Corporate Law Practice in Nigeria

Flashcards covering key legislations, regulatory bodies, company types, corporate governance principles, share and debenture concepts, capital market operations, corporate restructuring, dispute resolution, and insolvency practices in Nigerian corporate law. Also includes business and non-business organizations like business names, partnerships, and incorporated trustees.

Companies and Allied Matters Act (CAMA) 2020

A primary legislation for corporate law and practice in Nigeria, supported by subsidiary laws like Companies Proceeding Rules 1992, Companies Regulation 2021, and Companies Winding-up Rules 2001.

Investment and Securities Act (ISA) 2007

A legislation primarily for public companies in Nigeria.

Nigerian Investment Promotion Commission Act (NIPCA)

A legislation relevant for foreign investments in Nigeria.

Corporate Affairs Commission (CAC)

Established by S 1 CAMA, it is a body corporate responsible for the administration of CAMA, including the regulation and supervision of company formation, incorporation, registration, management, and winding up. It maintains the Companies Registry and conducts investigations into company affairs.

Pre-action notice (S.17 CAMA 2020)

A written notice of intention to commence a suit against the Corporate Affairs Commission, required 30 days before litigation, stating the cause of action, particulars of claim, intending plaintiff's name and abode, and relief(s) sought.

Registrar-General (CAC)

The Chief Executive of the Corporate Affairs Commission, who must be a legal practitioner with at least 10 years of qualification and 8 years of experience in Company law practice or administration.

Securities and Exchange Commission (SEC)

The apex regulatory organization for the Nigerian capital market, headed by a Director-General. Its functions include registering securities and capital market operators, assisting promoters, levying fees, intervening in failing operators, freezing assets, and regulating cross-border securities transactions.

Central Securities Clearing System (CSCS)

A subsidiary of the Nigerian Stock Exchange, licensed by SEC, that handles central depository, clearing, and settlement services for transactions in the Nigerian stock market.

National Office for Technology Acquisition and Promotion (NOTAP)

An office whose functions include promoting investments of foreign technology, assisting investors, registering contracts involving foreign technology transfer, issuing Certificates of Registration, and monitoring contract execution. Contracts involving foreign technology transfer must be registered with NOTAP within 60 days from execution.

Effect of Non-Registration (NOTAP)

No repatriation of funds through the official market for contracts registrable with NOTAP but not registered, as per S. 7 NOTAP ACT.

Nigerian Investment Promotion Commission (NIPC)

A commission that encourages, promotes, and coordinates investment in the Nigerian economy. Its functions include enhancing the investment climate, promoting investments, disseminating information on opportunities, registering enterprises, identifying projects, participating in promotional activities, assisting investors, registering companies for pioneer status, giving guarantees to foreign companies, and establishing the One Stop Investment Center (OSIC).

One Stop Investment Center (OSIC)

Created by NIPC to ease doing business in Nigeria, it is a single point where various major agencies set up desks to attend to customers.

Accredited Professionals (CAC)

Legal practitioners, chartered accountants, and chartered secretaries (or their firms) who are duly accredited to deal with the Corporate Affairs Commission, according to S. 8(1)(e) of CAMA.

Capital Market Operator (CMO)

A person registered with the Securities and Exchange Commission to operate as a capital market expert or carry on investment and securities business, as per S 38 ISA.

Private Company Limited by Shares (Ltd)

A company stated in its memorandum to be private, with member liability limited to unpaid shares. Its features include being formed by one person, possible share transfer restrictions, total membership not exceeding 50, prohibition from public share invitation (unless authorized), minimum issued share capital of N100,000, and its name ending with 'Ltd'.

Public Company Limited by Shares (Plc)

Any company other than a private company, expressed in its memo to be public, with member liability restricted to unpaid shares. Features include publishing financial statements, a minimum of 2 members with no maximum, ability to raise money from the public, minimum issued share capital of N2,000,000, and its name ending with 'Public Limited Company (PLC)'.

Private Company Limited by Guarantee (Ltd/Gte)

A company where member liability is limited to an amount undertaken to contribute to assets upon winding up. It is formed for promoting commerce, art, science, religion, sports, culture, education, research, charity, or similar objects, with income applied solely to these objects and no distribution to members. It does not have a share capital.

Private Unlimited Company (Unlimited)

A company without any limit on the liability of its members. It possesses separate legal personality but members do not enjoy limited liability. It must be incorporated with a share capital and its name ends with 'Unlimited'.

