LECTURE NOTES

ON

COMPANY LAW (424)

2017/2018 EDITION

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INTRODUCTION
HISTORICAL DEVELOPMENT OF COMPANY LAW IN NIGERIA
After the amalgamation of the Northern and Southern protectorate in 1914. S. 14 Supreme Court ordinance
was passed to the effect that the common law, the doctrines of equity and the statutes of general application which
were in force in England on the 1st of January 1900 shall be in force within the court Jurisdiction.
To this effect, the English company law which consists the three laws applicable in England, automatically
became applicable in Nigeria, pending the time Nigeria was able to pass her own law relevant matters.
The origin of Nigerian company law was to be found in the numerous cases decided by English courts and
English company act. 1862 which is generally regarded as the genesis of the modern company law.
In 1912, the first indigenous company law came up and applicable to the colony but after 1917, it was made
to be applicable to the whole Nigeria with the aim of providing for the formation of limited companies within the
colony and amendments to become company ordinance 1922. It was renamed cap.38 of the law of Nigeria. 1948
edition and also renamed cap.37 of the law of Nigeria 1958 edition. In 1963 it was called company Act till 1968 when
it was repealed. This 1968 Act was remarkable for it made provision for accounts, accountability and more
participation of shareholders in the affairs of the company.
The law that governs Companies in Nigeria today is the companies and Allied Matter act. Cap 59 law of the
federation of Nigerian 1990 enacted by the law reform commission in an effort to reform the company’s act. 1968
which could no longer keep pace with tremendous industrial and commercial growth brought about by the sudden oil
boom in Nigeria between 1970 and 1979. It can now be found in chapter 3 laws of the federation 2004.
It should be noted that the company and Allied matters acts (CAMA) 2004 inter alia deals with established of
the corporate affairs commission (CAC) introduction of minimum share capital, abolition of weighted votes and
nonvoting shares, stronger and closer control over directors and company account etc.
It is therefore divided into four material parts as follows:

Part “A” deals with company matters

Part “B” deals with business names

Part “C” deals with incorporated trustees

Part “D” deals with short title (citation)

THE ADMINISTRATIVE BODY

CORPORATE AFFAIRS COMMISSION (CAC)
The corporate affairs commission (here in after called “the commission”) is the body charged with the
administration and regulation of the business of companies registered under the act in Nigeria.
The commission has its headquarters in Abuja with branch offices established in each of the states of the
federation.

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 Section 1 (1) and (2) of CAMA create the CAC as a body corporate with perpetual succession and a
common seal capable of acquiring, holding or disposing of any property, movable or immovable for the purpose of
carrying out its functions.

The chief executive of the commission is the registrar-general, a legal practitioner who is 10 years at bar with
8 years experience in company law and practice or administration S.8 (1).

FUNCTIONS OF THE C.A.C.

1 Administration of the CAMA

2 Regulation and supervision of the formation, incorporate, registration, management and winding up
of companies
3 Establishment and maintenance of companies register offices in all the state of the federation
4 Conduct investigation into the affairs of any company where the interest of the shareholders and the
public so demand.
5 Administration of the business names and incorporated trustees of part B and C respectively See S.
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FORMATION OF COMPANY
Any two or more persons can form a company upon full filing of the requirements of the act for the particular
type of company. However, S. 20 of the CAMA provides that no person who is under 18 years together with the
infant.
Certain companies in Nigeria can only be formed by incorporated companies; these are Banks and other
financial companies. Bureau de charge. Insurance companies, etc. by the provision of S. 35 (3) of CAMA the
responsibility for formation of companies is exclusively vested in legal practitioners.
FORMATION OF COMPANY INVOLVES THE FOLLOWING STAGES:

a) Taking instruction from the clients (promoters)

b) Preparing the incorporation documents
c) Filling the documents at CAC
d) Obtaining the incorporation certificate

The instruction to be obtained from the client are the client’s personal details which comprises of full names,
addresses and occupations, the commencement date of the business and other important information relates to the
name of the company.
A suitable name must be chosen for the company. Section 30 (1) (S.30 (1)) restrict use of any name that:
a) Is identical with any name by which a company in existence is already registered or so nearly resemble
that name as to be calculated to deceive. See Niger City Chemist Ltd Vs. Nigeria Chemist (1961) all
NRI. 117.
b) Contains the words “Chamber of Commerce” unless it is a company Limited by guarantee.

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 c) Is capable of misleading as to the true nature of the business of the company.
d) Violate any existing trade mark of business name unless the consent of the owner has been obtained. S
32 provides for preservation of a name for maximum of 60 days, pending incorporation.

