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Parte 5 & # xA0; & # x2013; & # xA0; Introdução aos derivados.
The DSC Portfolio Ltd.
Managing Director, Loader Associates Ltd Disponível online 26 de agosto de 2016 26 de agosto de 2016.
Vimos nas partes anteriores que cada vez mais o uso de derivativos por fundos de investimento de todos os tipos está sendo feito, pois os gestores de investimentos buscam se beneficiar dos benefícios de hedge e estratégia que esses instrumentos podem oferecer. Portanto, é importante que os administradores e os custodiantes compreendam os produtos e suas características, de modo que possam ser estabelecidos processos, procedimentos e controles relevantes quando for feito uso de derivativos no portfólio. O uso de derivativos significa que os administradores e custodiantes precisam considerar várias questões importantes. Por exemplo, se a utilização do produto foi autorizada ou é permitida pela conformidade regulamentar do fundo, ou seja, a Directiva OICVM, os lançamentos contabilísticos associados à utilização de derivados e as técnicas de avaliação a aplicar, que serão incluídas na política de preços. Outras considerações serão possíveis chamadas de margens, gerenciamento de garantias e o exercício, atribuição e entrega, se a posição derivativa atingir esse estágio. Esta parte do livro explicará a estrutura dos mercados de derivativos e as características dos produtos comuns.
fundos de investimento ; gestores de investimentos; derivados; para frente; futuros.
Direitos autorais & copy; 2016 DSC Portfolio Limited. Publicado pela Elsevier Inc. Todos os direitos reservados.

Opção de negociação em ações individuais em nse iniciada em
1. SWASTIK - A empresa fabrica chapas de cimento para o setor rural sob a marca Swastik A empresa construiu telhados que duram mais e não são corrosivos. A Swastik fornece uma gama completa de soluções para telhados; Oferecemos mais de 100 acessórios para telhados com uma gama diversificada de cores para corresponder à necessidade de todos.
Cemply Swachalay - Swachalay é o banheiro verde ideal desenvolvido pela empresa para apoiar a iniciativa Govt & # 8211; Swachh Bharat Abhiyan: Estes blocos sanitários modulares podem ser instalados e prontos para uso em menos de 1 hora. Feitas com chapas e portas de fibrocimento da cemply e telhados swastik, essas unidades sanitárias seguras e protegidas estão prontas para instalação de acessórios sanitários antes do uso. O Cemply Swachalay é ideal para uso em residências, escolas, pontos turísticos e habitantes dos terrenos tribais ou montanhosos.
4. Comparação entre pares: (como em 30 de agosto de 17)
166 crores operando no negócio de chapas de fibrocimento. A empresa registrou um forte crescimento do lucro no trimestre de junho, com uma recuperação esperada durante este ano fiscal, o que o torna atraente em comparação com outros players listados na indústria.
ii) Como as monções desempenham um papel vital no crescimento da economia rural, as condições de mercado para as coberturas de telhados foram adversas devido a monções fracas no passado. O ano passado foi relativamente melhor, com melhor produção agrícola e mais renda disponível nas mãos dos clientes rurais. Com a monção acima do normal neste ano também, esperamos que os negócios de chapas grossas da empresa tenham um bom crescimento nos próximos dois anos.
iii) Devido aos preços do aço deprimido nos anos anteriores, os telhados de aço coloridos foram preferidos em relação às coberturas de amianto para aplicações industriais e de armazenamento que impactaram o crescimento dos fabricantes de placas de fibrocimento. No entanto, com os preços crescentes do metal base que devem permanecer firmes, acreditamos que a chapa de cimento será a escolha preferida para as atividades de construção daqui para frente. Além disso, um GST mais elevado em chapas de aço de 28%, comparado com 18% em chapas de cimento de amianto, dará aos fabricantes de chapas de cimento uma vantagem extra e, portanto, a Sahyadri será a beneficiária direta.
iv) A cobertura de telhas de fibrocimento é um negócio sazonal, pois a indústria como um todo depende da sazonalidade da demanda. Considerando a desaceleração no setor de habitação e infraestrutura no passado, a empresa tomou novas iniciativas nos últimos anos para isolá-la da sazonalidade da demanda por produtos tradicionais. A empresa começou a evoluir sua linha de produtos, introduzindo produtos relacionados a não-infra-estrutura de alta margem. Cemply Swachalay e Swastik Kukdookoo são alguns dos produtos lançados no âmbito desta iniciativa. Sahyadri se envolveu com vários grupos de autoajuda como Dilasa Janvikas Pratishthan para tornar o Swastik Kukdookoo disponível em toda a Índia.
vii) A partir de junho de 17, a participação da promotora na empresa é de 66,44%. A participação do promotor é a mesma sem qualquer alteração desde março de 2015. Os promotores não se comprometeram com nenhuma ação, a participação da Instituição na empresa é insignificante em 0,01%.
60% a preço de mercado atual de 173,45 40% na faixa de preço de 130 - 140 (em caso de correção no preço das ações no curto prazo)
As ações que revelamos através do Hidden Gems & amp; Escolhas de valor são empresas que não foram pesquisadas ou não cobertas por outras corretoras e empresas de pesquisa. Continuamos atualizando nossos membros sobre nossas recomendações anteriores, sugerindo-lhes que mantenham / comprem ou vendam ações com base no desempenho da empresa e nas perspectivas futuras.
