Comprehensive Undergraduate Study Guide to Nigerian Company Law

General Introduction and Historical Evolution of Company Law

• Conceptual Definitions of a Company:

  • The word "company" possesses no strict, exhaustive legal definition, but fundamentally denotes an association of persons united for a common object or purpose.
  • Lord Justice James defined a company as an association of persons formed for a common object.
  • Lord Lindley defined a company as a voluntary association or organization of many persons who contribute money or money's worth to a common stock and employ it in some trade or business, and who share the profit or loss arising therefrom.
  • A company is further defined as a distinct legal entity composed of an association of persons—whether natural persons, legal entities, or a combination of both—established to conduct a commercial or industrial enterprise, pooling talents, skills, and resources to accomplish declared goals.
  • While company objects are traditionally centered around economic gain and profit, companies may also be established for non-profit purposes (such as Incorporated Trustees or associations limited by guarantee).
  • Section 18 of the Companies and Allied Matters Act (CAMA): Formulates statutory formation by declaring: "As from the commencement of this decree, any two or more persons may form and incorporate a company by complying with the requirements of this Decree in respect of registration of such Company."

• Historical Development in England:

  • The modern corporate form developed from the Joint Stock Company system in Britain, which originally grew out of ecclesiastical bodies upon which corporate personality was conferred by the Crown through Royal Charters.
  • The expansion of maritime commerce and merchant adventurers travelling internationally during the age of discovery created a demand for substantial capital to finance risky ventures into uncharted territories; the term "company" was first adopted by these merchant adventurers.
  • Early regulated companies functioned as extensions of the medieval guild system adapted for foreign trade. Members traded their own separate stock on their own individual accounts while remaining subject to the collective regulations of the company. Contributing members' liabilities were kept distinct from the liabilities of the company.
  • Prominent early chartered enterprises included the African Company, the Russia Company, and the Turkey Company.
  • By the second half of the seventeenth century, two distinct commercial structures prevailed:
  • Unincorporated partnerships: Highly prevalent; capital was raised through member contributions divided into transferable shares, with original partners holding power of transfer. These associations could subsequently expand and seek charters.
  • Incorporated companies: Possessed distinct corporate privileges including perpetual succession, a common seal, capacity to sue and be sued in the corporate name, separation of corporate assets/acts from member assets/acts, and early equivalents of limited liability.
  • By the late seventeenth century, parliamentary acts empowered the Crown to issue commercial charters. In $1694$, the Bank of England received its charter under an act designed to raise funds for the state: subscribers advancing money to the government received corresponding share interests in the bank, whose capital essentially consisted of the sovereign debt.
  • The South Sea Company was similarly structured, holding capital consisting of public debt owed to private individuals.
  • By $1720$, a speculative mania led to the creation of over $200$ joint-stock entities prosecuting bizarre, fraudulent schemes to defraud the unwary public, including:
  • Schemes for "insurance and improvement of children’s fortunes."
  • Projects for "making salt water fresh."
  • Schemes to build a "wheel for perpetual motion."
  • Solicitations seeking $\text{Two Million pounds}$ for the "melting of sand dust and ship coasting."
  • Schemes for the "suppression of thieves and armed robbers."
  • Subscriptions invited for a "profitable venture to be later on promulgated."
  • Charters were originally conceived as state instruments granted solely for public utility and national economic development. The Crown's charter application process was slow, burdened with bureaucratic formalism, and prohibitive in financial cost. Speculators bypassed formal applications by buying obsolete charters, trading charters illegally, or inviting subscriptions for unregulated joint-stock associations.

• Historical Development and Legal Reception in Nigeria:

  • Prior to British colonization, indigenous commercial transactions were conducted through local markets (cloths, farm produce, metal items) expanding into inter-town and inter-village trade, mediated entirely through trade by barter.
  • Following the $1914$ amalgamation of the Northern and Southern Nigeria Protectorates, the Supreme Court Ordinance of $1914$ was enacted. Section 14 introduced English law:
  • "Subject to the terms of this or any other Ordinance, the common Law, the doctrines of equity and the statutes of general application in England on the 1st day of January, 1900 shall be in force within the Jurisdiction of the court."
  • This statute made English company law doctrines, common law, and statutory frameworks (most notably the English Companies Act $1862$, regarded as the genesis of modern company law) directly applicable in Nigeria.
  • The first domestic corporate enactment was the Companies Ordinance of 1912, initially applied to the Colony of Lagos and extended in $1917$ to the entire country. Its statutory preamble provided: "To provide for the formation of limited companies within the colony and protectorate. It is hoped thereby to foster the principles of co-operative trading and efforts in the country."
  • The Companies Ordinance 1922 consolidated and re-enacted the $1912$ and $1917$ ordinances with amendments, becoming Cap. 38 of the Laws of Nigeria ($1948$ edition) and subsequently Cap. 37 of the Laws of Nigeria ($1958$ edition).
  • In $1963$, Cap. 37 was redesignated as the Companies Act 1963, remaining operative until repealed.
  • The Companies Act 1968 (originating as the Companies Decree $1968$) superseded Cap. 37 to modernize company regulation to match post-independence economic expansion, strengthen accounting provisions, ensure accountability, and expand investor/creditor safeguards.
  • The Nigerian Enterprises Promotion Act 1977 (originating as the Nigerian Enterprises Promotion Decree $1972$) introduced the indigenization policy, revealing substantial procedural and administrative limitations in existing company legislation modeled on outdated UK laws like the UK Companies Act $1948$.
  • In $1987$, the Attorney General and Minister of Justice directed the Nigerian Law Reform Commission to reform Nigerian company law. A Consultative Assembly deliberated between $1988$ and $1989$, presenting a comprehensive report and draft decree.
  • This culminated in the promulgation of the Companies and Allied Matters Decree 1990 (No. 1 of 1990), taking effect on January 1, $1990$. Under the Laws of the Federation of Nigeria ($2004$), it is codified as CAMA, Chapter C.20.

Classification and Typology of Companies

• Broad Classification of Companies:

  • Chartered Companies: Entities incorporated by letters patent granted by the British Crown under Royal Prerogative or special statutory powers, historically used to confer territorial trade monopolies or institutional prestige (e.g., the British Broadcasting Corporation [BBC] and chartered British universities). These corporate entities are rarely created today.
  • Statutory Companies: Bodies created directly by a Special Act of Parliament or military decree to deliver vital social amenities and public utilities rather than pursue commercial profit (e.g., the Nigerian Railway Corporation, Power Holding Company of Nigeria [PHCN]).
  • Powers, objects, and administrative frameworks are established entirely within their enabling statutes.
  • The Government is typically the sole or majority shareholder.
  • Directors and senior executives are appointed directly by the Government.
  • They do not have a share capital divided into transferable shares.
  • Registered Companies: Business corporations incorporated under the general provisions of the Companies Act through administrative registration with the Corporate Affairs Commission (CAC). This constitutes the predominant corporate vehicle today.