MEMORANDUM AND ARTICLES OF ASSOCIATION

Here, the memorandum if the fundamental constitution or charter of the company. It defines and regulates
the company’s status and powers and enable shareholders and outsiders who deal with the company to know what
business it is permitted to undertake and the limit of such business, the capital and its relationship with outsider
generally. While articles, contain the internal regulations of the management of the company. See GUINESS Vs.
LAND CORPORATION OF IRELAND (1882) 22 CH.D 349. 381.

DISSIMILARITIES

1. Memo regulates the external affairs of the company while Articles regulates the internal affairs.
2. The memo control the articles but the later may be used to explain the former in respect of matters which
are not required by the act to be stated.
3. If there is conflict between the two, memo prevails. See WELTON V. SAFFERY (1898) AC 199. (All. ER
rep.567.
SIMILARITIES
1. Both form the company’s constitution
2. Both must be printed and stamped as a deed (9.34))
3. They are to be filled at CA during registration.

CONTENTS OF THE MEMORANDUM OF ASSOCIATION

1) The memo of the company

2) Registered office will be situated in Nigeria SS.27(1)(b) & 630 (1)
3) The object/Business clause: business authorized to be carried on S.27(1)(e)
4) The restriction if any on powers of the company S.27(1)(d) & S. 40 (1) (e)
5) Status of the company, i.e. private or public S. 27 (1) (e) limited or unlimited
6) Capital the amount of the authorized shared capital N10, 000 for private and N5000, 000 for public
companies.
7) Subscription clause, the subscribers with take at least 25% of the authorized capital and to write against
each person the number of share(s) taken S. 27 (2)
8) Note the signature of each subscriber on the memo. It should also be stamped as a deed.

CONTENTS OF THE ARTICLES OF ASSOCIATION

1. Interpretation
2. Share classes and variation of class rights S. 119

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 3. Borrowing power of the company S. 290
4. Meeting of the company as 211, 213, 215.
5. Resolutions S. 234
6. Number of directors SS.246, 248,249,251,255 258, etc.
7. The secretary S.296
8. Common seal
9. Dividend & Reserve
10. Accounts
11. Audit
12. Stock exchange
13. Notice
14. Winding up
15. Indemnity

PRELIMINARY MATTERS BEFORE COMMENCEMENT OF BUSINESS

1. Certificate of incorporation (S. 36 (6)).

2. Name plate (S.631 (1)(0)
3. Official publication of names (S.631 (1)(c))
4. Company seal (S. 631 (1) (b))

STATUTORY BOOKS

a) Register of members (s.83)

b) Index of members (S.85)
c) Register of substantial interest in shares (S.97)
d) Register of director’s share holdings (S.275)
e) Registration of directors and secretaries (S.292)
f) Registration of charge (S.191)
g) Register of debenture holders (S> 193)
h) Minutes Book (S.241)
i) Accounting Records (S.331)

STATUTORY FILLINGS UNDER THE ACT INCLUDE:

1. Court orders e.g. S. 46 (9), S. 53(3), S. 90(4)

2. Notice of change of particulars of directors or secretary (S. 292(4)).
3. Registration of charge (S. 197)
4. Registration of certain resolutions (S.237)
5. Annual return (S.370). Note concessions granted to small companies. See S.372.

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 6. Return of an allotment (S.121)
7. Return on the alteration of share capital (S.128)
8. Statutory reports (S.211)
9. Statement by Banks, insurance companies etc. (S.636)
10. Returns on the auditors (S. 357; S.362 (2), 365(3))
11. Returns during receivers and winding up e.g. (S.392)

See generally S.648 on the enforcement of duty to file returns with the commission

DEFINITION OF A COMPANY

It is an association of persons for some common object or objects. It can also be described as an association
of a number of persons united for economic purposes. I.e.to carries on business for gain. i.e. Partnership and
companies. But the later if more complicated having larger membership and can be corporate of unincorporated.

CLASSIFICATION OF COMPANY
Chartered companies: companies incorporated in pursuance of “latter patent” and granted a charter a monopoly
trade in a particular territory or by organization, i.e. BBC and some University in Britain. These types of companies
are no longer common today.
Statutory company: Companies incorporated by a special act of parliament of decree and are usually formed to
carry out special public purpose e.g. the Nigerian railway corporation. NIPOST, NTEL, NNPC

Registered companies: companies incorporated under the companies act (CAMA) by the process of registration.

TYPES OF REGISTERED COMPANIES

A company may be one the followings: -
a) Company limited by share: in this type of company, the liability of the members (shareholders) is limited by
the Memorandum of Association of the company in the amount unpaid on the shares respectively held by
them.
b) Company limited by guarantee: in this types of company the liability of members is limited by the
memorandum of the amount as the members may respectively undertake to contribute to the company in the
event of it being wind up
c) Unlimited company: in this type of company there is no limit as to the liability of any of the members of the
company in this case the ability may extend to members personal property. Now any of the above mentioned
companies can either be a private of a public company. There is some point to the noted in arriving at
whether or not a company is private or public.