Inscreva-se em Hidden Gems & amp; Value Picks e comece a investir sistematicamente. Aproveite descontos atraentes assinando nossos pacotes combo, clique aqui para detalhes.
Equipe - Saral Gyan.
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Terça-feira, 13 de fevereiro de 2018.
Hidden Gems & Value Picks 2017 Vs Índice Small & Mid Cap.
BANCA DE CARTÃO / LÍQUIDO.
No caso de você não se sentir confortável em assinar on-line, você pode efetuar o pagamento através de cheque / depósito em dinheiro / transferência do NEFT em qualquer um de nossos bancos e nos enviar uma cópia dos detalhes da transação. Clique aqui para detalhes bancários.
Desejo-lhe feliz & amp; Investimento seguro.
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Sábado, 13 de janeiro de 2018.
Estoque de Pick de valor - Sonata Software - ROI @ 75% em 1,5 anos.
60% a preço de mercado atual de 171 40% na faixa de preço de 145-150 (em caso de correção no preço das ações no curto prazo) Alocação de Portfólio: 3% de sua carteira de ações.
As ações que revelamos através do Hidden Gems & amp; Escolhas de valor são empresas que não foram pesquisadas ou não cobertas por outras corretoras e empresas de pesquisa. Continuamos atualizando nossos membros sobre nossas recomendações anteriores, sugerindo-lhes que mantenham / comprem ou vendam ações com base no desempenho da empresa e nas perspectivas futuras.
Entre em contato conosco em caso de dúvidas, teremos o maior prazer em ajudá-lo.
Desejo-lhe feliz & amp; Investimento seguro.
Equipe - Saral Gyan.
Você pode se inscrever para atualizações de e-mail grátis, para que você não perca nenhum artigo que pode ser valioso para você e seus investimentos!
Quinta-feira, 11 de janeiro de 2018.
Capital First Ltd - 15% a 90 dias - dez'17 meta atingida.
Imp Nota: Não sugerimos aos nossos membros para colocar todas as suas economias em 1 ou 2 ações para fazer dinheiro rápido, carteira diversificada é necessário ter ao investir em ações. Nosso estoque de 15% a 90 dias é recomendado com base em análises técnicas (padrões gráficos) e não há garantia de obter retornos de 15% em 90 dias. No entanto, a probabilidade de nossos estoques de 15% a 90 dias atingirem seu preço alvo é alta.
Sugerimos que nossos membros aloquem apenas 2% de seu portfólio de ações em nossas ações de 15% @ 90 dias e façam uma alocação maior em nossas Hidden Gems e Value Picks, que são as empresas apoiadas em fundamentos sólidos e podem recompensar investidores com retornos consideráveis ​​em média a longo prazo.
Desejo-lhe feliz & amp; Investimento seguro.
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Opção de negociação em ações individuais em nse iniciada em
Dois grandes anúncios hoje!
Em primeiro lugar, acabamos de lançar uma demo gratuita na web para o Yeah Jam Fury: UME on Newgrounds! Agora você não tem desculpa para não dar uma chance ao nosso maluco jogo de plataforma de quebra-cabeça. Você pode jogar aqui:
Em seguida, você quer ganhar um cartão Amazon eGift de US $ 100 e mais? Bem, você está com sorte! Hoje nós estamos anunciando o início de uma competição de 1 mês de duração para o Yeah Builder! (E qualquer um pode participar gratuitamente graças à demonstração!)
Nós o apelidamos: o Concurso Construtor de Fúria da Construtora Stage da Sra. Carrot!
A partir de agora até 16 de março de 2018, aceitaremos seus estágios personalizados exportados do criador de palco totalmente desbloqueado temporariamente disponível nas versões demo comerciais do jogo. Esta é a oportunidade perfeita para exercitar suas habilidades de design de jogos e provar que você é o melhor arquiteto de palco para o Yeah Jam Fury no mundo!
Vamos julgar por 3 categorias, com um vencedor para cada uma:
LIGA Artística / YEAH (Quão legal de uma foto você fez) LIGA ATLÉTICA / JAM (Quão agitado é) Quebra-cabeça / LIGA DE FÚRIA (Quão difícil é)
Os vencedores de cada categoria receberão todos os itens a seguir:
$ 100 Amazon eGift Card Uma chave de download do Steam para Yeah Jam Fury: U, eu, todo mundo! Downloads digitais dos álbuns YJF 2012 e YJFUME Um pôster de alta resolução de uma manga real! (ou imagem digital equivalente de uma manga para residentes fora dos EUA)

LEI CORPORATIVA.
LEI CORPORATIVA NA SEMANA PRÁTICA 3.
HISTÓRIA DA LEI DA EMPRESA NIGERIANA.
A lei nigeriana de empresas faz parte da herança nigeriana do sistema jurídico inglês imposto desde os dias coloniais. Antes de 1912, não havia estatutos de empresas locais em vigor na Nigéria, mas apenas empresas estrangeiras operavam no país e eram governadas pelas leis de seus diferentes países.