• Types of Registered Companies:

  • Company Limited by Shares:
  • Member liability is strictly limited to the amount, if any, remaining unpaid on the shares held by that member.
  • If a member's shares are fully paid up, the member bears zero residual liability toward company debts upon insolvency or winding up.
  • The member's liability boundary must be expressly stated in the memorandum of association.
  • Private Company Limited by Shares:
  • Formally designated as a private company in its memorandum and articles of association.
  • Restricts the right of members to transfer their shares.
  • Limits the total number of members to a maximum of $50$ (exclusive of persons who are in the employment of the company).
  • Prohibits any invitation to the public to subscribe for its shares or debentures.
  • Statutory minimum share capital is fixed at $\text{N}10,000.00$.
  • Must end its corporate name with "Limited" or "Ltd."
  • Minimum membership requirement is $2$ persons.
  • Public Company Limited by Shares:
  • Any company other than a private company; its memorandum must explicitly define it as a public company.
  • Under the $1968$ Act, required a minimum of $7$ members; under CAMA $2004$, requires a minimum of $2$ members, with no ceiling on maximum membership up to the limit of registered capital.
  • No restrictions exist on the transfer or issue of its shares.
  • Authorized to issue public invitations to purchase shares and debentures via an SEC-approved prospectus.
  • Requires higher initial capitalization due to public investor protection rules: statutory minimum share capital is $\text{N}500,000.00$.
  • Must end its corporate name with the words "Public Limited Company" or the abbreviation "PLC".
  • Key Structural Differences Between Public and Private Companies:
  • Minimum membership: Private requires $2$; Public requires $2$ (historically $7$ under $1968$ Act).
  • Maximum membership: Private capped at $50$; Public has no upper limit.
  • Minimum share capital: Private is $\text{N}10,000.00$; Public is $\text{N}500,000.00$.
  • Name suffix: Private ends with "Ltd." / "Limited"; Public ends with "PLC".
  • Share transferability: Private mandatorily restricts transfers; Public permits free transfer.
  • Public subscription: Private prohibited from public solicitations; Public permitted to market shares/debentures via prospectus.
  • Company Limited by Guarantee:
  • Member liability is limited to the specific sum the member undertakes in the memorandum to contribute to corporate assets in the event of winding up.
  • Prohibited from being formed to carry on business for the purpose of making and distributing commercial profits to members.
  • Restricted to promoting commerce, art, science, religion, sports, culture, education, research, charity, or similar non-profit objects.
  • All income and corporate property must be applied exclusively to promoting its objects; direct or indirect distribution to members is prohibited.
  • Must not be registered with a share capital.
  • Total guaranteed contribution by members must not be less than $\text{N}10,000.00$.
  • Must terminate its name with the words "Limited by Guarantee" or the abbreviation "Ltd./Gte" in brackets.
  • Unlimited Company:
  • Imposes unlimited liability upon its members; members are personally responsible for the totality of the company’s debts and obligations upon insolvency and winding up.
  • Liability does not arise during normal operations, but only attaches upon formal liquidation when corporate assets cannot satisfy debts.
  • Must be registered with a share capital.
  • Corporate name must end with the designation "Unlimited" or "Ultd."

Company Formation, Corporate Personality, and the Veil of Incorporation

• Statutory Thresholds and Exceptions for Association Size:

  • Section 19(1) of CAMA: Strictly prohibits any company, association, or partnership consisting of more than $20$ persons from carrying on business for profit or gain unless it is formally incorporated as a company under CAMA or formed pursuant to another Nigerian enactment.
  • Associations operating in violation are illegal entities. In Akinlose and Others v. A.I.T. and Others (1961) N.L.R 215, an unregistered association formed for profit with over $100$ members experienced an internal dispute. The court declared the association illegal for violating the $20$-person threshold without registration.
  • Section 19(2) Exceptions to the 20-Person Rule:
  • Registered co-operative societies formed under state co-operative laws; these operate for member welfare rather than commercial corporate profit.
  • Partnerships formed exclusively for legal practice, where each partner is duly called to the Nigerian Bar and registered as a Solicitor and Advocate of the Supreme Court of Nigeria.
  • Partnerships formed exclusively for accounting practice, where every partner is licensed by a recognized professional body (ICAN or ANAN).
  • Penalties for Default: Every person who continues as a member of an association exceeding $20$ persons after $14\text{ days}$ without incorporation commits an offence and is liable upon conviction to a fine of $\text{N}25.00$ for every day the default persists.

• Right to Form a Company and Membership Minimums:

  • Under CAMA $2004$ (Section 18), any $2$ or more persons may form and incorporate a company, eliminating the former $1968$ distinction requiring $7$ persons for public companies.
  • The Law Reform Commission justified retaining the minimum of $2$ members by asserting that the word "company" inherently denotes an association of persons. However, modern corporate law widely embraces single-member companies (e.g., the UK via the Twelfth EC Company Law Directive $89/667$ in $1992$ and Companies Act $2006$ s. 7, Canada, Europe, South Africa, Ghana, Kenya).
  • In practice, the two-person requirement often results in sole entrepreneurs naming nominal, non-participating spouses or children to satisfy statutory formality.

• Legal Capacity and Statutory Disqualifications for Formation (Section 20):

  • Minors (Infants): Persons under $18\text{ years}$ of age are disqualified from forming a company, unless at least $2$ other qualified adult subscribers join the memorandum (Section 20(2)).
  • Under common law, an infant's contracts are voidable; under the Infants Relief Act $1874$, contracts other than for necessaries are void.
  • An infant subscriber does not count toward the statutory minimum of two members.
  • Persons of Unsound Mind: Persons certified or found to be of unsound mind by a court in Nigeria or elsewhere.
  • Section 650 specifies courts as the Federal High Court, Court of Appeal, or Supreme Court.
  • Undischarged Bankrupts: Persons adjudged bankrupt by a court of competent jurisdiction who remain undischarged (Section 253 CAMA, Section 126 Bankruptcy Act $2004$).
  • Persons Disqualified Under Section 254: Persons convicted by a High Court of offences involving the promotion, formation, or management of a company, or guilty of fraud or breach of duty during winding up under Section 513. Courts may bar them from corporate management for a period not exceeding $10\text{ years}$.
  • Bodies Corporate in Liquidation: Corporate entities in liquidation cannot participate in company formation.

• Step-by-Step Incorporation Procedure:

  • Stage 1: Taking Instructions:
  • Client details: Full names, residential addresses, and occupations of promoters and subscribers.
  • Date of completion: Agreed timeline affecting legal practitioner professional fees.
  • Name availability and reservation: Conduct preliminary searches via the Directory of Registered Companies or online e-incorporation portals. File Form CAC 1; upon approval, a name may be reserved for up to $60\text{ days}$.
  • Prohibited names (Section 30(1)): Names identical to, or deceptively resembling, existing registered companies (actionable under the common law tort of passing off; Niger Chemists Ltd. v. Nigeria Chemists); names containing "Chambers of Commerce" (unless limited by guarantee); misleading, undesirable, or offensive names; names infringing existing trademarks or business names without owner consent.
  • Restricted names (Section 30(2) - require CAC consent): Names containing "Federal", "National", "Regional", "State", "Government", "Municipal", "Chartered", "Co-operative", "Building Society", "Group", "Holding", "Bank", or "Insurance".
  • Stage 2: Document Preparation and Filing:
  • Memorandum and Articles of Association, stamped for capital duty at the Federal Inland Revenue Service (FIRS).
  • Form CAC 1: Availability and Reservation of Name approval letter.
  • Form CAC 2: Statement of authorized share capital and return of allotment of shares, signed by at least one director (stamped).
  • Form CAC 2.1: Particulars of the Secretary (if appointed).
  • Form CAC 3: Notice of the registered office and head office address (if distinct).
  • Form CAC 7: Statement of list and particulars of the first directors, alongside their formal written consents.
  • Form CAC 4: Statutory Declaration of Compliance with CAMA requirements sworn by a Legal Practitioner engaged in company formation.
  • Payment of statutory filing fees as prescribed by the Companies and Allied Matters (Fees) Regulations $1995$ as amended.
  • CAC Registration and Legal Effect:
  • Under Section 36(1), the CAC must register the company unless the documents breach CAMA, the objects are illegal, a subscriber is legally disqualified, other registration enactments are breached, or the name conflicts with an existing trademark or trade name.
  • If the CAC refuses registration, the aggrieved party gives notice to the Commission to apply to the Federal High Court for directions (Section 36(2)).
  • Upon registration, the Commission issues a Certificate of Incorporation under its seal.
  • Under Section 36, the Certificate of Incorporation is prima facie evidence that all legal requirements have been met and the entity is duly incorporated.