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DIFFERENCE BETWEEN COMPANY LIMITED BY SHARE AND COMPANY LIMITED BY GUARANTEE ON ONE
HAND AND THE DIFFERENCE BETWEEN PRIVATE AND PUBLIC COMPANY

1. Company limited by share is for profit making, while company limited by guarantee is only for charitable
purpose.
2. When winding up the leftover of company’s assets are shared among the members in company limited
by shares, while company limited by guarantee the leftover assets are taken to similar company
While Private and Public is as follows:-
i. Kind and size of the business: the bigger the business the likelihood for a public company, the is why
most banks and insurance houses are public rather than private companies, because they yield a
huge amount of capital which private individuals can seldom hold.
ii. Membership: the membership of private company is limited in 2 to 50 where as there is no limit to
the membership public company, but the minimum is 7.
iii. Registration to transfer of shares: transfer of shares: transfer of share if restricted in respect of a
private company, which such restriction is not obtainable in a public company, S. 22(2) CAMA. Issue
of shares in a private company is restricted to the discretion of the directors, whereas in public
company once the shares are fully paid up, the directors where no choice than to issue such shares.
iv. Formation: a private company can operate with minimum formalities, for instance 22 (27) CAMA
permit a private company must file resolution in a formal way. Similarly S.211 provides that a public
company must hold statutory meeting and lay statutory reports before the members of the company,
but this requirement does not apply to a private Company holding& subsidiary companies.

INCORPORATION OF A COMPANY

The incorporation of a company refers to the registration of the company as required by the Act. The first
stage is the payment of the stamp duties which involves the presentation the commissioner for stamp duties the
following documents:

a) Two copies of the memorandum and articles of association of the company.

b) Two copies of the statement of the nominal share capital of the company. Se the tamp duties act cap 411
LFN 1990.

Then the second stage is the delivery at the CAC of the following documents

i) Memorandum and articles of the company duty signed.

ii) Notice of address of the company’s registered office

iii) Particulars of first directors of the company

iv) Statement of authorized share capital of the company, etc.

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CONCEPT OF CORPORATE PERSONALITY

Company as a corporate body: section 37 of the Act provides as follows:

“As from the date of incorporation mentioned in the certificate of incorporation, the subscribers of the
memorandum together with other a may from time to time become members of the company shall be a body
corporate by the name contained in the memorandum capable forth with exercising all the powers and functions of
incorporated company including the powers to hold land, and having perpetual succession and a seal, but with such
liability on the part of the members to contribute to the assets of the company in the event of its being wound up as
mentioned in this act” the concept of the legal entity of the company distinct from its members become finally
established at common law in the case of a Solomon & Co. Ltd (1897) A.C lord Margnattan stated the position as
follows:
“When the memorandum is duly signed and registered, though there be only seven shares taken, the
subscribers are a body corporate “capable forthwith” to use the words of the enactment, “of exercising all the
functions of an incorporated company”. Those are strong words. The company attains maturity on its birth. There is
no period of minority – no intervals incapacity. I cannot understand how a body corporate can lose individuality by
issuing the bulk of its capital to one person, whether he is subscriber to the memorandum or not.
The company is at law a different person altogether from subscribers to the memorandum, and although it
may be that after incorporation the same as it was before, and the same persons are managers, and the same
hands receiver the profits, the company is not in law the agent of the subscriber liable, in any shape or form; except
to the extend and in the manner provided by the act.”
Note here that, the independent legal personality of the company fundamental to the whole operation on of
business through companies. This legal concept affects its structure, existence capacity, power, right and liabilities.
Although a company is legal entity and has an independent legal entity. Therefore, all the operations and activities
have to be carried only by its organs and agents. In Colton (engineering) Co. Ltd V. Graham & Sons (1957) IQB 159
Dennin H.J distinguished the position saying that;
“A company may in many ways be likened to human body. It has a brain and nerve center which controls
what it does. It also has hand which holds the tools and act in accordance with directions from the centers, some of
the people in the company who are servants and agents who are nothing more than hands to do the work and
cannot be said to represent the mind or will other are directors and control what it does…”. The following include
result, impact, consequences, or some of the most important results/impact of incorporation.