Mandatory Clauses in a Memorandum of Association (S. 27(1) CAMA)

Name of the company, registered office address, business object, restrictions on powers, status, liability of members, capital clause, subscription clause, date, and attestation.

Prohibited Names (S. 852 CAMA)

Identical names, names containing 'chamber of commerce' (unless Ltd/Gte), misleading names, names violating existing trademarks, names suggesting association with foreign government/international organizations, or names capable of undermining public peace and national security.

Restricted Names (S. 852(2) CAMA)

Names containing words like 'Federal', 'National', 'Regional', 'State', 'Government', 'municipal', 'chartered', 'cooperative', 'building society', 'group', or 'holding', which require special consent from CAC and relevant authorities.

Statutory Small Company (S 394 CAMA)

A private company with a turnover not exceeding N120,000,000 (or as fixed by the commission), net asset value not exceeding N60,000,000 (or as fixed by the commission), no alien members, no government or corporation as a member, and directors holding at least 51% equity share capital.

Promoter (S. 85 CAMA)

Any person (natural or artificial) who undertakes to take part in forming a company with reference to a given project, setting it up, and raising capital for it. It excludes professionals acting solely in a professional capacity.

Fiduciary Relationship (Promoter and Company)

The legal relationship between a promoter and a company, characterized by utmost good faith, requiring duties such as accounting for money/properties, not making secret profits, not exploiting confidential information, disclosing conflicts of interest, and acting diligently and honestly.

Pre-incorporation contracts (S. 96 CAMA)

Contracts entered into on behalf of a proposed company before its formation, which can be ratified by the company after its formation, making the company bound by and entitled to the benefits of such contracts as if it existed at the time of the contract.

Ratification of Pre-incorporation Contracts (S.86(3) CAMA)

Requires full disclosure and can be done by the Board of Directors independent of the promoter, all members of the company, or the company at a general meeting (excluding votes from interested promoters/shareholders).

Shareholders' Agreement

A contract between parties to it, specifying terms related to management, dividends, confidentiality, transfer of shares, and other key provisions. In case of conflict with the Memorandum and Articles of Association, the latter prevails.

CAC Refusal of Registration (S 41 CAMA)

Reasons include non-compliance of memorandum/articles with CAMA, illegal business/object, incompetent/disqualified subscribers, or conflict with existing company/trademark/business name.

Foreign Direct Investment (FDI)

When foreigners participate in business by taking over existing Nigerian companies, merging, or incorporating new companies in Nigeria, representing foreign ownership of productive assets.

Foreign Portfolio Investment (FPI)

The entry of funds into a country where foreigners make purchases in the country’s stock and bond markets, such as investing in shares of a Nigerian company.

Expatriate Quota

Written consent from the Chief Federal Immigration Officer allowing a Nigerian or foreign company to employ aliens/foreigners for specific jobs, not applicable to government employment. It does not negate the need for a work permit.

Combined Expatriate Resident Permit and Aliens Card (CERPAC)

Also known as a green card, it is a document that allows a non-Nigerian to reside and work in Nigeria, dispensing with the need for a separate residence permit and work permit, though a visa is still required (except for ECOWAS citizens).

Annual Return (S. 417 CAMA)

Every company must make and deliver to CAC an annual return at least once a year, containing specified matters. The obligation to file annual returns starts after eighteen (18) months of incorporation.

Corporate Search

The process of accessing public documents filed at the Corporate Affairs Commission to reveal irregularities, determine corporate status, check priority of names, verify information for bank accounts/credit facilities, investigate companies, or identify encumbrances.

Alteration of Memorandum of Association

Can only be altered in cases, manners, and to the extent expressly provided under CAMA, except for changes like the substitution of 'Public Limited Company' for 'Limited' or vice versa during company conversion (S. 50 CAMA).

Compulsory Change of Name (S. 30(1) CAMA)

Occurs when a company has a name similar to an already registered name, prompting the CAC to direct a change within 6 weeks, or after a successful 'passing off' action in court.

Re-registration of Private Company to Public Company (LTD-PLC) (S. 56 CAMA)

A conversion process involving Board and Special Resolutions, requiring conditions such as minimum nominal share value of N2,000,000, at least 25% of allotted shares paid up, and a balance sheet not older than 7 months before application.

Reduction of Share Capital (S. 130 and 131 CAMA)

Requires authorization by the Company's Articles of Association and a Special Resolution, confirmation by the court, and a Scheme of Reduction. All four conditions are conjunctive.