A primeira legislação de empresas locais foi promulgada em 1912 como a Portaria de Companhias de 1912, baseada no Ato de Empresas de 1908, que era então o estatuto atual na Inglaterra. Esta Portaria aplicava-se apenas à colônia de Lagos e, em 1917, foi alterada e ampliada para ser aplicada a todo o país. Em 1922, as duas Portarias foram revogadas e substituídas pela Portaria das Companhias de 1922, que foi posteriormente alterada em 1929, 1941 e 1954. Em 1968, o Companies Act Cap. 37 das Leis de 1958 foi revogada e substituída pela Lei das Empresas de 1968. A Lei de 1968 foi uma melhoria significativa em relação à lei anterior. Por exemplo, fez provisões obrigatórias para contas e encorajou maior responsabilidade dos diretores e participação mais efetiva dos acionistas nos negócios da empresa. A mudança mais fundamental feita pela Lei foi a introdução da Parte X, que exigia que as empresas estrangeiras que pretendiam continuar seus negócios na Nigéria fossem incorporadas localmente. Esta Lei foi, no entanto, substituída pela Lei de Empresas e Allied Matters, 1990, agora redesignada para o Companies and Allied Matters Act, 1990 e agora em 2004.
PRINCIPAIS LEIS SOBRE A PRÁTICA DO DIREITO EMPRESARIAL.
As principais leis são: o Companies and Allied Matters Act, 2004; Decreto da Comissão de Promoção de Investimentos da Nigéria, 1995; Lei de Inspecção Industrial; A Lei de Promoção de Empreendimentos da Nigéria (Emissão de Ações de Capital Não-votante) de 1987; Decreto de Investimento e Títulos; O Ato de Imigração de 1963; Lei de Assistência ao Desenvolvimento Industrial (Imposto de Renda); e Decreto sobre Câmbio Estrangeiro (Monitoramento e Provisões Diversas).
ÓRGÃOS DE REGULAMENTAÇÃO SOBRE A PRÁTICA DO DIREITO EMPRESARIAL.
Existem 3 principais instituições ou órgãos que são estatutariamente investidos de autoridade reguladora, supervisora ​​e controladora sobre empresas e suas atividades na Nigéria. Estas são a Comissão de Assuntos Corporativos (CAC), Securities and Exchange Commission (SEC), e Nigerian Investment Promotion Commission (NIPC).
CARACTERÍSTICAS E FUNÇÕES DOS ÓRGÃOS DE REGULAMENTAÇÃO E SUA IMPORTÂNCIA NA PRÁTICA DO DIREITO EMPRESARIAL.
Comissão de Assuntos Corporativos.
Este é o ápice dos órgãos reguladores para empresas na Nigéria, que foi estabelecido sob a seção 1 da CAMA como um órgão com plena capacidade jurídica, como empresas incorporadas. Assim, tem sucessão perpétua e um selo comum, capaz de processar e ser processado em seu nome corporativo, de adquirir, deter ou alienar qualquer propriedade, móvel ou imóvel, com a finalidade de executar suas funções.
A criação da Comissão de Assuntos Corporativos como um órgão autônomo foi resultado da ineficiência e ineficácia percebidas do antigo Registro de Empresas, um departamento do Ministério Federal de Comércio e Turismo que era então responsável pelo registro e administração das empresas revogadas. Ato de 1968.
Recursos do CAC.
As características são que a comissão tem uma adesão de 15 pessoas representando uma grande variedade de interesses - a comunidade empresarial, trabalho, profissão legal, profissão contábil, Associação do Fabricante da Nigéria, associação de Indústrias de Pequena Escala, Instituto de Secretários e Administradores , a Comissão de Valores Mobiliários e os Ministérios do Comércio e do Turismo, Finanças e Desenvolvimento Econômico, Justiça, Indústria e Assuntos Internos. O presidente que é nomeado pelo presidente deve ser uma pessoa que tenha experiência ou tenha adquirido conhecimento especializado de assuntos corporativos, industriais, comerciais, financeiros ou econômicos e, portanto, possa fazer contribuições extraordinárias ao trabalho da constituição - a seção 2 do a comissão Secção 2 do CAMA.
Existe uma disposição para um Secretário-Geral da comissão, que deve ser uma pessoa que tenha qualificado para exercer a advocacia na Nigéria por não menos de 10 anos e ele deve ter experiência em práticas de direito das sociedades ou administração por não menos de oito anos. Ele tem o direito de representar a Comissão em processos judiciais em tribunal - seção 10 Seção 10 da CAMA.
Os membros da comissão que não sejam membros ex officio permanecem no cargo por 35 anos e são elegíveis para nova nomeação por mais 35 anos. Com exceção do Registrador, geralmente, eles são todos membros em tempo parcial - seção 3 da seção 3 da comissão da CAMA.
Um membro da comissão deixa de exercer suas funções, se ele se torna desorientado ou é incapaz de exercer suas funções, se ele se torna falido ou fez acordos com seus credores, se ele está convencido de crime ou qualquer ofensa envolvendo desonestidade.
Os membros, com exceção dos representantes dos Ministérios, da Comissão de Valores Mobiliários, do Instituto de Valores Mobiliários e Administradores e do Registro-Geral, têm direito a tais remunerações e subsídios que o presidente poderá direcionar - seção 4.