1. Legal personality: the fundamental attribute of corporate personality is that a company is a legal distinct
from its members; it is often described as an artificial person in contrast with a human being.
2. Perpetual succession: another advantage of an artificial person is the issue of perpetual secession. This
means that a company once it is incorporated lingers for unless and until it is wound up. It cannot be
incapacitated by illness, mental of physical problems and it has no allotted lifespan, the death of a member
of the company leaves the company unmoved. See S.248 CAMA.

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 This point was illustrated by GREER L. J. in the case of STEPHNY CORPORATION VS
OSOSFSKEY(1937) 3 All ER 281 where he said; “A corporate body has no soul to be saved or body to be
kicked”.
3. Common seal: S. 74 of the CAMA provides that a company must have a common seal the use of which
must be regulated by the articles of association of the company.
The common seal of a company must bear the name of the company as contained in the memorandum and
certificate of incorporation of the company.
4. Limited liability: another attribute of legal personality is that the members of the company are not liable for
the company’s debt the members of the company may have their liability by shares or by guarantee.
SALOMON VS SOLOMON AND CO. LTD (Supra).
5. Business activities: a registered company has the capacity and power to carryout activities within its
objectives and of entering into contractual and other relations for the purpose of such activities. It can for
example, carry on business and make profits and be liable to tax on such liability may sound in contract, tort
or crime. Unlike under section 109 of the companies’ act 1968, every company can commence business as
soon as it is incorporated and does not require a trading certificate.
6. Property: its property is vested in it and not in the members as a partnership. It can however hold land
subject to any statutory restrictions for example under the Land Used Act, 1978.
7. Duration: unlike a natural person it does not die, but has perpetual succession, subject to its being wound
up according to law. It does not matter that all the members are dead; the company remains the shares of a
dead member being vested in his personal representative by operation of law.
8. Formalities and publicity: one of the consequences of incorporation is the formality and publicity, it
required in the interest of both members and third parties who have or may wish to have dealings with the
company for example, the memorandum and article of association of the company are public documents. All
special resolutions passed by the company must be registered with the commission (S.237).
9. Doctrine of ultra vires: at common law, one of the consequences of the incorporation of a company is that
the power of the company is limited to carrying into effect the business or objects for which it is incorporated.
Any act performed outside those objects is vires (beyond the powers of) the company and therefore, invalid.

LIFTING THE VEIL OF INCORPORATION

Although the legal personality of the company distinct from those of the members has for long been
recognized together with the consequences as aforementioned, there are certain exceptional “Circumstances in
which the law disregards the corporate entity and pays regards instead to the economic reliabilities behind the legal
façade, for example when the veil” of incorporation is lifted in accordance with legal statutes or by the court in the
interest of justice. Here in such case, the law goes behind the corporate personality to the individual members, or
ignores the separate personality of each company in favor of the economic entity constituted by a group of
associated companies.

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 Example of circumstances in which the veil be lifted includes the following:

1. Number of members below legal minimum

2. Reckless or fraudulent trading
3. Investigation powers of the CAC
4. Liabilities on bill of exchange

COMPANY SECURITY

The security of a company consists of shares and debentures:

Shares

A share refers to a unit of right and responsibilities which a share holders has in a company as provided
in the terms of issue and the Articles of Association of the company. It also includes the right to attend
and vote at a meeting see S. 114 & (b). A share is a chose in action and therefore a property which is
transferable as provided in the articles see OKOYA VS SANTYILIU (1994) 4nmir PART 338, 256.
CAMA now provides the issue of non-voting weighted shares except as permitted by the act i.e. under S.
143 that allows preference shareholders to more than one vote per share, if allowed by the articles.
Issue of shares
A company has the right subject to the article to issue shares up to the number authorized in the
memorandum. The shares issued come in classes i.e. shares with different rights e.g. right as to
dividends or sharing of capital on winding up see S. 117 & 118. It is usual to distinguish here main
classes of shares namely, ordinary shares, founders/differed and preference shares.
(a) Debentures

A company may borrow money for the purpose of its business or objects and may charge or mortgage its
undertaking or property and issue Debentures S. 166. Debentures are instrument is often, but not necessary by
deed, see UNION BANK OF NIGERIA VS TROPIC FOODS LTD.

