FORMATION AND INCORPORATION OF COMPANIES IN NIGERIA

Flashcards on the Formation and Incorporation of Companies in Nigeria based on lecture notes.

What are the types of companies registrable under Part B of CAMA 2020?

Company Ltd/Shares, Company Ltd/Gtee, Unlimited Liability Coy

Who can form a company under CAMA?

Persons, government, and corporate persons.

What is an innovation of CAMA 2020 regarding company subscribers?

Sole subscriber only for private company.

What is the capacity of minors and foreigners in company formation?

Minors can if there are 2 other members who are not minors, foreigners can join others or own a Nigerian company 100%.

Who lacks the capacity to form a company?

A company in liquidation, undischarged bankrupt person, a person of unsound mind, disqualified under Sec 281 & 283.

What factors affect the choice of companies to be formed?

Nature of business, size of the proposed business, and capital requirement.

What is the minimum capital requirement for private and public companies?

Private Company – N100,000; Public Company – N2,000,000

What is the difference between a Common Seal and an Official Seal?

Common Seal authenticates contractual documents, Official Seal is a replica for use outside Nigeria.

What details are required for proposed shareholders?

Name, Address, Age, % shareholding.

What details are required for the first directors of a company?

Name, age, Means of ID, info on Directorship in other companies, type of Director intended, % shareholding

For what purposes is a Company Limited by Guarantee formed?

To promote commerce, art, science, religion, sport, culture, education, research, charity or other similar objects.

What must be included in the name of a Company Limited by Guarantee?

Name to include “Limited by guarantee” Ltd/Gte.

When is a Company Limited by Guarantee recommended?

Where the company’s object is for promotion of commerce, art, science, etc., and profit is not to be distributed to members.

What is an unlimited company?

A company not having any limit on the liability of its members.

What is the liability of members in a Company Limited by Share?

Liability limited to the amount, if any, remaining unpaid on the shares held.

What are the key features of a private company?

Stated in memo that it is a private company, authorized minimum share capital is N100,000, restricts transfer of shares, members shall not exceed 50, name ends with Limited (Ltd).

When is a private company recommended?

Where the capital available to start off business is relatively small, or where family and friends want to engage in business expected to last over a long period.

What are the features of a public company?

It is stated in its memorandum to be a public company, can invite members of the public to subscribe its shares, unlimited number of members, name ends with “Public Limited Company” Plc.

When is a public company recommended?

Where medium or large scale business needs to acquire corporate status, capital is relatively large, and the business organization would have access to public funds.

What questions should be asked during a client interview for formation of business organization?

What is your full name, what is the nature of business, what location do you have in mind, what sphere do you expect the business to cover, how many persons to start up the business.

What personal details are needed from shareholders during client interviews?

Name in full, nationality, gender, age, residential address

What details are required for directorship during client interviews?

Age, qualification/expertise, mental capacity, number of directors, contact address.

What aspects should be covered regarding the sphere/dimension of business?

Need for registered office address in Nigeria, and advantages and incentives in export promotion, manufacturing and rural location.

What details are needed for the Registered Office Address?

Number, Street, Quarters/District, Town, LGA, State.

What are the aspects of control and management that should be discussed?

Use of Common Seal, Life Director, Chairman, Majority Shareholding, Preferential shareholding, Power to appoint and remove Director, Compulsory signatory to the account.

What details are required regarding the Company Secretary?

Name of Company Secretary, Qualifications, Personal Details

Why is it important to determine the nature and objects of business?

This will help the Solicitor to advise along share capital prescription, need for proficiency certificate, obtaining needed permits, licence, approval and consents, and regulatory agencies.

What should be discussed regarding the proposed name of the business during client interview?

Preferred name and Alternative Name.

What are Prohibited Corporate Names?

Names that cannot be approved because of their illegal, offensive or deceptive nature.

What are some examples of Restricted Corporate Names?

Name which contains the word “National”, “Government”, “ Municipal”, “State”, Federal”, “Regional” which in the opinion of the CAC suggests or is calculated to suggest that it enjoys the patronage of the Federal /State Government Nig. or any ministry or dept

What are the other documents/items required for incorporation?

Memorandum and Articles of Association, Original receipts of registration fees, stamp duties and compliance oath, Any other Document required by any other law /Regulation .

What are the statutory forms needed for incorporation of companies limited by Guarantee?

FORMC CAC 1- Availability and Reservation of name, FORM 1.1 with Notice of registered office and address; Declaration of compliance with the requirement of CAMA and Particulars of first Directors

What are the needed statements for company registration?

Statement of Capital & Shareholding, Guarantee, Proposed Directors, Compliance.

When can CAC refuse Registration?

Non compliance with CAMA, Business object not legal, Incompetent subscriber, Objection to name, Non compliance with any other law.

What are the types of companies registrable under Part B of CAMA 2020?

Company Ltd/Shares, Company Ltd/Gtee, Unlimited Liability Coy

Who can form a company under CAMA?

Persons, government, and corporate persons.

What is an innovation of CAMA 2020 regarding company subscribers?

Sole subscriber only for private company.

What is the capacity of minors and foreigners in company formation?

Minors can if there are 2 other members who are not minors, foreigners can join others or own a Nigerian company 100%.

Who lacks the capacity to form a company?

A company in liquidation, undischarged bankrupt person, a person of unsound mind, disqualified under Sec 281 & 283.

What factors affect the choice of companies to be formed?

Nature of business, size of the proposed business, and capital requirement.

What is the minimum capital requirement for private and public companies?

Private Company – N100,000; Public Company – N2,000,000

What is the difference between a Common Seal and an Official Seal?