O quórum para as reuniões da Comissão é de cinco, excluindo os representantes do Instituto dos Secretários e Administradores Chartered, a Securities and Exchange Commission e os Ministérios - secção 5 (3).
Funções do CAC.
As funções da Comissão, conforme estabelecidas na seção 7 da Lei de Empresas e Outras Matérias, incluem o seguinte:
• Administrar a Lei, incluindo a regulamentação e supervisão da formação, incorporação, gestão e liquidação de empresas;
• Estabelecer e manter registros e escritórios de empresas em todos os estados da Federação adequadamente e adequadamente equipados para desempenhar suas funções sob a Lei ou qualquer lei a respeito da qual seja responsável;
• Organizar e conduzir uma investigação sobre os assuntos de qualquer empresa onde os interesses dos acionistas e do público o exigirem;
• Realizar outras atividades que sejam necessárias ou convenientes para dar pleno efeito às disposições da Lei.
A relevância para o direito societário é que a Comissão também registra os Nomes Comerciais e os Administradores Incorporados, bem como fornece uma ampla gama de serviços auxiliares.
Comissão de Valores Mobiliários.
A Securities and Exchange Commission (SEC) é o órgão regulador máximo do mercado de capitais da Nigéria. No entanto, opera sob a supervisão do Ministério Federal das Finanças. A Comissão de Valores Mobiliários e Câmbio da Nigéria, como outras comissões de câmbio de outros países, regulamenta o funcionamento das transações do mercado de capitais, assegurando que as regras relevantes sejam cumpridas.
O negócio de formação e mobilização de capital está na raiz do desenvolvimento econômico, e é por isso que toda economia quer desenvolver seu mercado de capitais. Os mercados de capitais impulsionam a mobilização e a alocação de capital para as empresas, no impulso para o crescimento econômico. Por meio do mercado de capitais, as empresas e os governos mobilizam capital para investimentos, ao mesmo tempo em que oferecem aos investidores a oportunidade de buscar saídas lucrativas para seus fundos. Como processos financeiros complexos são frequentemente envolvidos e um grande número de investidores participa, a necessidade de proteger o mecanismo para essas transações se torna aparente. Os investidores precisam ser protegidos, assim como o processo precisa ser mantido viável.
A Comissão de Valores Mobiliários como é hoje, é o resultado da Lei de Investimentos e Valores Mobiliários (ISA) nº 45 de 1999. No entanto, sua semente foi realmente semeada em 1962, quando o Comitê de Assuntos de Capital, um braço do Banco Central do Brasil. A Nigéria foi criada para avaliar pedidos de empresas que querem levantar capital do mercado e recomendar aprovações. Esse comitê foi transmutado para a Comissão do Mercado de Capitais em 1973 e para a Comissão de Valores Mobiliários em 1978, por força do Decreto nº 7 de 1979. A Lei de Investimentos e Valores Mobiliários nº 45 de 1999 procurou finalmente ampliar o funcionamento da Comissão e refocar para mais impacto no crescimento econômico.
Funcionalidades da SEC.
As características da Comissão consistem no facto de consistir num presidente designado pelo presidente e dez outras pessoas, incluindo dois comissários a tempo inteiro, que devem ser pessoas com competência, experiência e conhecimentos especializados em matéria de mercado de capitais - secção 2 da Comissão. Existe um director-geral da Comissão. Ele é nomeado pelo Presidente e ele é o Chefe do Executivo da Comissão.
Funções do SEC.
A Comissão de Valores Mobiliários e Câmbio da Nigéria, em geral, tem a responsabilidade de regulamentar o mercado de capitais e garantir que os investidores estejam protegidos. Isso significa garantir que os processos sejam cada vez mais transparentes e que as regras de transação sejam cumpridas.
 Examina as partes que se aplicam a operar no mercado de capitais como operadores de mercado e as licenças consideradas adequadas. Esses operadores incluem: casas emissoras, corretores / corretores de valores mobiliários, sub-corretores, registradores, fiduciários, consultores de mercado de capitais, contadores de relatórios, solicitadores e consultores de investimento, etc.
 Títulos para emissão para o público investidor também são examinados e registrados pela Securities and Exchange Commission. Uma parte que pretenda um problema deve solicitar à SEC a aprovação. Estes incluem: Acções / acções, debêntures / empréstimos industriais, títulos do governo e esquemas de investimento colectivo.
 É de responsabilidade da Security and Exchange Commission licenciar andares e trocas de transações, incluindo: Bolsas de Valores (como bolsas de valores), Bolsas de Mercadorias e Pontos de Capital, Futuros, Opções e Trocas de Derivativos, bem como Depositário, Compensador e Agências de liquidação como o CSCS.
 Grandes transações financeiras como fusões, aquisições, aquisições e outras formas de combinações de negócios também devem ter a bênção da Securities and Exchange Commission.
 A SEC tem um papel de monitoramento no mercado de capitais. Esse papel é garantir práticas justas que promovam o mercado e atraiam mais investimento. Estende-se a garantir a boa governança corporativa para as empresas cotadas que, entre outras coisas, têm a responsabilidade de fornecer relatórios oportunos e confiáveis ​​ao público investidor.