TYPES OF DEBENTURES

1. Perpetual debenture: these are debentures which are made irredeemable or redeemable only on the
happening of a contingency however, remote or on the expiration of a period however long. This is
provided for in section 171.
2. Convertible debentures: these are debentures which are issue upon the terms that in lieu of
redemption or payment, they may at the option of the holders of the company, be converted into shares
on the company upon the terms as are stated in the debentures S. 172.
3. Secured and Naked Debenture: A secured debenture is that which is secured by a charge over the
company’s property and it may be so secured by a fixed charge or by a floating charge, while a Naked
Debenture is one which is not secured by a charge. S.173

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 4. Redeemable Debentures: These are debentures that are redeemable after a period of time as provided
by the terms of the debentures. S.174. Debentures are however, issued in accordance with the
provisions of the Memorandum and Articles of association, but CAMA provides that if debentures are
issued to the public a prospectus must be issued. S.543

CONTROL AND MANAGEMENT

Control and management of the business of the company is entrusted to the directors of the company. See
S. 244 (1) there is a rebuttable presumption that person dealing with the company either as an executive director or
otherwise has been dully appointed S. 244 (2). Directors also includes persons on whose directions or instructions
the directors of the company are accustomed to act otherwise known as SHADOW DIRECTORS. See S. 245 and
OLUFOSOYE VS FAKOREDE (1993) NWLR P. 272, P. 747.

COMPANY STAFF

Company staff includes directors and secretaries of the company.

Directors: Def: Directors are persons duly appointed by the company to direct and manage the business of the
company S. 244.

Any company registered or deemed to be registered under the CAMA must have a minimum of two directors
S. 246. This is without prejudice to the company’s power to fix a maximum number of directors in its articles. The
number of directors and the names of the first director shall be determined in writing by the subscribers to the
memorandum of the company or a majority of them or the directors may be named in the articles S. 247.

Appointment of subsequent directors is done at the Annual General meeting of the company S. 248(1).

WHO MAY BE APPOINTED AS A DIRECTOR

A person can be appointed as a director who does not fail under any of the following categories of people as
provided under S. 257, they are:

a. An infant i.e. a person under the age of 18 years, under S. 20 an infant can be a subscriber to the
memorandum of a company so long as there are two adults as members to the memorandum of
company and cannot be director.
b. A lunate or a person of unsound mind
c. A person disqualified under S. 253 (insolvent person) or under S. 254 (fraudulent person).
d. A corporation other than its representative to the board of directors for a given period. Note that there is
no age limit for appointment as a director but where a person over 70 years is proposed to be appointed
a director of a public company, a public notice of the resolution must be given to the company S. 256.

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TYPES OF DIRECTORS

1. Executive: executive directors responsible for the day-to-day running of the company and the powers are
usually circumscribed by the articles.
2. Managing director: note directors are not servants of the company but its alter ego. However, managing
director is a servant of the company, see YALAJU-AMAYE VS ASSOCIATED registered engineering
contractors ltd (1990) 4 NWLR (part 145) 422.
3. Special director: is an employee of the company whose status has been raised to that of a director but who
continues essentially as such employee i.e. a sales director.
4. Alternate director: he is appointed by a director to seat on the board in his place under power contained in
the articles.
5. Shadow director: he is any person on whose direction and instructions the directors are accustomed to act.
(S.45) and OLUFOSOYE VS. FAKOREDE (1993) 1 NWLR (PART 272) 747.
6. Life director: a person may be appointed a director for life, in which case he is not subjected to retirement by
rotation. Note however, that the fact using the procedure laid down under S. 262 CAMA.
7. Rotational director: unless otherwise provided by the articles, at the first annual general meeting all directors
shall retire from office. Thus, every subsequent year 1/3 of the directors of if there members is not three or a
multiple of three, then nearest to 1/3 shall retire S. 159 (1). Though anyone who offers himself for re-election
may be re-elected.

DUTIES OF DIRECTOR

1. Fiduciary relationship: director stands in a fiduciary relationship towards the company and must observe
utmost good faith in transaction with of for the company, (S. 270(1)).
2. To act in the best interest of the company S. 279(3)
3. He must exercise his powers for the purpose for which it is specified and not for a collateral purpose S. 279
(5).
4. He must not filter his discretion to vote in a particular way S. 279 (7)
5. Must not so delegate his powers as to amount to an abdication of those powers S. 279(7)
6. He is a trustee as well as agent of the company’s money properties and powers. No secrete profits 283(1)
see TRI: NCO NIG LTD. VS.AFRICAN REAL ESTATE & INVESTMENT CO. LTD (1979) ALINR 124
7. His personal interest must not conflict with any of his duties.
8. Duty of care & skill: shall act honestly in good faith and in the best interest of the company S. 282 see COOK
VS. SEEKS (1961) AL. 554.

Liability of directors

1. Liability of directors may be limited or unlimited depends on the types of company, S. 288 & 289
2. Fraudulent directors shall be personally liable to the party from whom he receives money or property.

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 3. Remuneration of director will be determined from, time to time by the general meeting or fixed by the articles,
otherwise no remuneration except refund of the expenses properly incurred in the course of the company’s
business S. 267.

