TABLE OF CONTENTS
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Declaration
Certification
Dedication
Acknowledgement
Table of Contents
Table of Abbreviations
Table of cases
Table of statutes
Preface
Abstract
CHAPTER ONE
INTRODUCTION
1.1 Meaning, nature and scope of a company
1.2 Critical analysis
1.3 Types of companies
1.3.1 Private company
1.3.2 Public company
1.3.3 Company limited by shares
1.3.4 Company limited by guarantee
1.3.5 Unlimited company
1.3.6 Statutory company
1.4 A brief history of company law in Nigeria
1.5 The legal implications of incorporation
1.6 Registration of a company: the lawyer’s role
1.6.1 The effect of incorporation
1.7 Doctrine of incorporation
1.7.1 Corporate personality and legal responsibility
CHAPTER TWO
2.0 Pre-incorporation contracts
2.1.1 Pre-incorporation contract at common law
2.1.2 Pre-incorporation contracts under the company and allied matters act, 1990 (CAMA)
2.2 Reliefs and ratification
2.3 Who is a promoter?
2.3.1 Role and duties of promoters
2.3.2p0; Duty of disclosure
2.3.3 Duty to account
2.3.4 Duty of care and skill
2.4 Remedies for breach of promoter’s duties
2.4.1 Rescission of the contract
2.4.2 Action for recovery of secret profit
2.4.3 Other remedies
2.5 Remuneration of the promoters
CHAPTER THREE
3.0 The concept of the veil of incorporation
3.1 Meaning of the concept
3.2 Lifting the veil of incorporation
3.2.1 Statutory lifting of veil
3.2.2 Reduction of membership below the statutory minimum
3.2.3 Fraudulent trading
3.2.4 Signing of negotiable instruments
3.2.5 Misdescription of company
3.2.6 Relationship between holding and subsidiary companies
3.2.7 Taxation
3.3 Judicial lifting of the veil
3.3.1 Agency relations
3.3.2 Fraud or improper conduct
3.3.3 Trust
3.3.4 Public policy
3.3.5 Other instances
CHAPTER FOUR
4.0 The consequences of incorporation
4.1 The corporate personality principle
4.2 Sue and be sued
4.3 Perpetual succession
4.4 Limited liability
4.5 Power to borrow
4.6 Power to transfer shares
4.7 Power to contract
4.8 Power to own property
4.9 Contract of employment
4.10 Other consequences
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.0 Introductions
5.1 Summaries
5.2 Conclusions
5.3 Recommendations
Bibliography
ABSTRACT
This is a thesis which discussed the topic “The twin concepts of corporate personality and lifting the veil of incorporation under the Nigerian company law. The indispensability of this aspect of our law has propelled this research so as to enable the readers have some fundamental knowledge about company law and practice in Nigeria. This legal research is divided into five chapters.
The first chapter deals basically with the general introduction. Chapter two examines pre-incorporation contracts viz-a-viz pre-incorporation contract at common law and under the CAMA 1990. The role of promoters, the remedies for breach of promoters duties as well as the remuneration of promoters are also examined.
Chapter three gives us a proper understanding of lifting the veil of incorporation as well as the various ways in which the veil of incorporation could be lifted. Chapter four reviews the consequences of incorporation as it relates to both private and public companies.
Lastly, chapter five deals with the general conclusion and recommendations to solve some of the problems confronting company law and practice with particular emphasis to the subject matter of this research.
CHAPTER ONE
INTRODUCTION
1.1 MEANING, NATURE AND SCOPE OF A COMPANY
A general review of the relevant texts on company law and practice in Nigeria, and indeed within the commonwealth, will reveal that many authors have hold different opinions as to the meaning of the term “Company”.
This is because, just as we have many authors on company law and practice around the globe, so also exist different conceptions as to the meaning of a company. Added to this is the fact that certain problems are usually associated with arriving at a universally acceptable definition of some legal terms. It has been observed that the word “Company”, has a variable disposition.
L.C.B. Gower opined that a company is an association of number of people for some common object or objects purely for economic reason(s).
A company has also been viewed as an intangible business entity or association formed by people or groups for the purpose of carrying out defined and common objective or objectives usually for gain
Similarly, Oshorn’s Law Dictionary defines a company as incorporated body with separated legal personality.
It is an association of persons formed for the purpose of some business or undertaking, carried on in company’s name
The foregoing therefore explains why section 18 of the Company and Allied Matters Act (CAMA) 1990 provides thus:- “As from the commencement of the Act, any two or more persons may form and incorporate a company by complying with the requirements of the Act in respect of registration of such company” .
The intendment of this provision is that a company may be regarded as a legal framework whereby at least two persons agree to carryon business whether equally or otherwise with predetermined object (economic gain or charitable reason) be it they practice directly or otherwise in running of the business provided they complied with the provisions of the enabling legislation.
for the incorporation of the companies thereby attaining a distinct legal personality which is autonomous of its shareholders or its subscribers.
For the purpose of this research, a company can simply be defined as a legal entity or corporate body which is brought into being by the registration procedures laid down by the Nigerian Companies and Allied Matters Act, 1990.
The Company and Allied Matters Act, 1990 provides that:
“a company or an existing company means company formed and registered under this Act, or as the case may be formed and registered in Nigeria and in existence on the commencement of this Act”.
From the above provision, it is illegal for an association consisting of more than twenty persons to operate a business for profit or gain unless such an association is registered as a company under the Company and Allied Matters Act, 1990 or such company is formed in pursuance of some other enactment in force in Nigeria.