 Como investidores, é bom saber, também, que a Comissão adjudica disputas de transação, além de receber e tratar reclamações de investidores / operadores. As partes que são prejudicadas por transações de mercado e não conseguem um tratamento justo em outro lugar podem levar seu caso à SEC. Muitas vezes, as partes inadimplentes recebem o big stick.
A relevância para o direito societário é que a Securities and Exchange Commission está, consequentemente, lá para cuidar do desenvolvimento ordenado e rápido do mercado de capitais. Seu papel básico é garantir uma conduta transparente, de modo que as partes que tomam decisões, especialmente em investimentos, o façam com base em boas informações e processos sólidos. Por isso, é atrair mais fundos para o mercado e também atrair empresas mais viáveis ​​que possam expandir suas operações, utilizando recursos do mercado de capitais.
Comissão Nigeriana de Promoção de Investimentos.
Este foi criado em 1995 como um corpo corporativo com sucessão perpétua ao abrigo do Decreto NIPC de 1995. A comissão deve incentivar, promover e coordenar o investimento na economia da Nigéria.
Funções do NIPC.
• Ser o órgão do Governo Federal para coordenar e monitorar todas as atividades de promoção de investimentos às quais este Decreto se aplica;
• Iniciar e apoiar medidas que aumentem o clima de investimento na Nigéria para investidores nigerianos e não nigerianos;
• Promover investimentos dentro e fora da Nigéria através de meios promocionais eficazes;
• Fornecer e divulgar informações atualizadas sobre incentivos disponíveis para investidores;
• Ajudar os investidores entrantes e existentes, prestando serviços de apoio;
• Avaliar o impacto da Comissão nos investimentos na Nigéria e recomendar recomendações apropriadas; e.
• Manter a ligação entre investidores e ministérios, departamentos e agências governamentais, credores institucionais e outras autoridades envolvidas em investimentos.
One Stop Investment Commission.
Em seu esforço contínuo para incentivar o Investimento Estrangeiro Direto (IED) na Nigéria, o Governo Federal estabeleceu o One Stop Investment Center (OSIC), também conhecido como One Stop Shop (OSS) em 21 de março de 2006.
A Nigéria, como a maioria dos países africanos, criou órgãos estatutários para regular o investimento estrangeiro no país. Portanto, os estrangeiros interessados ​​em exercer negócios no país são obrigados a obter aprovações de investimentos após incorporarem suas empresas. A prática tem sido que a incorporação de empresas e aprovações de investimentos estrangeiros são processadas em diferentes agências governamentais autorizadas. Esse processo foi caracterizado por atrasos normalmente causados ​​pela burocracia do governo, que também sufocou o bom início de negócios estrangeiros na Nigéria.
Em uma tentativa de garantir a incorporação oportuna de empresas e a concessão de aprovações de investimentos, o governo instituiu, no início de 1990, o Comitê de Desenvolvimento Industrial (IDDC) para atuar como uma agência única para todas as aprovações de pré-investimento. O IDDC tinha a responsabilidade estatutária de conceder Licenças de Negócios, Estatuto Aprovado no Princípio, Cotas de Expatriados, aprovações de concessões fiscais, licenciamento veterinário e acordos de transferência e geralmente aconselhar o Governo Federal em questões políticas destinadas a promover a industrialização do país.
Embora a lei que estabelece o IDDC estabelecesse que todas as solicitações válidas recebidas fossem processadas dentro de dois meses, essa expectativa raramente era cumprida na prática. A Lei IDDC foi posteriormente revogada pela Lei nigeriana de Promoção de Investimentos (NIPC) de 1995, que estabeleceu o NIPC para incentivar e promover o investimento na Nigéria. Empresas com participação estrangeira são obrigadas a se inscrever no NIPC para registro e o estatuto determina que dentro de 14 dias a partir do recebimento dos formulários de registro preenchidos, o NIPC registrará tais empresas ou aconselhará o solicitante de acordo.
Funções do OSIC.
Isso inclui a simplificação e a redução dos procedimentos e diretrizes para a emissão de aprovações, autorizações e autorizações de negócios, eliminando os gargalos enfrentados pelos investidores no estabelecimento e na gestão de negócios na Nigéria.
Além disso, espera-se que o OSIC atinja as seguintes funções:
• Reduza o alto custo de fazer negócios.
• Elimine o trato com várias agências.
• Erradicar o uso de discrição e falta de transparência na concessão de aprovações, licenças, autorizações.
• Eliminar a burocratização excessiva nos procedimentos e processos.
• Erradicar a prestação de serviços precários.
• Garantir Investimento Estrangeiro Direto e rastreamento de investidores.
Recursos do OSIC.
• As agências participantes manterão seus mandatos e responsabilidades existentes dentro da estrutura do OSIC.
• Somente disposições estatutárias serão administradas no OSIC e não em aplicações especiais.
• As agências estabelecerão sua presença no OSIC em fases.
• O tempo de aprovação para aprovações de entrada de negócios é de 24 horas.
• O OSIC abrange investimentos em todos os setores da economia.
• É obrigatório que todos os investidores estrangeiros se registrem no OSIC para facilitar o rastreamento de investimentos estrangeiros diretos / rastreamento de investidores, conforme previsto na Lei do NIPC.