Company secretary

The position of a company secretary is now recognized under CAMA. Un like the controversy that existed
before now, the company secretary may be described as a senior officer of the company and sometime a member of
the management team. S. 293 CAMA. Provides that every company must have a secretary. A person may be a
director in a company and at the same time a secretary, but where an act is required by CAMA.

Qualification for appointment as a secretary: there is no stipulated qualification for appointment as a

secretary of a private company, although the directors usually appoint a person with requisite knowledge and
experience.

For a public company S. 295 provides that a company secretary must hold one of the following qualifications;

a. A member of the institute of chartered secretary and administrators.

b. A legal practitioner
c. A member of the institute of chartered accountants of Nigeria or a similar body.
d. A person with 3 years experience as a secretary within the last five years immediately preceding his
appointment.
e. Company or firm secretary’s legal practitioners or accountants S. 295.

Note that it is a common opinion among authors of corporate law that one of the major innovations of CAMA
1990 is the provisions for the appointment, qualifications, duties and tenure of office of secretaries of public
companies.

Appointment and removal of secretaries: a company secretary is appointment by board of directors and may
be removed by them after satisfying the grounds and procedure under S. 206 (2) – (4)

Duties of company secretaries

This is provided for under S. 298 (1) of CAMA to include the following:

a. Attending the meeting of the company, the board of directors and its committees, tendering all necessary
secretarial services in respect of the meeting and advising on compliance by the meetings with the
applicable rules and regulations.
b. Maintaining the register and other statutory records
c. Rendering proper returns and giving notifications required to be given to the corporate affairs
commission.

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 d. Carrying out such administrative and other secretarial duties as directed by the directors or by the
company.

FINANCIAL STATEMENT & AUDITING

Financial statement: not that financial statements of a company are its bills of health that they show the
annual statement of affairs of the company they are vital and of great important to both members and third parties
dealing with company. It allows a member to know whether his investments are growing, that is appreciating or
depreciating and whether to sell off or retains his share in a company. It also provides vital information to a potential
investor persuading to or dissuading him from investing in a particular company.

DUTY TO KEEP ACCOUNTING RECORDS

a. Every company must keep such accounting records as it will be sufficient to show and explain the
transactions of the company so as to:
b. Disclose with reasonable accuracy, at any time, the financial position of the company
c. Enable the directors to ensure that financial statement comply with the requirement of the act S. 99, to
the form and contents of the company’s financial statement S. 331 (1).

ONTENTS OF ACCOUNTING RECORDS

1. Entries of all sums of money received and expended

2. Records of the assets and liabilities of the company S.331 (3)
3. Statement of stock held
4. Statement of stock taken
5. Statement of all goods sold and purchased

LOCATION AND PRESERVATION OF ACCOUNTING RECORDS

The accounting records shall be kept at the company’s registered office or such other places as think fit by
directors, but it must be open to inspection by officers of the company, S. 332 (1)

Company is required to preserve the accounting records for a period of 6 years from the day they are made.

DIRECTORS’ DUTY TO PREPARE ANNUAL ACCOUNTS

At the first meeting of the board after incorporation, the directors must determine which date each year the
financial statement shall be made up and notify the commission within 14 days of the determination. S. 332(1).

CONTENT OF FINANCIAL STATEMENT

1. Statement of accounting policies

2. The balance sheet as at the last day of the year
3. Profit & loss account or income & expenditure for not profit making company

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 4. Notes on the account
5. The auditors’ reports
6. The directors’ report
7. Statement of the source and application of fund
8. Value added statement for the year
9. A five years financial summary
10. Group financial statement, for holding company

Note: director’s report: it shall be prepared every year.

PERSONS ENTITLE TO RECEIVE FINANCIAL STATEMENT S. 344

1. Every member of the company

2. Every holder of the company’s debenture
3. All other persons so entitled

DIRECTORS DUTIES TO LAY AND DELIVER FINANCIAL STATEMENT

Not later than 18 months after the incorporation and subsequently once in every year it must be laid before
the general meeting, copies of financial statements not exceeding a month’s previous to the date of meeting S.
345(1)

Directors should also deliver to CAC with annual return

a) Copy of balance sheet

b) Profit & loss account
c) Notes on the statement that were laid before the general meeting

Note: small company can modify its financial statement S. 351(1)

PUBLICATION OF FINANCIAL STATEMENT S. 355

A company publishes its full account when the complete statement is laid before the company in general
meeting and those delivered to the CAC.

AUDITOR

APPOINTMENT OF AUDITORS

The directors and the members have their respective responsibilities for the appointment of auditors.