• The Doctrine of Corporate Personality and the Rule in Salomon v. Salomon:

  • Incorporation creates an artificial legal person with rights, obligations, and legal capacities completely separated from its human shareholders (Salomon v. Salomon & Co. (1897) A.C. 22 @ 66).
  • In Salomon, Aron Salomon sold his leather and boot manufacturing business to a company he formed, comprising himself, his wife, daughter, and four sons. Salomon held $20,001$ of the $20,007$ shares and took secured debentures worth $\text{\pounds}10,000$. Following insolvency caused by industrial strikes, corporate assets were insufficient to satisfy unsecured creditors after paying Salomon's debentures.
  • The House of Lords held that the company was not Salomon's mere alias or agent, but a wholly distinct legal person. Salomon as a debenture holder held valid security with priority over unsecured trade creditors.

• Advantages and Disadvantages of Incorporation:

  • Advantages:
  • Limited Liability: Shareholder liability is pegged at the unpaid amount on their shares, protecting personal assets.
  • Corporate Property Ownership: Real and personal assets belong directly to the corporate persona rather than individual members.
  • Perpetual Succession: Corporate existence is unaffected by the death, insanity, bankruptcy, or retirement of shareholders or directors.
  • Capacity to Contract with Members: A company can enter into legally enforceable agreements with its own shareholders.
  • Unlimited Capital Expansion: Public companies have no membership ceilings and can issue shares freely to the public.
  • Superior Debt Financing: Companies can secure borrowing by issuing fixed charges, floating charges, and debentures.
  • Disadvantages:
  • Loss of Insurable Interest: A shareholder possesses no insurable interest in corporate property, even if they hold $100\%$ of the shares (Macaura v. Northern Assurance Co. (1925) A.C. 615).
  • Commercial Disconnect from Assets: Shareholders cannot claim company activities as their personal business (Tunstall v. Steigman (1897) A.C. 66).
  • Capacity Limitations: The ultra vires doctrine restricts operational capacity to the explicit objects stated in the memorandum (Section 39(3)).
  • Criminal Exposure: Controlling owners cannot claim corporate identity to avoid charges of theft or conversion of corporate assets.

• Lifting the Veil of Incorporation:

  • Statutory exceptions and judicial decisions pierce the corporate veil to expose economic realities behind the legal façade.
  • Statutory Grounds for Lifting the Veil:
  • Section 93: Carrying on business with fewer than $2$ members for more than $6\text{ months}$; remaining directors/officers aware of the default become jointly and severally liable for all corporate debts contracted after that period.
  • Section 95: Substantial shareholders in public companies (holding prescribed percentages) must disclose particulars in writing to the company.
  • Section 548: Failure to affix/engrave company name outside offices, on the common seal, and in business letters, notices, or bills of exchange creates personal liability for default officers.
  • Inadequate Accounting: Failure to keep proper books of account throughout the $2\text{ years}$ immediately preceding winding up exposes officers to fines unless they prove honest conduct.
  • Section 506: Fraudulent or reckless trading discovered during liquidation allows the court to impose personal liability without limitation on culpable officers.
  • Section 336: Mandates preparation of group financial statements consolidating parent companies with their subsidiaries.
  • Section 234: Permitting written resolutions signed by all members of private companies without formal general meetings.
  • Companies Income Tax Act $1979$: Pierces the veil to ascertain where effective management and control are exercised to determine whether an entity is a "Nigerian Company".
  • Judicial Grounds for Lifting the Veil (Case Law):
  • Corporate Agency / Sham: Re F.G. (Films) Ltd. (1882) 20 Ch. 169 (an American studio funded $\text{\pounds}80,000$ of an $\text{\pounds}80,100$ film project using an English shell company to claim British subsidies; held to be an American film made via an agency sham).
  • Prevention of Fraud or Evasion of Obligations: Gilford Motor Co. v. Horne (1933) Ch. 935 (a former employee bound by a non-compete clause formed a front company to solicit customers; held to be a "mere sham", "cloak", or "stratagem", and enjoined).
  • Public Policy and Enemy Character: Inspecting corporate ownership during wartime to ascertain whether an entity is controlled by alien enemies.
  • Group Enterprises / Single Economic Entity: D.H.N. Food Distribution Ltd. v. Tower Hamlets London Borough Council (1944) K.B. 146 (a parent company and wholly-owned asset-holding subsidiaries were treated as a unified economic entity to award compulsory acquisition compensation).

• Detailed Comparison: Registered Companies Versus Partnerships:

  • Legal Personality: A company is an independent legal corporation; a partnership is an unincorporated collective of individuals.
  • Liability for Debt: Corporate debts belong entirely to the company; partners remain jointly and severally liable to the full extent of their personal assets.
  • Agency Power: Shareholders are not corporate agents; every partner is a general agent capable of binding the firm.
  • Contractual Capacity with Members: Companies can contract with their members; partners cannot contract directly with their firm.
  • Transferability of Interests: Shares are freely transferable personal property; partnership shares cannot be transferred without unanimous partner consent.
  • Capital Maintenance: Corporate capital is legally regulated and cannot be altered without statutory processes; partnership capital is altered by private agreement.
  • Vesting of Property: Corporate property vests in the company; partnership property belongs directly to individual partners.
  • Limitation of Liability: Company members may limit liability via shares or guarantee; partners carry unlimited liability.
  • Ultra Vires Doctrine: Applies to companies via their objects clause; partnerships can pursue any lawful commercial endeavor agreed upon.
  • Membership Thresholds: Private companies have $2$ to $50$ members, public have $2$ to unlimited; partnerships are capped at $20$ members (excluding recognized professions).
  • Perpetual Succession: Companies survive the death, bankruptcy, or insanity of members; partnerships dissolve upon such events unless otherwise agreed.
  • Statutory Capital Requirements: Company law fixes minimum share capital ($\text{N}10,000.00$ private; $\text{N}500,000.00$ public); partnership capital is flexible without statutory minimums.

• Unincorporated Associations:

  • Lack independent legal personality and cannot sue or be sued in their own name (Nigerian Bar Association v. Gani Fawehinmi (1979) FRCR 23, holding that although the NBA is distinct from its individual members, it is not an incorporated legal entity and cannot be sued in its name).

Constitutional Documents: The Memorandum and Articles of Association

• The Memorandum of Association (Section 27):

  • Serves as the primary constitutional document defining the external boundaries and statutory limits of corporate capacity.
  • Mandatory Contents:
  • Company Name: Ending with "Limited"/"Ltd." (private), "Public Limited Company"/"PLC" (public), "Limited by Guarantee"/"Ltd./Gte" (guarantee), or "Unlimited"/"Ultd." (unlimited).
  • Registered Office Clause: Explicitly stating that the registered office must be located within Nigeria.
  • Objects Clause: Defining the specific nature of businesses authorized to be undertaken.
  • Powers Restriction Clause: Outlining any statutory or chosen reservations limiting internal corporate authority.
  • Corporate Status: Expressly declaring whether the company is private or public.
  • Limitation of Liability Clause: Specifying whether liability is limited by shares, by guarantee, or unlimited.
  • Capital Clause: Stating the nominal authorized share capital, divided into fixed units, adhering to statutory minimums ($\text{N}10,000.00$ private, $\text{N}500,000.00$ public).
  • Subscription Clause: Confirming that subscribers collectively take up not less than $25\%$ of authorized share capital, with each subscriber writing the number of shares taken opposite their name.

• The Objects Clause and the Ultra Vires Doctrine:

  • Historically, a company possessed capacity only to pursue business expressly stated in its objects or reasonably incidental thereto; acts outside this scope were ultra vires and void (Ashbury Railway Carriage & Iron Co. v. Riche (1875) L.R. 7 H.L. 653).
  • Modern company practice limits the historical proliferation of bloated object clauses, separate entity clauses, and subjective discretion clauses (Bell Houses Ltd. v. City Wall Properties Ltd. [1966] 2 All E.R. 674; Cotman v. Brougham [1918] A.C. 514; N.I.P.C. Ltd. v. The Thompson Organisation [1969] 1 All N.L.R. 138).
  • Under CAMA, companies possess the legal powers of a natural person of full capacity, subject to explicit restrictions in the memorandum.
  • The core policy of the ultra vires doctrine protects investors (ensuring funds are not risked on unauthorized ventures) and creditors (ensuring capital is preserved for liability settlement).