Corporate Governance

The mechanism of internal and external controls over the actions and inactions of a company's organs, ensuring compliance with public policy, acting in stakeholder interest, and preventing corporate failure and abuse.

Stakeholder Theory

Posits that a company should operate in the best interests of all stakeholders (shareholders, management, employees, creditors, society, government), not just the shareholders.

Agency Theory

States that the officers (directors) of a company are agents of the shareholders (principals) and should work in their best interests.

Stewardship Theory

Suggests that management or directors are stewards of the shareholders and are expected to use their best skills to work for the company's benefit.

Director

A person duly appointed by the company to direct and manage its business (dejure director), also including anyone occupying such position by whatever name called or acting on whose instructions the directors are accustomed to act (de facto or shadow director) (S 269(1), S 868 CAMA).

Independent Director (S.275 CAMA)

A director of a public company (at least one-third of the total) who, or whose relatives, has no significant employment, financial, or auditing ties with the company for the past two years, ensuring ethical operation.

Special Notice (S. 261 CAMA)

A notice given to the company at least 28 days before a meeting, required for resolutions concerning director removal (S. 288 CAMA), appointing/re-appointing a director over 70 years old (S. 282 CAMA), or certain auditor appointments/removals (S. 411 CAMA).

Company Secretary (S. 330(1) CAMA)

Every company, except a small company, must have a secretary. For public companies, specific qualifications (legal practitioner, chartered accountant/secretary, or experienced secretary) are required (S.332 CAMA).

Member of a Company (S. 105 CAMA)

A person who owns at least one share or an interest attracting voting rights in a company, and whose name is listed in the company's register of members. Subscribers to the MEMART are automatically members.

Statutory Meeting (S. 235 CAMA)

Every public company must hold a general meeting within six months of its incorporation, with 21 days' notice. The meeting considers the statutory report, which details share allotment, cash received, directors, auditors, pre-incorporation contracts, and financial summaries.

Annual General Meeting (AGM) (S. 237 CAMA)

Every company (except small companies or single shareholder companies) must hold an AGM each year, within 18 months of incorporation for the first, and not more than 15 months between subsequent AGMs. It transacts ordinary business like dividend declaration, financial statement presentation, director/auditor elections, and audit committee appointments.

Extraordinary General Meeting (EGM) (S. 239 CAMA)

A general meeting held at any time to transact urgent business that cannot wait for the next AGM. It can be convened by the Board of Directors, a resigning auditor, or by member(s) holding the required percentage of shares/voting rights (1/10th).

Proxy (S. 254(1) CAMA)

Any member of a company entitled to attend and vote at a meeting can appoint another person (member or not) as their proxy to attend and vote on their behalf. In a company limited by guarantee, the right to appoint a proxy is not automatic but must be provided for in the articles.

Quorum (S. 256 CAMA)

The minimum number of members required to be present for a general meeting to validly transact business. Unless specified otherwise in the articles, it is 1/3 of the total members or 25 members (whichever is less) present in person or by proxy, and must subsist throughout the meeting.

Ordinary Resolution (S. 258(1) CAMA)

A resolution requiring a simple majority (at least 51%) of votes cast by members entitled to vote in person or by proxy at a general meeting.

Special Resolution (S. 258(2) CAMA)

A resolution passed by a 3/4 majority (75%) of votes cast by members present and voting, after 21 days' notice specifying the intention to propose the resolution.

Written Resolution (S. 259 CAMA)

A resolution signed by all members entitled to attend and vote in a private company, which is as valid and effective as if passed in a general meeting. It is not permissible for public companies.

Accounting Records (S. 374(1) CAMA)

Day-to-day records of a company's financial activities that must be kept to disclose its financial position accurately and form the basis for financial statements. They must be preserved for at least 6 years.

Financial Statement (S.377 CAMA)

Statements prepared by the company's directors for each financial year, typically including a balance sheet, profit and loss account, notes on accounts, auditor's report, and directors' report.

Auditor (S. 401(1) CAMA)

An individual or firm appointed at each Annual General Meeting to audit the financial statements of a company from the conclusion of that meeting until the next AGM. Auditors must be qualified accountants and independent of the company.

Audit Committee (S 404 CAMA)

Every public company must have an audit committee consisting of 5 members (3 members and 2 non-executive directors). All members must be financially literate, and at least one must be a member of a professional accounting body in Nigeria.

Foss v. Harbottle (Majority Rule)

A foundational principle of corporate law stating that if an actionable wrong has been done to a company, the company itself is the proper plaintiff to seek a remedy, and courts generally won't interfere in internal management where the majority can rectify the wrong.