The first audited to commence business and such auditors will hold office until the conclusion of the next
(first) annual general meeting (S. 357(5)). Usually, the first auditors are appointed at the first meeting of the directors.
If the directors fail to exercise this power, the company may in a general meeting convened for that purpose appoint

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the first auditors (S. 357(5)(b). any auditors appointed by the directors may be remo9ved by the company at a
general meeting and the company appoint in their place any other person who has been nominated for appointment
by any member of the and notice of whose nomination has been given to the members not less than 14 days before
the date of the meeting (S. 356(5)(a)).

Every company must at each annual general appoint an auditor (or auditors) to audit the financial statements
of the company and to hold office from the conclusion of that meeting, until the conclusion of the next annual general
meeting (S. 357(1)).

RESIGNATION OF AUDITORS See S.365 and 366

Qualifications of auditors See S. 358

1. Accountant
2. Any officer/company’s servant
3. Partner to company’s servant
4. Firm that offers professional advice to a company
5. Body corporate.

Auditors’ report

The auditors of a company shall make a report to the members on the account examined by them, and on
every balance sheet, profit and loss account and financial statements, which are to be laid before the company in a
general meeting during the auditor’s tenure of office S. 359 and in the case of public company, a similar report shall
be made to audit committee (S. 359 (3)).

Removal of auditors

A company may by ordinary resolution of which special notice is given remove and auditor (S. 362(1) and
(S.364 (1) (d)). Notice of removal of of an auditor will be given to the commission within 14 days of passing of the
resolution (S. 362 (2)).

3. Secured and naked debentures: a secured debentures is that which is secured by a charge over the
company’s property and it may be so secured by a fixed charge or by a floating charge, while a naked
debentures is one which is not secured by charge S 173.

4. Redeemable debenture: these are debentures that are redeemable after a period of time as provided by
the terms of the debentures S.174.

Debentures are issued in accordance with the provisions of the memorandum and article of association, but
CAMA provides that if debentures are issued to the public a prospectus must be issued S. 543.

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 COMPANY MEETINGS

There three types of company meeting under the CAMA, in this case they are:

a. Statutory meeting
b. The annual general meeting
c. The extra ordinary general meeting

The statutory meeting

This type of meeting is prescribed for public companies only S. 211. It is to be held within 6 months from the
date of incorporation of the company. The meeting is principally to consider the statutory report, which must be sent
to the members at least 21 days before the time fixed for the meeting.

At the meeting, members have right to discuss any issue in respect of the formation of the company and the
commencement of the business of the company in any matter arising from the statutory report S. 21(8).

THE ANNUAL GENERAL MEETING

Every company (private or public) is hold annual general meeting. The notice calling to must described it as
an annual general meeting. Not more than 15 months should elapse between the date of one annual general
meeting and the next. However, the first annual general meeting of a company may be held within 18 months of its
incorporation.

If a company fails to call annual general meeting a member can apply to CA which will give directives on
calling the meeting and such directives will include the power for one member to apply to court to make an order that
such member shall taken decisions that will bind members of the company S. 213(2). If there is a default in carrying
out the directives of CA there is a default fine of N500 on the company and every at fault S. 213 (5).

EXTRA-ORDINARY GENERAL MEETING

This type of meeting can be held at any time. It is meant to deal with any mater that is so important that it
cannot wait until the next annual general meeting.

The board of directors may or any director, if there are no other directors in Nigeria to form a quorum,
whenever they or he deems fit convene and extra-ordinary meeting S. 215(1).

Extra-ordinary general meeting may also be requisitioned by members holding not less than one tenth of the
up capital S. 215(2). If after 21 of deposit of the notice of requisition the directors fail to call a meeting, the
requisitions may themselves call the meeting S. 215 (4).

All business transacted at extra-ordinary general meeting deemed special S. 215(8). Notice of meetings: all
general meeting require 21 days of notice calculated from date it is sent out or posted to the date of the meeting S.
215(1).

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However, shorter notice could be given

a) For annual general meeting if it agreed to by all members entitled to attend and vote at the meeting.
b) For any other meeting by a majority holding not less than 90% in normal value of the shares with right to
attends and votes (S. 217(2)).

PROCEEDING AT MEETING

Quorum: this is the minimum number of members that must be present at the meeting to enable the
meeting to start. Normally, it is a matter for the articles of the company to fix but where it is silent section 232 (2)
applied i.e. 1/3 of members or 25 whichever is less applies. In determining whether quorum is there. Members and
proxies will be counted S. 232(3).

Voting: this is to be done by show of hands except a pail demanded (S. 224). Right to demand a pail cannot
be taken away by the articles of the company except on issue of election of a Chairman or adjournment of the
meeting S. 225.

Proxy: this is the person mandated by a member of a company to represent him at the company’s meeting.
He may or not be a member of the company. A proxy has the same right to speak and vote at the meeting as the
member appointing him S. 230.