• The Articles of Association (Section 34):

  • Defines internal regulations governing corporate operations, management, and internal rights among members.
  • Subordinate to the memorandum; any article conflicting with the memorandum is invalid.
  • Formal Execution Requirements: Must be printed, divided into numbered paragraphs consecutively, signed by each memorandum subscriber before at least one witness, and stamped as a deed.
  • Key Provisions Contained in the Articles (Items 1 to 47):
  • Interpretation of internal terms.
  • Share classes and variation of class rights (s. 119), share transfer restrictions (s. 152(3)), allotment powers, and share certificates (s. 146).
  • Financial assistance prohibitions for share acquisition and liens on shares (s. 139(1)).
  • Calls on shares (s. 133), share transmission (s. 155), forfeiture (s. 140), and share capital alterations (consolidation, subdivision, stock conversion, cancellation; ss. 100, 101, 150).
  • Share capital increases (ss. 102, 103) and capital reductions (ss. 105–111).
  • Borrowing powers and debenture issuance (s. 290).
  • General meetings (statutory, AGM, EGM; ss. 211, 213, 215), notices, proceedings, quorums (s. 232), chairman (s. 240), voting (s. 224), polls (s. 226), proxies (s. 230), and written resolutions (s. 234).
  • Board structure: Director numbers (s. 246), appointments (s. 248), casual vacancies (s. 249), share qualifications (s. 251), life directors (s. 255), vacation of office (s. 258), tenure/rotation (s. 259), removal (s. 262), proceedings/written resolutions (ss. 263, 264), notice/remuneration (ss. 266, 267), managing directors, and statutory duties (ss. 279, 280, 282, 283).
  • Company Secretary appointment, removal, and duties (ss. 296, 298).
  • Common seal custody, official seal, and document authentication.
  • Dividends declaration, interim dividends, reserves, and profit capitalization (ss. 379, 383).
  • Financial records, books of account (s. 331), and external auditor appointments (s. 237).
  • Stock Exchange listing compliance (including the Second-Tier Securities Market [SSM]).
  • Notices (s. 220), corporate winding up, and officer indemnity provisions.

Corporate Membership, Promoters, and Pre-Incorporation Contracts

• Membership of a Company:

  • Section 37 of CAMA: Confers corporate personality upon subscribers to the memorandum and subsequent persons who become members.
  • Shareholder vs. Member Distinction: A shareholder is anyone holding at least one share; a member is a shareholder whose name is formally entered into the statutory Register of Members.
  • Only registered members are entitled to exercise membership rights (e.g., attending meetings, voting).
  • Capacity of Specific Persons:
  • Minors: An infant under $18$ cannot form a company alone, but may join if $2$ competent adults subscribe (the adults' capacity cures the infant's disability). An infant is omitted when counting the statutory minimum number of members.
  • Personal Representatives: Upon a member's death, executors (under a probated will) or administrators (under letters of administration) become entitled to the shares via transmission, but do not become members until formally entered into the Register of Members.
  • Corporations: Possess full capacity to hold shares in another company, provided they are not in liquidation.
  • Aliens: Permitted to hold shares under CAMA (Sections 18, 20(4)) and Section 17 of the Nigerian Investment Promotion Commission (NIPC) Act $2004$, subject to obtaining business and residency permits.

• Acquisition of Membership:

  • By Subscription: Signing the memorandum prior to incorporation and taking at least $25\%$ of authorized share capital; names are entered into the Register upon incorporation.
  • By Allotment: Applying directly to the company for newly issued shares and being entered into the Register upon payment.
  • By Transfer: Purchasing or receiving shares from an existing member via a share transfer instrument and securing registration in the Register.
  • By Transmission: Inheriting shares through legal succession, established via a grant of probate or letters of administration issued by the High Court.

• Promoters (Section 61):

  • Defined as any person who undertakes to take part in forming a company with reference to a given project, sets it going, and takes necessary steps to accomplish that purpose, or raises capital for it.
  • Excludes professionals acting purely in an advisory capacity (e.g., lawyers drafting documents, accountants preparing projections).
  • Fiduciary Duties of Promoters:
  • Stand in a fiduciary relationship to the company, requiring utmost good faith (uberrima fides).
  • Strictly prohibited from making secret profits; must account to the company for any profit derived from transactions, property, or information acquired in their capacity.
  • Contracts involving promoter self-dealing may be rescinded by the company unless fully disclosed to and ratified by an independent board of directors or general meeting (where the promoter cannot vote).
  • No statutory limitation period bars a company from suing a promoter for breach of fiduciary duty, though courts retain equitable jurisdiction to grant relief from liability.
  • Promoters have no inherent legal right to remuneration or reimbursement for promotion expenses unless expressly provided in the articles or authorized by the board.

• Pre-Incorporation Contracts:

  • Contracts entered into by promoters on behalf of the unincorporated company prior to registration.
  • Under common law, an unincorporated entity had no capacity to contract or ratify prior agreements.
  • Under CAMA, a company can ratify pre-incorporation contracts after registration, becoming bound by and entitled to their benefits as if it had existed when the contract was made.
  • Prior to corporate ratification, the promoter remains personally liable on and entitled to the benefits of the contract, absent contrary agreement.

Share Capital, Allotment, Share Transfers, and Capital Maintenance

• Nature and Classes of Shares:

  • A share is an intangible personal property unit measuring a member’s proprietary and financial stake in a company's share capital.
  • Ordinary Shares: Equity shares with no special preferential rights or dividend caps. They receive distributions from residual profits after preference dividends are satisfied, sharing unlimited upside in profitable years.
  • Preference Shares: Entitled to priority dividend payments of a fixed percentage before distributions to ordinary shareholders, advantageous during volatile market conditions. They do not share in surplus profits unless expressly provided.
  • Deferred (Founders') Shares: Held by company founders or principal initial financiers, ranking behind ordinary shares for dividends, but often entitled to substantial surplus profits after ordinary shares reach an agreed dividend cap.

• Share Allotment and Issuance:

  • Authorized share capital must comply with statutory minimums: $\text{N}10,000.00$ for private companies, $\text{N}500,000.00$ for public companies.
  • Public companies must secure prior approval from the Securities and Exchange Commission (SEC) and issue a detailed prospectus.
  • Private companies cannot issue public prospectuses, but may distribute share offers privately.
  • The board of directors or allotment committee makes allotments; companies may allot fewer shares than applied for, but cannot allot more without the applicant's consent.
  • If an applicant is allotted fewer shares than applied and paid for, the surplus funds must be refunded with interest.
  • For shares quoted on the Nigerian Stock Exchange (NSE), allotments are credited directly to the shareholder’s electronic Central Securities Clearing System (CSCS) account.
  • Under Section 135, consideration for shares may be in cash, kind (subject to independent professional valuation), or both.
  • The company must file a formal Return of Allotment with the CAC within $1\text{ month}$ of allotment.

• Calls, Forfeiture, and Share Certificates:

  • Demands for unpaid share balances are termed "calls on shares", requiring a mandatory $14\text{ days'}$ notice to the shareholder.
  • Failure to pay a call allows directors to issue a further notice demanding payment with interest; default allows forfeiture via board resolution, permitting the company to sell the shares.
  • Companies must issue sealed share certificates within $2\text{ months}$ of allotment (unless shares are credited electronically via the CSCS), serving as prima facie evidence of title.