However, a company can be formed for reasons other than profit motive. And a company, whether incorporated or otherwise, can be formed with only two members.
This situation more often than not applies to private companies whereby the minimum members are two while the maximum is fifty.
1.2 CRITICAL ANALYSIS
We have seen in the preceding phase that an attempt to arrive at a definite definition of the word “Company” is unrealizable, it is also very pertinent to note that it is not in all cases that companies are formed for the purpose of profit maximization. This is because there are instances where companies are formed solely for charitable reasons. It is in view of this fact, that the Nigerian Companies and Allied Matters Act 1990 states that:
“Where a company is to be formed for promoting commerce, art, science, religion, sports, culture, education, research, charity or other similar objects, and that the income and property of the company are to be applied solely towards the promotion of its objects and no portion thereof is to be paid or transferred directly or indirectly to the members of the company shall not be registered as a company limited by shares but may be registered as a company limited by guarantee”.
The inference from the above is that a company limited by guarantee is that company that is formed for charitable purposes and not for profit motive.
Moreover, it is worthy to note that a company whether incorporated or not could be brought into an existence by only two members, one of whom may possess an overwhelming majority shares while the others may be a mere dormant or sleeping member. This has however negated the believe that a company can only be formed by many people with equal or at least fairly balanced interest.
Furthermore, a further analysis of the word “company” will show to a great extent that, that there is no clear demarcation between the members of a company and a manager of a company. Therefore for a proper understanding of the term under study, recourse should be had to both the statutory provisions as well as some of the contributions from various authors on company law and practice.
Therefore, this work would be better appreciated if the word “company” could be viewed from the perception of that legal organization where at least two persons have agreed to float a company or business in question, either on an equal proportion or otherwise, to carryon some specific charitable purpose or for other purposes whether or not participate directly or indirectly in the management of the business concerns, and have complied with the relevant requirements of the Act, with regard to registration of a company and afforded itself a distinct legal personality thereby of conducting the business as an artificial person.
1.3 TYPES OF COMPANIES
Having attempted the various ways in which the word “Company” could be defined, it is hyperactive to also look at the different types of companies with particular reference to their structure, purpose and functions as this would help us in further appreciation of the concept – company
Basically, there are five types of companies, namely:
(i) Private Company
(ii) Public Company
(iii) Company Limited by Shares
(iv) Company Limited by Guarantee
(v) Unlimited Company
1.3.1 PRIVATE COMPANY
A private company is a company that restricts the right to transfer its share and limits the number of its member to 50, not including the persons who are in the employment of the company and person who having been formerly in the employment of the company who were while in that employment and having continued after the determination of that employment to be members of the company, and prohibit any invitation to the public to subscribe for any shares or debenture of the company. Minimum share capital of a private company is N10,000.00.
According to section 22 of the Company and Allied Matters Act, 1990, a private company is one which states in its memorandum to be private company. It has the following features among others:
(a) It shall be restricted from transfering its shares without due consultation with other members?
(b) Its members shall not exceed fifty not including person who are bonafide in the employment of the company or were while in that employment and have continued after the determination of that employment to be members of the company.
(c) It is not, unless authorized by law to invite the public to subscribe for any shares or debentures of the company or deposit money for fixed period or payable at call, whether or not bearing interest.
1.3.2 PUBLIC COMPANY
The Act merely declares that any company other than a private company shall be a public company and its memorandum shall state that it is a public company The main features of public company are: It can, unlike private company transfer its shares freely to the public without any restriction.
Also, there is no seal as to the membership of public companies. Besides, a public company can invite the public subscribers for its shares and debentures. The minimum, capital requirement of a public company is N500,000.00.
1.3.3 COMP ANY LIMITED BY SHARES
This is a type of company having the liability of its members limited to the amount if any unpaid on the shares respectively held by them. Here, a member who has paid for his share in full cannot be held liable for the debts of the company unless in particular cases in which the shareholder’s liability is extended.
Conversely, where a shareholder has an outstanding sum on his shareholding, he can be called upon to pay a duly authorized collard and this is so whether or not the company is being wound.
1.3.4 COMPANY LIMITED BY GUARANTEE
A company limited by guarantee is that company which is formed for the promotion of commerce, art, science, religion, sports, culture education, research, charity or other similar objects, and the income and property of the company are to be applied solely toward the promotion of its objects and no portion thereof is to be paid directly or indirectly to the members of the company except as permitted by this Act, the company shall not be registered as a company limited by share, but may be registered as a company limited by guarantee.
Moreover, a company limited by guarantee shall not be registered without the authority of the Attorney General of the Federation.
In the event of winding up, the liability of members of a company limited by guarantee is limited to such an amount as the members may respectively thereby undertake to contribute to the assets of the company.
1.3.5 UNLIMITED COMPANY
An unlimited company is a company where the liability of the members is unlimited. Here, every member is personally liable in full for the debts of the company while still a member. An unlimited company can register with twenty members, but the directors may from time to time register an increased number of members.
An unlimited company under the Nigerian Companies and Allied Matters Act, 1990 must be registered with a share capital and all existing unlimited companies must not later than association so that it becomes an unlimited company having a share capital not below the minimum share capital permitted under section 99 of CAMA.
1.3.6 STATUTORY COMPANY
There are companies brought about by statute. Their power, purpose, management and functions are as stated in the enabling Act. A profit is not the major main aim of setting up these companies but basically for government to provide an important social amenity. These companies’ major or only shareholder is the Government, the Directors and top managers are appointed by Government and they do not have share capital.
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