Corporate representation: a company which is a member of another company shall be represented at the
general meeting of that company of which it is a member by a person authorized on a resolution of the board of
directors or other governing council S. 231.

Resolutions: there are two types of resolutions as provided for in S. 233 (1) and 2 respectively.

a. Ordinary resolution which is passed by a simple majority of votes cast by members in person or by
proxy. Ordinary resolution is presumed when the act simply requires the passing of a resolution by the
company without saying which (ordinary or special).
b. Special resolution is passed by at least ¾ (three-four majority) of member voting in person or by proxy at
a general meeting of which not less than 21 days notice of intention to propose the resolution as a
special resolution has been given (S. 233(2)). Shorter notice may however be given if agreed to be
majority representing no less than 95% of the nominal value of the shares or by members representing
no less than 95% of the total voting right in case of company not having share capital.
Note:

Insurance act No. 2 of 1997, (S.32) provides that petitions that to wind and insurance company may be
presented by not less than 50 policy holders and the commissioners.

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 Commencement of winding up (S. 415)

a. Where a special resolution has passed before the presentation of petition for winding up by the court,
winding up is deemed to have commenced at the time of the passing of resolution.
b. In any other case, the winding up by the court is deemed to commence at the time of the presentation of
the petition, for the winding up.

Method of application to court

Application for winding up is made by way of petition presented to the court see winding up rules Cap 59
LFN 1990. See Oilfield supply center Ltd vs. Johnson (1986) 2 NWRL (part 23) 681.

Step leading up to presentation of the petition

1. In case of petition by the company

Call board meeting to approve resolution that the company be wound up.
Call EGM to pass special resolution
File resolution with the commission and forward copies for winding up.
2. Prepare petition and other accompanying documents and files at registry of federal high court.
3. Prepare statement of affairs unless otherwise ordered by the court.
The petition
The rules of court for the winding up of companies are contained in the companies winding up rules.
Every petition shall be in any of the forms Nos. 2, 3 or 4 in the appendix to the rules which such variations as
the circumstances may requires. The petition must be verified by an affidavit referring to it.
4. Minutes: every company must causes minutes of its meeting to be neatened in book kept for that propose at
its registered office. S. 241(1) & 242(1).
RESOLUTIONS

Decision at company meeting takes the form of resolution. Note that a meeting must always be held and
convened for a valid resolution to be passed by a company. However, in case of a private company a resolution
signed by all the members notified to attend and vote at the meeting is as valid and effective as if it was passed in a
general meeting see S. 234.

They are two types of resolution under the CAMA and are;

a. Ordinary resolution: this is a resolution passed by simple majority or passed members either in person
or by proxy. Whenever CAMA requires an act to be done without specifying the type of the resolution, it
is deemed to be ordinary resolution
b. Special resolution: a special resolution is passed by ¾ majority of members voting in person or by
proxy at a meeting of which not less than 21 days notice has been given see S. 233 (2). CAMA requires
an act to be done without specifying the types of the resolution, it is deemed to be an ordinary resolution.

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 RECONSTRUCTIONS

A company is an artificial person, as we have considered earlier during our discussion on the effects of
incorporation of a company. Just like in a case of natural person running a business, a company may run into some
financial difficulties and during this time of trial the member of the company may decide to re-organize the equity
holding of the company so as to bring some relief into the company’s business. Reconstruction usually takes the
following forms.

1. Arrangement on sales of company’s property under S. 538.

2. By comprise and arrangement under S. 539 and 540.
3. By reconstruction and amalgamation under S. 591 % 593.
4. By a take-over bid under S. 594 to 613.

Audit committee

The audit committee is made up of an equal number of directors and representatives of the shareholders in
the company, subject to a maximum of six members S. 359(4). Nomination of a shareholder as a member of the
audit committee may be made by a member giving notice of such nomination to the secretary of the company at
least 21 days before the annual general meeting S. 159 (5). A member appointed to the audit committee may be re-
elected annually S. 359(4).

Objectives and functions of the audit committee

1. To examine the auditors’ report and make recommendation thereon S.359 (4).
2. To ascertain that the accounting and reporting policies of the company are in accordance with legal
requirements and agreed ethical practices S. 359(5)(a)
3. To review the scope and planning of audit requirements S. 359(5)(b)
4. To review the findings on management matters in conjunction with the external auditor and department
responses thereon S. 359(5)(c)
5. To keep under the effectiveness of the company’s system of accounting and internal control S. 359(5)(b)
6. To make recommendations to the board in regards to the appointment removal and remuneration of the
external auditors of the company S. 359(5)(c); and
7. To authorize the internal auditors to carry out investigations into any activities of the company which may
be of interest or concern to the committee S. 359(5) (f)

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