• Transfer and Transmission of Shares:

  • Section 115 and Okoya v. Santilli (1994) 4 NWLR (pt. 338) 256: Confirms shares are personal property transferable according to the company’s articles.
  • Under Section 22(2), private companies must restrict share transfers via:
  • Directors' Discretion Clauses: Authorizing directors to refuse transfers without assigning reasons (Berry and Stewart v. Tottenham Hotspur F.C. Ltd [1935] Ch. 718).
  • Pre-emption Clauses: Mandating that shares be offered first to existing members at a fair price before transfer to outsiders (Ocean Coal Co. Ltd v. Powell Duffryn Steam Coal Co. Ltd [1932] 1 Ch. 654).
  • Transfer Procedures:
  • Total Transfer: Transferor delivers the share certificate and executed transfer instrument to the transferee, who submits them to the company. The company must register the transfer and issue a new certificate within $3\text{ months}$, or provide written reasons for refusal.
  • Partial Transfer: Transferor submits the certificate and transfer instrument to the company; the company stamps the instrument with "Certificate Lodged", returns it for delivery to the transferee, and subsequently issues split certificates.
  • Transmission: Shares of a deceased joint holder pass to the surviving holder; sole-owner shares pass to legal representatives via probate or letters of administration.
  • Protection of Beneficiaries: A party claiming equitable interests in shares can execute an affidavit of interest and serve notice on the company. The company enters a caveat in the register and must give $42\text{ days'}$ notice to the claimant before registering any adverse transfer, remaining personally liable for default.
  • Mortgage and Attachment: Shares can be mortgaged legally (transfer of legal title to mortgagee) or equitably (deposit of share certificates), and may be attached by court judgment under the Sheriffs and Civil Process Act $2004$.

Profits, Dividends, Debentures, and Charges

• Statutory Rules for Declaring Profits and Dividends:

  • Section 380 of CAMA: Dividends are payable solely out of distributable profits, comprising realized profits from company assets, revenue reserves, and net realized profits from asset sales over book values.
  • Section 381 (Solvency Requirement): Companies are prohibited from declaring or paying dividends if reasonable grounds suggest the company cannot meet liabilities as they fall due.
  • Capital Maintenance: Dividends cannot be paid out of capital. Directors knowingly paying dividends from capital are jointly and severally liable to reimburse the company; payments are recoverable from shareholders aware of the breach.
  • Fixed Assets vs. Circulating Capital:
  • A company may pay dividends without making good depreciation on wasting fixed assets, provided remaining revenues cover current liabilities (Lee v. Neuchatel Asphalte Co. (1889) 41 Ch. D. 1).
  • Losses of circulating capital (defined in Section 567 as subscribed capital circulated in business to yield profit) must be fully recouped before profits can be distributed (Verner v. General Commercial Investment Trust [1894] 2 Ch. 239).
  • Capital Appreciation: Unrealized asset revaluation surpluses cannot fund cash dividends, but may write off losses or fund bonus shares.
  • Dividend Approval: Declared by the general meeting upon board recommendation. The general meeting can reduce, but cannot increase, the dividend recommended by directors.
  • Payment Mechanics: Dividends are paid via warrants (cheques) payable to current accounts, constituting a debt recoverable within $12\text{ years}$.
  • Unclaimed Dividends: Must be listed in notices for the next AGM; if unclaimed after $3\text{ months}$, companies may invest them outside the company. Warrants delayed by company fault accrue interest at the current bank rate starting $3\text{ months}$ after the scheduled mailing date.
  • Capitalization: General meetings, upon board recommendation, may capitalize reserves by paying up unissued shares to issue as fully paid bonus shares.

• Debentures and Corporate Charges:

  • Definition: A written document under company seal acknowledging corporate indebtedness and setting out repayment terms and interest (Section 567; Levy v. Abercorris Slate and Slab Co. (1887) 37 Ch. 260).
  • Classification of Debentures:
  • Perpetual Debentures: Irredeemable or redeemable only on specified long-term contingencies.
  • Convertible Debentures: Granting the option to convert debt into equity shares.
  • Secured vs. Naked Debentures: Secured debentures create fixed or floating charges over company assets; naked debentures are unsecured debt acknowledgments.
  • Redeemable Debentures: Redeemable by the company at designated dates or terms.
  • Bearer Debentures: Negotiable instruments payable to the physical bearer.
  • Registered Debentures: Payable exclusively to registered holders recorded in the statutory register.
  • Debenture Trust Deeds: Mandatory when debentures are issued to the public, appointing independent trustees to monitor company performance and protect debenture holders' collective security.
  • Fixed and Floating Charges:
  • Fixed Charge: Attaches to specific corporate assets (e.g., land, equipment), preventing the company from disposing of them without chargee consent.
  • Floating Charge: An equitable charge hovering over shifting asset classes (e.g., stock-in-trade) until an event of default causes crystallization into a fixed charge.
  • Registration Requirements: All charges must be filed with the CAC within $90\text{ days}$ of creation (Sections 197(1), 198(2)), with priority determined by registration date. Companies must also maintain internal registers of charges (Section 191(1)) and debenture holders (Section 193(1)).
  • Remedies Available to Debenture Holders:
  • Action to sue for principal and accrued interest (Sections 176(2), 209(2)).
  • Petition for compulsory winding up if an undisputed debt exceeding $\text{N}2,000.00$ remains unpaid after $21\text{ days'}$ demand (Sections 408(d), 409).
  • Exercising power of sale under the deed.
  • Foreclosure proceedings under Section 209(2)(b)(i) to extinguish corporate equity of redemption.
  • Appointing a receiver or receiver-manager under Sections 180(3) and 209(1).
  • Proving for outstanding balances during winding up as secured priority creditors.

Conversion, Re-registration, and Alteration of Corporate Constitution

• Conversion of Private Company to Public Company:

  • Requires passing a special resolution, amending the memorandum and articles, and applying to the CAC.
  • Filing Requirements:
  • Printed copy of the amended memorandum and articles.
  • Written statement certified on oath by directors and secretary confirming that paid-up capital is not less than $25\%$ of authorized capital.
  • Balance sheet dated as of the resolution or within the preceding $6\text{ months}$.
  • Statutory declaration by a director and secretary confirming the special resolution and certifying that corporate assets equal or exceed paid-up capital plus undistributable reserves.
  • Copy of any prospectus or statement in lieu of prospectus delivered to the SEC within the preceding $12\text{ months}$.

• Conversion of Public Company to Private Company:

  • Requires a special resolution modifying constitutional documents, followed by CAC application signed by a director and secretary.
  • Minority Protection: Holders of not less than $5\%$ in nominal value of issued capital (or any class), or not less than $5\%$ of total members, may apply to the Federal High Court within $28\text{ days}$ to cancel the resolution.
  • CAC Filing Timelines: If no cancellation application is filed, submit documents within $15\text{ days}$ after the $28\text{ days}$ expire; if an application is filed, submit within $15\text{ days}$ of the court order.

• Alteration of Constitutional Documents:

  • Alteration of Name: Requires board resolution, CAC availability check/reservation, special resolution, and written CAC approval. Post-registration steps require updating corporate seals, letterheads, and certificates, alongside mandatory advertisements in daily newspapers and the Federal Government Gazette.
  • Alteration of Objects Clause: Requires $21\text{ days'}$ written notice to all members and floating charge debenture holders, passing a special resolution, and filing with the CAC. Dissenting holders of at least $15\%$ nominal value of share capital, debentures, or membership may petition the court within $28\text{ days}$ for cancellation.
  • Alteration of Share Capital:
  • Alterations by Ordinary Resolution: Consolidation and division into larger denominations, subdivision into smaller denominations, stock conversion, and unissued share cancellations (CAC notified within $1\text{ month}$).
  • Increase of Share Capital: Passed by ordinary resolution. Notice must be delivered to the CAC within $15\text{ days}$ with stamp duty paid. The increase lapses unless at least $25\%$ of total capital (including the increase) is issued within $6\text{ months}$, verified by a directors' statutory declaration.
  • Reduction of Share Capital: Authorized by articles, requires a special resolution, a court petition to confirm the reduction scheme, and CAC registration of the court order and approved minutes.

Directors: Appointment, Powers, Duties, and Removal

• Definition, Organs, and Classification:

  • A director is any person duly appointed to direct and manage corporate affairs, including any person occupying that position irrespective of title, as well as shadow directors on whose instructions directors are accustomed to act.
  • Companies act through two primary organs: the General Meeting and the Board of Directors. Directors are not mere servants, but represent the directing mind and will of the company.
  • Every company must have a minimum of $2$ directors (Section 246).
  • Types of Directors:
  • Executive Directors: Full-time employees engaged under contracts of service, running day-to-day operations.
  • Non-Executive Directors: Independent directors who attend periodic board meetings to formulate policy and receive sitting allowances without employee status.
  • Alternate Directors: Nominated by serving directors under article powers to attend and vote in their absence.
  • Shadow Directors: Persons directing board decisions from behind the scenes without formal appointment.
  • Directors by Estoppel: Persons held out by the company as directors whose acts legally bind the company.

