An individual intending to establish a business in Nigeria has the option of forming registering a company or a business name/partnership or an incorporated trustee.
The body tasked with the responsibility of regulation and supervision of the formation, registration, incorporation, management and winding-up of businesses in Nigeria, be it a company, a business name/partnership or an incorporated trustees is the Corporate Affairs Commission. The law governing the registration and regulation of such businesses is the Companies and Allied Matters Act (CAMA)
Registration of Companies
Who can form a company?
Any two or more persons can form and register a company in Nigeria whether private of public company. All that is required of them is to comply with the requirements of CAMA on registration.
On the other hand, except for a partnership formed for the purpose of carrying on business as legal practitioners or accountants or a co-operative society, a company, association or partnership comprising of more that 20 persons formed for the purpose of carrying on business for profit or gain must be registered.
However not all person can join in the formation of a company. The following persons are disqualified from joining in the formation of a company in Nigeria:
- A person less than 18 years of age, unless two other persons of 18 years and above are joining in the formation of the Company. This is more so because as will be explained later a person less than 18 years cannot be a director of a company and a company must have at least two directors.
- A person of unsound mind, who has been found so, by a court in Nigeria or elsewhere.
- An undischarged bankrupt
- A person disqualified from being a director of a company. That is a person who;
- has been convicted by a high court of any offence in connection with the promotion, formation or management of a company.
- In the course of winding up of a company
- has been found guilty of fraud in relation to a company or
- has been found guilty of an offence in relation to the property of a company.
- A company in liquidation.
Types of Companies
There are basically two types of companies, a private company and a public company. However a company whether private or public can be registered in three different forms; as a private or public company limited by shares, as a private or public company limited by guarantee or as a private or public company unlimited.
Company limited by shares: Thisis a company having the liabilities of its members limited to the amount, if any, unpaid on the shares held by such members. This means that as the share holding of a person in a company represents the person’s involvement and commitment in the company, a person who has paid for his shares in full cannot be held liable for any part of the liability of the company.
This by far the largest type of companies, which is normally used for business purposes.
limited by guarantee: This is a company having the liabilities of
its members limited to such amount (not less than
N10, 000.00), which they have respectively undertaken to contribute
to the assets of the company in the event of its being wound up.
Three major characteristics of this type of company are that:
- It cannot be incorporated with the object of carrying on business for the purpose of making profit for distribution to members. This means that the profits made by the company cannot be shared among the members of such company.
- It cannot be incorporated with a share capital; and
- The consent of the Attorney-General of the Federation must be sort, before it can be registered.
Unlimited Company: This is a company not having any limit on the liability of its members. Each member is personally liable in full for the debts of the company. This unlimited liability makes this type of company unattractive for business purposes.
For the purpose of this write up, we shall be discussing companies limited by shares.
Private Company Limited by Shares
A private company is one which is stated in its memorandum of association to be a private company. It must by its articles of association restrict the transfer of its shares and the total membership must not exceed 50.
Public Company Limited by Shares
This is any other company not a private company. Such a company is required to state in its memorandum that it is a public company.
Differences between a public company limited by shares and a private company limited by shares
|S/N||Public Company||Private Company|
|1.||The name of a public company must end with “Plc”||The name of a private company must end with “Ltd”|
|2.||The membership of a public company is unlimited.||The membership of a private company must not exceed 50|
minimum share capital of a public company is ||
minimum share capital of a private company is |
|4.||A public company can invite the public to subscribe for its shares or debentures or to deposit money with it||A private company cannot|
|5.||There is no restriction in the transfer of the shares of a public company.||A private company must by its articles restrict the transfer of its shares.|
|6.||Every public company must hold a statutory meeting and file a statutory report.||A private company is not required to do so.|
|7.||A person 70 years and above, who is appointed a director of a public company must disclose his age. Failure to do so is punishable with a fine.||There is no need for such disclosure in a private company.|
Procedure for registration of a company
These are the steps required to be taken for the incorporation of a company:
- Ascertaining the particulars of the proposed company and reservation of name. This is the stage where a person decides the type of company to incorporate, the proposed name of the company, the objects of the company; that is the purposes for which the company is being formed, the share capital of the company, the registered address of the company and the shareholders and directors of the company.