptive or objectionable -capable of undermining public peace.

Question 32

What are restricted names?

Answer 32

**S 852(2) CAMA** 1. Government-National, State, Regional 2. Municipal or Chartered 3. Cooperative/building society 4. Group/Holding Any name that suggests the government’s patronage can only be used subject to the confirmation by the CAC because they are restricted.

Question 33

What is the effect of the object clause?

Answer 33

it is a statement of mere intention & the company would not be wound up for failure to carry out all the objects as stipulated in its object clause. It also protects the investors & creditors **EDOKOPOLOR V SEM EDO WIRE**

Question 34

Draft the subscription clause?

Answer 34

“We, whose names and address are subscribed to herein, are desirous of being formed into a company, in pursuance to the memorandum of association and we respectively agree to take the number of shares indicated opposite our names”

Question 35

How to take instructions from promoters or your client during client interview to incorporate a company for the client?

Answer 35

1. Clients personal details i.e name, address, phone number, email, nationality 2. Name and alternative name of the company 3. Registered address 4. Object of the company-SEC 51 5. Status of the company 6. Type of the company 7. Particulars of directors, secretaries and subscribers 8. Issued share capital 9. Particulars of significant shareholders 10. Membership 11. Date for completion of registration.

Question 36

Steps for online availability check and reservation of name of the proposed company?

Answer 36

-Create an account with www.cac.gov.ng & log in. -Check for availability of two proposed names & reserve it(valid for 60 days) -Select the type of company -Click on preview -Pay the required fees & make an online payment through remita -Check your account after 24 days to see the status of the available name.

Question 37

Can a non lawyer register a company?

Answer 37

YES! The executive order of the ease of doing business and CAMA 2020 allows direct registration of companies by ONLY BY **first directors and subscriber** You must be a member or director in that company to register it, if you are not a member, you must be accredited.

Question 38

What happens when an AG refuses to register a company?

Answer 38

The Attorney General of the Federation shall, within **30 days**, grant authority to register a company limited by guarantee where there are no objections or any other cogent reason to refuse the grant. Where the AGF refuses to make a decision within 30 days of submitting an application for approval to register a company limited by guarantee, the promoters of the company shall place an advertisement in three national daily newspapers inviting objections **SEC 26**

Question 39

Why should one go for company limited by guarantee over incorporated trustees?

Answer 39

A company limited by guarantee is the most preferred option because the research centre is intended to generate income in form of a business, but the income will be ploughed back for further research. See **Section 26 of CAMA**. An Incorporated Trustee will not be able to fulfil this purpose because they are not allowed to do business for money at all.