• Appointment, Tenure, and Rotation:

  • First directors are determined by subscribers in the memorandum or named in the articles.
  • Subsequent directors are appointed by ordinary resolution in general meetings, by powers under the articles, or by court order where all directors and members have died.
  • Casual vacancies arising from death, resignation, or removal are filled by the board until the next AGM.
  • Rotation (Section 259): Unless articles provide otherwise, all directors retire at the first AGM. At subsequent AGMs, one-third ($\frac{1}{3}$) of directors (or the number nearest to one-third) retire based on seniority, with lots cast to resolve ties among those appointed on the same day.
  • Minimum age for directors is $18\text{ years}$. In public companies, appointing or re-appointing a director aged $70\text{ years}$ or older requires a $28\text{ days'}$ special notice to the company and special disclosure to the general meeting.

• Statutory Removal Procedures:

  • In Bernard Longe v. First Bank of Nigeria Plc (2010) All FWLR 252 528 @ 310, the Supreme Court held that directorship is an office with statutory flavor, requiring strict compliance with CAMA procedures (Sections 262 and 266); failure to provide statutory notice rendered Longe's removal null and void, resulting in judicial reinstatement.
  • Section 262 Procedure:
  • Proponents must serve a $28\text{ days'}$ special notice of intent on the company.
  • The company secretary must forward a copy to the director, who is entitled to submit written representations.
  • Written representations must be circulated with the meeting notice ($21\text{ days'}$ notice), or read aloud at the meeting if received late.
  • The director is entitled to be heard orally at the meeting.
  • Removal is effected by an ordinary resolution (simple majority). The CAC must be notified within $14\text{ days}$.
  • Life directors can be removed by ordinary resolution under Section 262 (subject to damages for breach of contract), or by amending the articles to delete the life directorship clause via a three-fourths ($\frac{3}{4}$) special resolution (which eliminates claims for wrongful termination damages).

• Disqualification and Vacation of Office:

  • Disqualified persons include minors, persons of unsound mind, undischarged bankrupts, persons restrained under Section 254 for fraud, and corporate bodies.
  • An office is vacated if a director fails to acquire their share qualification within $2\text{ months}$ of appointment, becomes bankrupt, is convicted of fraud, becomes of unsound mind, or resigns in writing.

• Duties of Directors:

  • Fiduciary Duties (Sections 279–283): Must observe utmost good faith, act in what they honestly believe to be the best interests of the company, exercise powers for proper purposes, preserve their discretion, and avoid abdicating duties.
  • Duty of Care and Skill: Must exercise the diligence and skill that a reasonably prudent director would exhibit. In Re City Equitable Fire Insurance Co. Ltd [1925] Ch. 407, Romer J. established three principles:
  • A director need not exhibit a greater degree of skill than reasonably expected from a person of their knowledge and experience.
  • A director is not bound to give continuous attention to company affairs, being required only to attend periodic meetings.
  • A director may delegate duties to officials or board committees where business exigencies require, provided there are reasonable grounds for trust.
  • Conflicts of Interest: Directors must not place themselves in positions where personal interests conflict with company duties, make secret profits, or misuse corporate opportunities/information; secret profits must be accounted for unless disclosed and approved by the general meeting.

• Board Meetings and Quorums:

  • First board meeting must be held within $6\text{ months}$ of incorporation.
  • Quorum is $2$ directors where total membership is $6$ or fewer; if greater than $6$, quorum is one-third ($\frac{1}{3}$) or the nearest whole number.
  • Decisions are taken by simple majority; the chairman holds a casting vote in the event of a tie.

The Rule in Foss v. Harbottle, Exceptions, and Minority Protection

• The Rule of Majority Control:

  • In Foss v. Harbottle (1843) 2 Hare 461 (67 E.R. 189), shareholders sued directors for fraudulently selling their own land to the company at inflated prices. The court held that the injury was inflicted upon the company as an independent legal person; only the company, acting through its organs, can sue.
  • In MacDougall v. Gardiner (1875) 1 Ch.D 13, Mellish L.J. affirmed that litigation is futile if the majority can lawfully ratify the irregular or challenged act.
  • Codified under Section 299 of CAMA, confirming that when a wrong is done to a company or an internal irregularity occurs, the company is the proper plaintiff.
  • Adopted in Nigeria in Abubakar v. Smith (1973) 6 EC 31.

• Exceptions: Member's Direct Personal and Representative Actions:

  • Individual members may initiate direct personal or representative actions for injunctive or declaratory relief in the following cases:
  • Transactions that are illegal or ultra vires.
  • Purporting to do by ordinary resolution what CAMA or the articles require to be done by special resolution.
  • Infringements on personal, individual membership rights (e.g., voting rights, dividend collection).
  • Frauds committed against the minority where wrongdoers control the company.
  • Situations where a general meeting cannot be convened in time to protect interests.
  • Breaches of duty where directors directly benefit from their negligence.

• Derivative Actions:

  • A member may apply to the court for leave to institute an action in the name and on behalf of the company, or intervene in existing litigation to prosecute or defend corporate interests.
  • Statutory Conditions for Leave:
  • The alleged wrongdoers are directors or controlling shareholders who refuse to take action.
  • The applicant has served reasonable notice on directors demanding action, which went unheeded.
  • The applicant acts in good faith.
  • The action is prima facie in the best interests of the company.
  • The company indemnifies the applicant for reasonable legal costs, since benefits accrue directly to the corporate persona.

• Relief Against Unfairly Prejudicial and Oppressive Conduct:

  • Members can petition under statutory provisions for relief if corporate affairs are conducted in a manner that is oppressive, unfairly discriminatory, or unfairly prejudicial to their interests.
  • Court remedies include regulating future corporate conduct, purchasing minority shares, setting aside invalid transactions, or ordering winding up.
  • CAC Investigation: The CAC may appoint inspectors to investigate corporate affairs upon member petition (Sections 314–330).
  • Just and Equitable Winding Up: Members can petition for winding up under Section 408(e) where management deadlocks or operational paralysis occurs.

The Company Secretary

• Evolution of the Secretary's Legal Status:

  • Historical Common Law View: The secretary was treated as a mere clerk bound to obey orders, possessing no authority to make representations or bind the company (Barnett, Hoares & Co. v. South London Tramways Co. (1887) 18 QBD 815; George Whitechurch Ltd v. Cavanagh [1902] AC 117).
  • Modern Judicial Shift: In Panorama Developments (Guildford) Ltd v. Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711, Lord Denning M.R. and Salmon L.J. recognized that the secretary is a chief administrative officer with ostensible authority to enter into contracts for the administrative operations of the company (e.g., car rentals).
  • Nigerian Jurisprudence: Affirmed in Okeowo v. Migliore (1979) 11 SC 138 and Wimpey Ltd v. Balogun (1987) 2 NWLR 322, establishing that the company secretary is a principal officer and an integral part of corporate management.

• Statutory Office and Dual Capacity Restrictions:

  • Section 293 mandates that every company have a company secretary; Section 567 classifies the secretary alongside directors and managers as corporate officers.
  • A person can act as both director and secretary, but acts requiring execution by both a director and secretary cannot be discharged by the same individual acting in dual capacities.

• Statutory Qualifications (Section 295):

  • Private Companies: No specific professional certification is mandated; the board appoints any person appearing to possess the requisite knowledge and experience.
  • Public Companies: Appointees must satisfy at least one of the following qualifications:
  • Member of the Institute of Chartered Secretaries and Administrators (ICSA).
  • Legal Practitioner qualified to practice in Nigeria.
  • Member of a statutory accounting professional body (ICAN or ANAN).
  • A firm of chartered accountants, legal practitioners, or chartered secretaries.