PROCEDIMENTO DE ACREDITAÇÃO COM O CAC.
1. Taxa de inscrição de N2.500 para indivíduos e N5.000 para empresas.
2. Devolução do formulário preenchido acompanhado de:
(a) Duas fotografias de passaporte.
(b) Certificado de qualificação (Certificado de Barras - fotocópia)
(c) Praticar o recebimento da taxa pelo menos para o ano de aplicação.
(d) certificado de descarga do NYSC.
PROCEDIMENTO DE ACREDITAÇÃO COM A SEC.
PREENCHIMENTO DAS FORMAS NECESSÁRIAS PARA ACREDITAÇÃO.
1) Reserva do nome Formulário;
2) O nome da empresa;
3) A natureza geral do negócio ou atividades propostas;
4) O endereço completo do principal local de negócios, e todos os outros escritórios subsidiários;
5) Onde o registro a ser efetuado é o de uma firma; os nomes e sobrenomes atuais, nacionalidade, idade, sexo, ocupação e endereço residencial habitual de cada um dos indivíduos que são parceiros, e o nome corporativo e sede de tal empresa, que é parceira;
6) A data de início dos negócios ou atividades;
7) Fotografias de passaporte devidamente certificadas no caso de empresas em nome individual ou empresas constituídas por indivíduo;
8) Certificados de proficiência profissional em casos de sociedades unipessoais ou sociedades ou firmas que pretendem exercer qualquer atividade profissional.
Deve-se observar que informações adicionais e documentos comprobatórios podem ser exigidos no caso de uma firma ou pessoa física exercer negócios em nome de outro indivíduo, firma ou corporação, seja como indicado ou curador e no caso de uma firma ou indivíduo negócios como agente geral para outra preocupação ou entidade no exterior e não ter um local de negócios na Nigéria.
QUESTÕES ÉTICAS ENVOLVIDAS.
Engajamento nos negócios & # 8211; A regra 7 (1) da RPC declara que, a menos que permitido pelo Conselho Geral da Ordem dos Advogados (doravante referido como o “Conselho da Ordem dos Advogados”), um advogado não deve praticar como um advogado ao mesmo tempo que pratica qualquer outra profissão. .
A regra 7 (2) afirma que um advogado não deve exercer a profissão de advogado enquanto estiver pessoalmente envolvido em -
(a) O negócio de compra e venda de commodities;
(b) o negócio de um agente da comissão;
c) Qualquer outra actividade comercial ou negócio que o Conselho da Ordem possa, de tempos a tempos, declarar incompatível com a prática como advogado ou como tendente a minar o alto nível da profissão.
A regra 7 (3) estabelece que, para os fins desta lei, “comércio ou negócios” inclui todas as formas de participação em qualquer comércio ou negócio, mas não inclui:
(a) Membro do Conselho de Administração de uma empresa que não envolva funções executivas, administrativas ou de escritório;
(b) Ser Secretário de uma empresa; ou.
(c) Ser acionista de uma empresa.
Advogados em emprego assalariado - A regra 8 (1) estabelece que um advogado, enquanto empregado ou assalariado de qualquer tipo, não deve comparecer como advogado em um tribunal ou tribunal judicial para seu empregador, exceto quando o advogado estiver empregado como representante legal. oficial em um departamento do governo.
Regra 8 (2) um advogado, enquanto empregado ou assalariado, não deve preparar, assinar ou arquivar articulados, pedidos, instrumentos, acordos, contratos, escrituras, cartas, memorandos, relatórios, pareceres jurídicos ou instrumentos ou processos semelhantes. ou arquivar qualquer documento desse tipo para seu empregador.
Regra 8 (3) um diretor de uma companhia registrada não deve comparecer como advogado em tribunal ou tribunal judicial para sua empresa.
Regra 8 (4) um advogado em um emprego assalariado em tempo integral pode representar seu empregador como um oficial ou agente nos casos em que o empregador é permitido por lei a aparecer por um oficial ou agente, e em tais casos, o advogado não deve usar vestes.
Regra 8 (5) Um oficial nas Forças Armadas que é um advogado pode exercer quaisquer deveres que lhe são devidos como tal oficial e pode aparecer como um Tribunal Marcial, desde que ele o faça na qualidade de oficial e não como advogado.
SEMANA 4 ESCOLHA DE ORGANIZAÇÕES E FORMAÇÃO EMPRESARIAIS.
TIPOS DE ORGANIZAÇÕES EMPRESARIAIS.
Sociedade Anônima Sociedade de Responsabilidade Limitada (Privada / Pública) Sociedade Anônima de Responsabilidade (Privada / Pública) Empresas Limitadas por Garantia (Privada / Pública)
PARTE A DA CAMA INCORPORAÇÃO DE PARCERIA DE EMPRESAS / RESPONSABILIDADE LIMITADA.
PARTE B DOS NOMES DE NEGÓCIOS DA CAMA.
PARTE C DA CAMA INCORPORADO EMPRESAS.