Members Direct Action (S 343 CAMA)

An action any member may bring against the company for an injunction or declaration in specific circumstances, such as ultra vires transactions, acts requiring special resolution performed by ordinary resolution, infringements of individual membership rights, fraud, or where the meeting cannot be called in time to redress a wrong.

Derivative Action (S 346 CAMA)

An action where an applicant seeks leave of court to bring a suit in the name or on behalf of the company (or its subsidiary) to redress a wrong that the company itself ought to have pursued, with any benefits accruing to the company. The applicant must show good faith and that the action is in the company's best interest.

Shares

Represents the bundle of rights and liabilities a shareholder holds in a company's share capital, dependent on the terms of issue and the company's articles. Every share carries a right to attend and vote at general meetings.

Share Premium Account (SPA) (S. 145(2) CAMA)

An account to which the amount received in excess of the face value of shares issued at a premium is transferred. Funds in this account can be used for paying up unissued shares as bonus shares, writing off preliminary expenses, or providing for premium payable on redemption of redeemable shares.

Lien on Shares (S. 164 CAMA)

A company has a first and paramount lien on all its issued shares that are not fully paid up, extending to dividends payable on those shares.

Forfeiture of Shares (S. 165(1) CAMA)

If a member fails to pay for called-up shares, the directors can serve a notice (not less than 14 days) requiring payment, and upon non-compliance, the shares may be forfeited by a resolution of the directors and disposed of as deemed fit.

Ordinary Shares

Referred to as the 'equity share capital', these shares bear the financial risk of the company, are last to be paid dividends, and last to be paid upon winding up, but enjoy an unrestricted right to participate in surplus profits.

Preference Shares (S. 144 CAMA)

Shares issued with preferred, deferred, or other special rights or restrictions regarding dividend, return of capital, or otherwise, as determined by ordinary resolution. They are entitled to fixed dividends with priority over ordinary shareholders.

Redeemable Preference Shares (S. 182 CAMA)

Preference shares with a maturity date, upon which the company repays the capital amount to shareholders and discontinues dividend payments. They must be fully paid, redeemed from profits or proceeds of a fresh issue, and any premium payable on redemption must be provided for from profits or the Share Premium Account.

Weighted Shares and Non-Voting Shares (S. 140(1) CAMA)

Generally prohibited; every share issued by a company must carry one vote. However, preference shares may carry more than one vote in specific circumstances like resolutions on preferential dividends, varying share rights, auditor appointments/removals, winding up, or increasing shares of another class, if provided by the articles (S. 168 CAMA).

Allotment of Shares (S. 149 CAMA)

The power to allot shares, vested in the company, may be delegated to directors, subject to conditions or directions in the articles or by general meeting. For public companies, allotment is subject to ISA and SEC Rules.

Transfer of Shares (S. 139 and 175 CAMA)

An arrangement by which a shareholder transfers all or part of their shares to another person. It is effected by an instrument of transfer and entry of the transferee's name in the register of members. The company may refuse registration under specific grounds (S. 176 CAMA).

Transmission of Shares (S. 179(1) CAMA)

A change in share ownership by operation of law due to death, unsoundness of mind, or bankruptcy of a member. The shares vest in survivors (joint holders), bankruptcy trustees, or personal representatives (sole holder).

Debenture

A written acknowledgment of a company’s indebtedness, representing loan capital. Debentures are typically secured by a charge (fixed or floating) over the company's assets and are issued to creditors (debenture holders) who lend money to the company.

Floating Charge (S. 203(1) CAMA)

An equitable charge over the whole or a specified part of a company's undertakings and assets (present and future), including cash and uncalled capital. It does not prevent the company from dealing with assets until it crystallizes (becomes enforceable).

Fixed Charge

A charge secured or attached to a particular piece of property/asset of the company, whose identity does not change during the charge's subsistence. The company cannot deal with the asset without the chargee's consent.

Registration of Charges (S. 222(1) CAMA)

Every charge created by a company must be registered with the CAC by filing Form CAC 9 and other documents within 90 days from the date of its creation. Failure to register renders the charge void against a liquidator and other creditors.

Capital Floatation

The method by which a company offers its securities to the public to raise money, involving regulatory bodies like SEC, Nigerian Exchange Group, and CAC.

Primary Market

Also known as the new issues market, where a company offers its securities to the public for the first time (Initial Public Offer) or subsequently (Public Offers) to raise fresh funds directly for the company.