• Statutory Duties of the Secretary (Section 298):

  • Pre-Meeting: Consult with the board chairman to fix meeting dates, draft agendas, assemble board packets, issue statutory notices, and organize venues.
  • At Meeting: Attend board and general meetings, record minutes of proceedings, and advise on legal compliance.
  • Post-Meeting: Prepare finalized minutes, communicate board directives, and file statutory returns with the CAC.
  • Statutory Books: Maintain registers (members, debenture holders, charges, directors, secretaries) and custody of the common seal.
  • Under Section 298(2), the secretary cannot exercise executive management powers reserved exclusively for the board without explicit authorization.

• Removal Procedures (Section 296):

  • Private Companies: The secretary is appointed and removed by board resolution; individual directors or chairmen cannot dismiss the secretary without delegated authority.
  • Public Companies (Mandatory Statutory Sequence):
  • The board must issue a $7\text{ working days'}$ notice of intent to remove, stating specific grounds and offering the option to resign.
  • If the secretary resigns, proceedings terminate.
  • If the secretary fails to resign or defend, the board may remove the secretary and report to the next general meeting.
  • If the secretary submits a defense that the board deems insufficient:
    • For allegations of fraud or serious misconduct, the board may dismiss the secretary and report to the next general meeting.
    • For grounds other than fraud or serious misconduct, the board may only suspend the secretary pending determination by the general meeting.
    • The General Meeting retains final authority to ratify, reverse, or fix the effective date of the removal.

Company Meetings and Proceedings

• Classification of General Meetings:

  • Statutory Meeting (Section 211):
  • Mandatory exclusively for public companies, held within $6\text{ months}$ of incorporation.
  • The board must draft and circulate a Statutory Report detailing shares allotted, total cash received, preliminary expenses, and officer particulars to members, while filing a copy with the CAC.
  • Failure to hold the meeting or file the report constitutes grounds for compulsory winding up (Section 408(b)), and default officers are liable to a daily fine of $\text{N}50.00$ (Section 212).
  • Annual General Meeting (AGM) (Section 213):
  • Mandatory for every company; not more than $15\text{ months}$ may elapse between successive AGMs.
  • The first AGM must be held within $18\text{ months}$ of incorporation, after which the CAC cannot grant extensions; for subsequent AGMs, the CAC may grant extensions up to $3\text{ months}$.
  • Default allows the CAC, upon member application, to convene the meeting or direct that a single member constitute a valid meeting.
  • Extraordinary General Meeting (EGM) (Section 215):
  • Convened by directors or requisitioned by members holding not less than one-tenth ($\frac{1}{10}$) of paid-up capital or voting rights to address urgent matters.
  • Requisitionists deposit a signed agenda at the registered office; if directors fail to convene the meeting within $21\text{ days}$, requisitionists representing more than one-half of total voting rights may convene it, recovering expenses from the company.

• One-Man Meetings:

  • Common Law Rule: Generally, one person cannot constitute a meeting (Sharp v. Dawes (1876) 2 Q.B.D. 26; Re London Flats Ltd [1969] 2 All E.R. 744).
  • Common Law Exception: Allowed where one individual holds all shares of a particular class (East v. Bennett Bros. Ltd [1911] 1 Ch. 163) or holds the total percentage required for a quorum.
  • Statutory Exceptions under CAMA:
  • CAC-directed one-member meeting following AGM default (Section 213(2)).
  • Court-ordered meeting where convening a meeting is impracticable (Section 223(5); Re El-Sombrero Ltd [1958] 3 All E.R. 1).
  • Court order when members deliberately withdraw to break a quorum (Section 232(5)).
  • Single requisitionist holding more than half the voting rights of all requisitionists convening an EGM.
  • Single member holding proxy mandates representing all other shares.
  • Meetings of wholly-owned subsidiaries where a single representative holds parent and subsidiary proxies.

• Statutory Notice Requirements (Sections 217–221):

  • Mandatory minimum notice period for all general meetings is $21\text{ days}$ from dispatch.
  • Shorter notice is permissible if agreed to by $100\%$ of members at an AGM, or by a majority holding at least $95\%$ of voting shares at other meetings.
  • Entitled recipients include every member, legal representatives of deceased/bankrupt members, directors, auditors, and the secretary (Section 219).
  • Notices dispatched by post are deemed served after $7\text{ days}$.
  • Omission to give notice invalidates the meeting (Young v. Ladies Imperial Club Ltd [1920] 2 K.B. 523), unless the company proves accidental administrative omission (Re West Canadian Collieries Ltd [1962] Ch. 370). Legal misinterpretations do not constitute accidental omissions (Musselwhite v. C.H. Musselwhite & Sons Ltd [1962] Ch. 964).
  • Contents must state the date, time, venue (AGMs and Statutory Meetings must be held in Nigeria; Section 216), business details (Baillie v. Oriental Telephone Co. Ltd [1915] 1 Ch. 503), and a prominent proxy notification (officers defaulting on proxy notices are liable to a fine of $\text{N}500.00$ under Section 218(4) or $\text{N}250.00$ under Section 230(2)).

• Quorum, Proxies, and Voting:

  • Quorum (Section 232): Unless articles specify otherwise, quorum is one-third ($\frac{1}{3}$) of total members or $25$ members, whichever is less; if membership is $6$ or fewer, quorum is $2$ members.
  • Proxies (Section 230): Members may appoint proxies in writing, submitted to the registered office at least $48\text{ hours}$ before the meeting.
  • Voting (Section 226): Decided by show of hands (one person, one vote) unless a poll is demanded by the chairman or at least $3$ members representing not less than one-tenth ($\frac{1}{10}$) of paid-up capital.

• Types of Resolutions:

  • Ordinary Resolution: Passed by a simple majority; handles ordinary business (dividends, accounts, director elections, auditor appointments).
  • Ordinary Resolutions Requiring Special Notice (28 Days): Removing a director, appointing a replacement director, or appointing/re-appointing a director aged $70$ or older in a public company (Section 236).
  • Special Resolution: Requires a three-fourths ($\frac{3}{4}$ or $75\%$) majority of votes cast, applicable to special corporate alterations.
  • Written Resolutions (Section 234): Exclusively for private companies, signed by all voting members in lieu of a formal meeting.
  • Members' Resolutions: Supported by members holding at least one-twentieth ($\frac{1}{20}$ or $5\%$) of voting rights or $100$ members holding shares averaging $\text{N}500.00$ each, submitted $6\text{ weeks}$ prior, accompanied by an explanatory statement not exceeding $1,000\text{ words}$.

Financial Statements, Auditing, Audit Committees, and Annual Returns

• Accounting Records and Financial Statements:

  • Companies must maintain books of account disclosing daily transactions, asset/liability states, and year-end inventory statements, preserved for at least $6\text{ years}$ at the registered office.
  • Directors must prepare annual financial statements covering a period ending not more than $9\text{ months}$ prior to the AGM.
  • Statutory Components of Financial Statements (Section 335):
  • Statement of accounting policies (must comply with Nigerian Accounting Standards Board standards).
  • Balance sheet reflecting a true and fair view.
  • Profit and loss account.
  • Notes to the accounts.
  • Auditor’s report and Directors’ report.
  • Statement of sources and application of funds.
  • Value-added statement.
  • Five-year financial summary.
  • Group financial statements (for holding companies).
  • Private companies are exempted from the accounting policy statement, fund source statement, value-added statement, and five-year financial summary.

• External Auditors:

  • Appointed at each AGM; initial auditors are appointed by directors to serve until the first AGM.
  • Retiring auditors are re-appointed automatically unless disqualified, a replacement resolution is passed, or written notice of resignation is given.
  • Must be a chartered accountant (Section 358(1)). Disqualified persons include corporate officers/servants, partners/employees of officers, and corporate bodies.
  • Duties and Professional Standards: Investigates whether accounting books are properly kept and agree with financial statements. In Re London and General Bank (No. 2) [1895] 2 Ch. 673, Lindley L.J. affirmed that an auditor must ascertain and state the company's true financial position with reasonable care and skill, but is not an insurer guaranteeing absolute accuracy.
  • Negligent auditors are liable to the company in damages; members may sue on the company's behalf if directors fail to act after $30\text{ days'}$ notice.
  • Vacates office by resignation in writing (confirming whether circumstances warrant reporting to members) or removal by ordinary resolution upon special notice (CAC notified within $14\text{ days}$).