Seção 18 CAMA, prevê que quaisquer 2 ou mais pessoas possam formar e incorporar uma empresa. Seção 20 CAMA, prevê que um indivíduo não deve participar na formação de uma empresa se:
a) Ele tem menos de 18 anos, a menos que haja duas outras pessoas de idade e capacidade que já tenham assinado o memorando.
b) Ele é de mente insalubre e foi encontrado por um tribunal na Nigéria ou em outro lugar;
c) Ele é um falido não cumprido;
d) Ele é desqualificado sob a seção 254 da CAMA de ser diretor de uma empresa.
Um corpo corporativo em liquidação não pode participar na formação de uma empresa Seção 20 (3) CAMA. Alien pode juntar-se na formação de uma empresa registrada desde que tenha cumprido as disposições de qualquer lei aplicável.
CARACTERÍSTICAS DA ÚNICA PROPRIETÁRIO & amp; PARCERIA EM CONTRASTE.
Único praticante: É adequado para um negócio realizado por uma pessoa que assume todos os lucros e suporta todos os riscos do negócio. Parceria: Onde 2 ou mais pessoas desejam realizar negócios em comum com o objetivo de fazer e compartilhar lucros entre si, uma parceria será adequada e é recomendada devido à simplicidade de formação, flexibilidade e confidencialidade.
RESPONSABILIDADE LIMITADA.
Uma companhia limitada por ações é definida como uma empresa que tem a responsabilidade de seus membros limitada pelo memorando ao valor, se houver, não pago sobre as ações detidas por eles. Seção 21 (1) (a) CAMA Deve ser registrado com um capital social. Tem personalidade jurídica com sucessão perpétua e capacidade de selo comum para processar e ser processado em seu próprio nome. Incorporated under PART A CAMA Apenas profissionais da área jurídica, contadores e secretários autorizados podem incorporar. Mínimo de 2 e máximo de 50 membros para empresa privada e mínimo de 2 e máximo ilimitado para uma empresa pública.
Recomenda-se uma companhia limitada por ações quando se pretende que a responsabilidade dos membros da empresa de contribuir para os ativos da empresa em caso de liquidação ou liquidação deve ser limitada ao valor, se houver, não pago em suas ações.
Uma companhia ilimitada não tem nenhum limite na responsabilidade de seus membros. Seção 21 (1) (c) CAMA. As empresas ilimitadas devem ser registradas com capital social. Seção 25 CAMA. A empresa pode evitar ter que divulgar a posição financeira da empresa. O nome de um ilimitado termina com "Ilimitado" ou a abreviação "Ultd".
As empresas ilimitadas são usadas em situações em que a lei especificamente prevê que a responsabilidade dos membros seja limitada.
EMPRESAS LIMITADAS POR GARANTIA (CLG)
Uma CLG é uma empresa na qual a responsabilidade dos membros é limitada pelo memorando a uma quantia que os membros possam comprometer, respectivamente, a contribuir para os ativos da empresa na empresa no caso de sua liquidação. Seção 21 (1) (b) CAMA. A renda de um CLG é para a promoção de seus objetos e não há participação nos lucros. Seção 26 (1) CAMA. Um CLG é registrado sem um capital social. Seção 26 (2) CAMA. O memorando de um CLG deve ser aprovado pelo AG (Fed). O Artigo 26 (5) do CAMA, se não o fizer, é punível nos termos do Artigo 26 (9) do CAMA. Após a liquidação da empresa, seus ativos remanescentes não devem ser compartilhados, mas devem ser transferidos para um CLG com objetos semelhantes ou aplicados a algum objeto de caridade. Seção 26 (10) CAMA. O nome de um CLG deve terminar com as palavras “Limited by Guarantee” ou “Ltd / Gtc”, seções 29 (2) e 29 (5) resp.
Quando uma empresa for formada para promover arte comercial, ciência, religião, esporte, cultura, educação, pesquisa, caridade ou outros objetos similares, e a renda e propriedade da empresa serão aplicadas unicamente para a promoção de seus negócios. objetos e nenhuma parcela dos mesmos deve ser paga ou transferida direta ou indiretamente para os membros da companhia; é adequado registrar tal CLG.
LISTA DE VERIFICAÇÃO DOS DOCUMENTOS NECESSÁRIOS PARA O REGISTRO DE ORGANIZAÇÕES EMPRESARIAIS.
Memorando e Estatutos, devidamente carimbados como escritura. CAC 1 Verificação de disponibilidade e reserva do nome CAC 2 Demonstração do capital social autorizado e colocação de ações assinadas por pelo menos um diretor. CAC 3 Aviso do endereço do escritório registrado da empresa e sede, se diferente. CAC 4 Uma declaração estatutária por um profissional de direito de conformidade com os requisitos da Lei CAC 7 Uma declaração da lista e detalhes dos primeiros diretores da empresa, juntamente com o consentimento dos diretores ou alterar nele. Prova da taxa de depósito paga à CAC e prova do imposto de selo pago ao Federal Inland Revenue Service (FIRS) Qualquer outro documento exigido pela comissão para satisfazer a exigência de qualquer lei relativa à constituição de uma empresa.
CONDUCT CLIENT INTERVIEW AND APPLY CLIENT INSTRUCTIONS TOWARDS PREPARATION OF DOCUMENTS FOR REGISTRATION OF THE BUSINESS ORGANISATIONS.