Secondary Market

Provides investors with the opportunity to buy or sell securities that were previously issued in the primary market. Funds raised in this market go to the shareholder/investor, not directly to the company.

Prospectus (S. 315 ISA)

Any written or electronic information, notice, advertisement, or other invitation made to the public for the purchase of shares, debentures, or other approved securities of a company. Its purpose is to inform potential subscribers of material facts about the offer.

Rights Issue

An offer of additional shares made specially to existing shareholders, usually at a discount and in proportion to their current holdings, allowing them to maintain their percentage share of ownership. The prospectus used is a 'Rights Circular'.

Bonus Issue

An issue of fully-paid up shares made to existing shareholders based on their current proportion, for which shareholders do not pay as the company has already covered the cost.

Private Placement

An offer of securities not to the public at large, but to specific or pre-arranged buyers. For public companies, it requires prior SEC approval and limitations on advertising and number of subscribers.

Collective Investment Schemes (CIS) (S 153 ISA)

A pooled investment by a group of persons with no membership but participatory interest, managed by a third-party professional fund manager. Participants (unit holders) share risks and benefits proportionally or as determined in the deed, but do not have day-to-day control over management.

Unit Trust Scheme (UTS)

An arrangement for public participation as beneficiaries in profits/income from securities or other property under a trust, administered as a limited liability company and managed by Fund/Portfolio Managers with a Trustee holding investments.

Merger (S. 92(1)(a) FCCPA)

Any amalgamation of the undertakings or interests of two or more companies into one, usually on equal terms. The Federal Competition & Consumer Protection Commission (FCCPC) is the primary regulatory body for mergers, focusing on competition effects.

Horizontal Merger

A merger involving direct competitors, or companies in the same line of business. This type of merger may lead to monopoly and lessen competition.

Vertical Merger

A merger between companies in a non-competitive relationship, engaging in complementary business activities, such as a raw material supplier merging with a manufacturer.

Large Merger (S. 96(1) FCCPA)

A merger where the combined annual turnover of the acquiring and target companies in Nigeria exceeds N5 billion. Parties must notify the FCCPC and cannot implement the merger without approval.

Acquisition

The takeover by one company of sufficient shares in another company to gain control over it. For external restructuring, the threshold of shares acquired must be below 30% (Rule 421 Consolidated SEC Rules).

Takeover Bid (S. 131(1) ISA)

An external restructuring process involving the acquisition of at least 30% (but typically 30% to 50%) of the shares or voting rights of a target company, by an individual or company, with the intent of gaining control. It primarily applies to public quoted companies (S 133(4) ISA, R 445 SEC RULES).

Companies Proceedings Rules (CPR)

Procedural laws applicable to matters of companies created under Part B of CAMA, prescribing originating summons as the default mode for commencing company proceedings unless otherwise provided.

Investment and Securities Tribunal (IST) (S. 274 ISA)

Established for the settlement of disputes arising under the ISA, having exclusive jurisdiction over questions of law or disputes involving decisions of SEC, disputes between capital market operators, and disputes arising from collective investment schemes.

Corporate Insolvency (S 572 CAMA)

The inability of a company to pay its debts, deemed to occur if a creditor serves a demand for a sum exceeding N200,000 (as amended) and the company neglects to pay for three weeks, or if an execution on a judgment is returned unsatisfied.

Insolvency Practitioner (S 868 CAMA and S 705 CAMA)

A legal practitioner or chartered accountant with a minimum of 5 years post-qualification experience in insolvency matters, authorized to act by a certificate from BRIPAN and holding an authorization granted by CAC.

Company Voluntary Arrangement (CVA) (S 434 CAMA)

A business rescue arrangement allowing a company in financial difficulties to propose an agreement to its creditors for the repayment of all or part of its debts over an agreed period, typically involving a nominee (insolvency practitioner) as a supervisor.

Administration (of Companies)

An insolvency procedure to rescue an insolvent company, appointed by the court, a floating charge holder, the company, or its directors. It provides a moratorium on other legal processes against the company while the administrator works to rescue the business or achieve a better outcome for creditors.

Provisional Liquidator

Someone appointed to act as a liquidator until the main liquidator is appointed, with their role ceasing upon such appointment. In court-ordered winding up, the Official Receiver often serves this role.

Liquidator

A person appointed by the company or court to wind up the affairs of a company, liquidate its assets, and distribute them among creditors and contributories according to the articles. They represent the interests of all creditors.