Common Seal authenticates contractual documents, Official Seal is a replica for use outside Nigeria.

What details are required for proposed shareholders?

Name, Address, Age, % shareholding.

What details are required for the first directors of a company?

Name, age, Means of ID, info on Directorship in other companies, type of Director intended, % shareholding

For what purposes is a Company Limited by Guarantee formed?

To promote commerce, art, science, religion, sport, culture, education, research, charity or other similar objects.

What must be included in the name of a Company Limited by Guarantee?

Name to include “Limited by guarantee” Ltd/Gte.

When is a Company Limited by Guarantee recommended?

Where the company’s object is for promotion of commerce, art, science, etc., and profit is not to be distributed to members.

What is an unlimited company?

A company not having any limit on the liability of its members.

What is the liability of members in a Company Limited by Share?

Liability limited to the amount, if any, remaining unpaid on the shares held.

What are the key features of a private company?

Stated in memo that it is a private company, authorized minimum share capital is N100,000, restricts transfer of shares, members shall not exceed 50, name ends with Limited (Ltd).

When is a private company recommended?

Where the capital available to start off business is relatively small, or where family and friends want to engage in business expected to last over a long period.

What are the features of a public company?

It is stated in its memorandum to be a public company, can invite members of the public to subscribe its shares, unlimited number of members, name ends with “Public Limited Company” Plc.

When is a public company recommended?

Where medium or large scale business needs to acquire corporate status, capital is relatively large, and the business organization would have access to public funds.

What questions should be asked during a client interview for formation of business organization?

What is your full name, what is the nature of business, what location do you have in mind, what sphere do you expect the business to cover, how many persons to start up the business.

What personal details are needed from shareholders during client interviews?

Name in full, nationality, gender, age, residential address

What details are required for directorship during client interviews?

Age, qualification/expertise, mental capacity, number of directors, contact address.

What aspects should be covered regarding the sphere/dimension of business?

Need for registered office address in Nigeria, and advantages and incentives in export promotion, manufacturing and rural location.

What details are needed for the Registered Office Address?

Number, Street, Quarters/District, Town, LGA, State.

What are the aspects of control and management that should be discussed?

Use of Common Seal, Life Director, Chairman, Majority Shareholding, Preferential shareholding, Power to appoint and remove Director, Compulsory signatory to the account.

What details are required regarding the Company Secretary?

Name of Company Secretary, Qualifications, Personal Details

Why is it important to determine the nature and objects of business?

This will help the Solicitor to advise along share capital prescription, need for proficiency certificate, obtaining needed permits, licence, approval and consents, and regulatory agencies.

What should be discussed regarding the proposed name of the business during client interview?

Preferred name and Alternative Name.

What are Prohibited Corporate Names?

Names that cannot be approved because of their illegal, offensive or deceptive nature.

What are some examples of Restricted Corporate Names?

Name which contains the word “National”, “Government”, “ Municipal”, “State”, Federal”, “Regional” which in the opinion of the CAC suggests or is calculated to suggest that it enjoys the patronage of the Federal /State Government Nig. or any ministry or dept

What are the other documents/items required for incorporation?

Memorandum and Articles of Association, Original receipts of registration fees, stamp duties and compliance oath, Any other Document required by any other law /Regulation .

What are the statutory forms needed for incorporation of companies limited by Guarantee?

FORMC CAC 1- Availability and Reservation of name, FORM 1.1 with Notice of registered office and address; Declaration of compliance with the requirement of CAMA and Particulars of first Directors

What are the needed statements for company registration?

Statement of Capital & Shareholding, Guarantee, Proposed Directors, Compliance.

When can CAC refuse Registration?

Non compliance with CAMA, Business object not legal, Incompetent subscriber, Objection to name, Non compliance with any other law.

Why is financial record keeping important for companies?

To ensure accountability and transparency in financial reporting.

What is company incorporation?

The process of formally registering a company with the relevant authorities, such as the Corporate Affairs Commission (CAC) in Nigeria.

What are Articles of Association?

These are the rules and regulations governing the internal affairs of a company, including the rights and responsibilities of shareholders and directors.

What is a Memorandum of Association?

A document that outlines the company's name, objectives, registered office address, and the authorized share capital.

What is authorized share capital?

A company's authorized share capital is the maximum amount of share capital that the company is allowed to issue to shareholders.

What is paid-up capital?

Refers to the actual amount of capital that shareholders have paid to the company in exchange for shares.

Who are the directors of a company?

The individuals appointed to manage the company's affairs and make strategic decisions.

What is the role of a company secretary?

A company officer responsible for administrative and compliance matters, ensuring the company complies with legal and regulatory requirements.

What are preference shares?

Shares with preferential rights, such as priority in dividend payments or return of capital, over ordinary shares.

What is a rights issue?

When a company issues additional shares to existing shareholders in proportion to their existing shareholding.

What are shareholders' meetings?

Meetings held by shareholders to discuss and make decisions on company matters, such as electing directors and approving financial statements.

What is a written resolution?

A written resolution passed by shareholders instead of holding a formal meeting.

What is a dividend?

The distribution of a company's profits to its shareholders, typically paid in cash or shares.

What are financial statements?

Financial statements that provide an overview of a company's financial performance and position, including the balance sheet, income statement, and cash flow statement.

What is an audit?

An independent examination of a company's financial records to ensure accuracy and compliance with accounting standards.

What is liquidation?

The process of winding up a company's affairs, selling its assets, paying off debts, and distributing any remaining assets to shareholders.

A legal process where a company is unable to pay its debts