• Audit Committees (Section 359):

  • Mandatory exclusively for public companies, capped at a maximum of $6$ members, composed of an equal number of directors and shareholder representatives.
  • Objectives include reviewing the auditor’s report, evaluating accounting policies, assessing internal control systems, recommending auditor appointments/removals, and authorizing internal investigations.

• Annual Returns:

  • Every company must submit an Annual Return to the CAC within $42\text{ days}$ following its AGM.
  • Must include registered office address, summary of registers (members, debenture holders), share capital and corporate debt statements, member rosters, director/secretary details, and certified copies of the balance sheet, profit and loss account, auditor’s report, and directors’ report.

Corporate Reconstruction: Arrangements, Compromises, Mergers, and Takeovers

• Arrangements and Compromises (Sections 538–539):

  • Restructuring devices altering shareholder, debenture holder, or creditor rights to salvage financially distressed enterprises.
  • Members' Voluntary Realization (Section 538): A company resolves by special resolution to wind up voluntarily, directing the liquidator to sell assets to an acquiring entity in exchange for shares or debentures, with dissenting shares purchased at SEC-approved values.
  • Creditors' Compromise (Section 539): Directors propose a scheme wherein creditors accept a lesser sum in full satisfaction of debts; requires court-directed meetings, court sanction, and CAC registration to become binding.

• Mergers (Investments and Securities Act [ISA] 2007, Sections 119–130):

  • Defined under Section 119 as the amalgamation of undertakings or interests of two or more companies.
  • Categories of Mergers:
  • Vertical Mergers: Integration of companies operating at complementary stages of the same supply/production chain.
  • Horizontal Mergers: Combination of direct competitors at the same level of production to eliminate market overlap.
  • Conglomerate Mergers: Amalgamation of companies engaged in completely unrelated commercial sectors.
  • Three-Stage Merger Process:
  • Pre-Merger Stage: Boards approve the scheme, pre-merger notices are delivered to members and the SEC, and an initial application is made to the Federal High Court to order separate general meetings.
  • Consolidation Stage: Scheme must be approved by a three-fourths ($\frac{3}{4}$) special majority of votes cast at each company’s general meeting, submitted to the SEC for approval, and returned to the Federal High Court for final sanction.
  • Merger Stage: Sanctioning court order must be registered with the SEC within $7\text{ days}$, published in the Federal Gazette and at least one national daily newspaper, and followed by formal notification of completion to the SEC.

• Takeovers (ISA 2007, Sections 131–151):

  • An acquisition of control through transactions bringing an individual's or joint actors' voting rights to $30\%$ or more, or adding to an existing holding situated between $30\%$ and $50\%$.
  • Prohibited in private companies.
  • Procedure: Submit a bid proposal to the offeree board, apply for SEC bid authority (valid for $3\text{ months}$, subject to renewal), dispatch approved bids to target shareholders and directors, acquire deposited shares, and compulsorily acquire dissenting shares at fair, SEC-approved values.

Winding Up and Corporate Dissolution

• Modes and Jurisdiction:

  • The three statutory modes of winding up are compulsory winding up by the court, voluntary winding up, and winding up subject to court supervision.
  • Section 251(1)(e) of the $1999$ Constitution and CAMA confer exclusive jurisdiction on the Federal High Court in the judicial division where the company’s registered office was located during the preceding $6\text{ months}$.

• Compulsory Winding Up by the Court (Section 408):

  • Statutory Grounds:
  • Company passes a special resolution resolving to be wound up by the court.
  • Default in holding the statutory meeting or delivering the statutory report to the CAC.
  • Membership drops below the statutory minimum of $2$ members.
  • Inability to pay debts (Section 409).
  • The court determines it is just and equitable to wind up the company.
  • Test for Inability to Pay Debts (Section 409):
  • A creditor owed over $\text{N}2,000.00$ serves a formal written demand and the company fails to satisfy it within $21\text{ days}$ ($3\text{ weeks}$).
  • Execution issued on a court judgment in favor of a creditor is returned unsatisfied.
  • The court assesses contingent and prospective liabilities and concludes assets cannot cover them.
  • The company cannot be wound up if the debt is disputed on bona fide substantial grounds (Re London and Paris Banking Corporation (1875) L.R. 19 Eq. 444; Bowes v. Hope Life Insurance & Guarantee Co. (1865) 11 H.L. Cases 389).
  • Just and Equitable Doctrine: Applied where the operational substrate has failed (Re German Date Coffee Co. (1882) 20 Ch.D 169) or where an irremediable deadlock paralyzes the board (Re Yenidje Tobacco Co. Ltd [1916] 2 Ch. 426).
  • Eligible Petitioners (Section 410): The company, creditors (including contingent or prospective creditors), the Official Receiver, contributories, trustees in bankruptcy/personal representatives, the CAC (with Attorney General approval), and authorized receivers.
  • Consequences of Commencement: Deemed to commence upon presentation of the petition to court (Section 415(2)). Dispositions of corporate assets, attachments, and judicial executions are void (Sections 413, 414). Legal actions against the company are stayed, corporate contracts of service are terminated (Madrid Bank v. Bayley (1866) L.R. 2 Q.B. 37), and the Official Receiver assumes control as provisional liquidator.

• Voluntary Winding Up:

  • Commences upon passing an ordinary resolution (when the contractual period in the articles expires or a dissolving contingency occurs) or a special resolution to wind up voluntarily (Section 457).
  • Must be advertised in the Federal Government Gazette and $2$ national daily newspapers within statutory timeframes.
  • Members' Voluntary Winding Up: Available only if directors make a Statutory Declaration of Solvency within $5\text{ weeks}$ prior to the resolution, certifying full debts will be settled within $12\text{ months}$. Making a false declaration is an offence punishable by a fine of $\text{N}1,500.00$ or imprisonment for $3\text{ months}$, or both. The liquidator summons a final meeting, files accounts with the CAC within $7\text{ days}$, and dissolution occurs $3\text{ months}$ thereafter.
  • Creditors' Voluntary Winding Up: Applies where directors cannot furnish a declaration of solvency or where the liquidator discovers assets are insufficient to settle debts within $12\text{ months}$ (Section 466). Meetings of members and creditors are held separately; the liquidator nominated by creditors prevails. A Committee of Inspection (maximum of $5$ persons) may be appointed to oversee the liquidation. Dissolution occurs $3\text{ months}$ after filing final accounts with the CAC.

• Winding Up Subject to Court Supervision (Sections 486–489):

  • Occurs when a voluntary liquidation is placed under judicial supervision upon creditor or member petition due to procedural disputes.
  • Retains the voluntary commencement date, but operates with the legal consequences of a compulsory winding up.
  • Liquidators must advertise the supervision order in the Gazette and daily newspapers within $28\text{ days}$.

• Major Liquidation Officers and Statutory Asset Distribution:

  • Officers: Official Receiver (Deputy Chief Registrar of the Federal High Court), Provisional Liquidator, and Liquidator (NDIC v. Obende, Provisional Liquidator of Progress Bank Nig. Ltd (2001) 5 NWLR pt. 705, 184).
  • Statutory Priority of Claims (Sections 492–494):
  • Preferential Payments: Local rates, taxes, and PAYE liabilities; clerk, servant, and laborer salaries for services rendered; accrued holiday remuneration; total costs and expenses of the winding up.
  • Creditors: Secured creditors holding valid fixed charges, followed by floating charge holders, and unsecured trade creditors.
  • Shareholders: Surplus proceeds distributed among contributories according to class rights, concluding in formal dissolution.