Name of Company and alternate name Type of company Proposed address of the company Date for completion of registration Sphere of operation of the company Control and management of the company Object of the company.
CAPITAL Number of shares allotted payable in cash Nominal amount of shares so allotted Amount paid or due and payable on each share Number of shares allotted for consideration other than Amount to be treaded as paid on each such share The consideration for which such shares have been allotted.
PARTICULARS OF FIRST DIRECTORS, SUBSCRIBERS, EXPPATRIATE EMPLOYEES Full Names, age, address, nationality, state of origin.
Registration can now be done online at the CAC website using an e-payment system, assessable at cac. gov. ng.
Absence of legal recognition of electronic signatures. There is no CAC 4 equivalent online Stamping: hitherto had been done manually by virtue of Section 23 Stamp Duty Act. Scanning of MEMOART is time consuming. Telecommunications problems PHCN/NEPA issues.
PROFESSIONAL RESPONSIBILITIES (ETHICAL ISSUES)
READ NOW RPC 2007 Rules 8(2), 9(2), 10(1) A lawyer shall not form partnership with a non-lawyer Rule. 5(1) RPC 2007 It shall be unlawful to carry out legal practice as a corporation. Rule 5(5) RPC 2007 When a lawyer collects money for his client or is in a position to deliver property on behalf of his client in the course of incorporation of a company, he shall promptly report and account for it, and shall not mix such money or property with, or use it as his own Rule 23(2) RPC 2007.
WEEK 5 CHOICE OF BUSINESS AND NON BUSINESS ORGANISATION (II)
• It is essentially a non-business/ charitable organization.
• It has corporate personality with perpetual succession and a common seal; can sue and be sued in its corporate name and has power to hold and dispose of any property.
• The income and property of a body/association registered as incorporated trustees shall be applied solely towards the promotion of the objects of the body.
• The income and property of an association registered as incorporated trustees shall not be paid or transferred directly or indirectly by way of dividend, bonus, or otherwise by way of profit to any of the members of the association.
• It is incorporated under PART C of CAMA.
SIMILARITIES BETWEEN INCORPORATED TRUSTEES AND COMPANY LIMITED BY GUARANTEE.
• The objects of both organizations are non-profit oriented.
• Both bodies enjoy tax exemptions. Section 23 Companies Income Tax Act.
• They are both administered by the CAC.
• Both have legal personality and upon winding up, after debts have been settled, the remaining assets are transferred to bodies with similar objects/ other charitable objects.
DIFFERENCES BETWEEN INCORPORATED TRUSTEES AND CLG.
• While a CLG requires the approval of its memo by the AG (Fed) as part of its registration requirements, this requirement does not apply to incorporated trustees.
• Incorporated trustees must fulfill the advertisement requirement before registration but a CLG need not comply with this requirement.
• See Section 579(1)(2)(4), 574(1) CAMA. (Now).
In conducting client interview in relation to the registration of business name, instructions should be taken in respect of the following:
• The proposed name of the business.
• The general nature of the business.
• Address of the principal place of business.
• Particulars of the partners or S. P. as the case may be.
• Date of commencement of business.
In conducting client interview in relation to the incorporation of incorporated trustees, instructions should be taken in respect of the following:
• Name of the association.
• Aims and objects of the association.
• Address of the association.
• Particulars of the trustees.
CHECKLIST OF DOCUMENTS AND ITEMS REQUIRED FOR THE REGISTRATION OF BUSINESS NAMES AND INCORPORATED TRUSTEES.
• Search of availability of name report.
• Tax clearance certificate, S. P./Partner (as the case may be)
• Two passport photographs of the applicant or each applicant in the case of partnership.
• Evidence of payment of filing fees.
• Qualifying certificate where it is a professional partnership.
• Where there has been a change of name of the applicant or any applicant; evidence of such change of name.
• Availability and reservation of name report.
• 2 copies of the applicant’s constitution.
• Impression or drawing of the proposed common seal of the applicant body.
• Duly signed copy of extracts of the minutes of the meeting where the trustees were appointed.
• A copy of the resolution adopting the special clause.
• Evidence of land ownership by the association or undertaking in lieu.
• Evidence of advertisement in 3 Daily Newspapers (2 National dailies and 1 local newspapers widely circulating in the area where the association is based clearly stating:
(a) The name of the association.
(c) Calling for objections to the registration of the association.
• Sworn affidavit by each trustee (in the prescribed form) that they are not disqualified from acting as trustees under Section 591 – 592 CAMA.
• Payment of the prescribed filing fee (N20,000.00)
• Receipt from the court where the IT Declaration form was sworn to should be attached.
• Trustees should attach 2 passport sized photographs each one attached to the application form and one attached to IT Declaration Form.
• Letter authorizing the person who is effecting the registration for the applicant body or association.
A person is disqualified from being a trustee is A) He is an infant B) He’s of unsound mind having been so found by a court C) He is an undischarged bankrupt D) He has been convicted of an offence involving fraud or dishonesty within 5 years of his proposed appointment.
Where a minor is a partner, the application must in addition be signed by a magistrate, legal practitioner or police officer not below the rank of an Assistant Superintendent of Police. Section 574(6) CAMA.
The register may refuse to register a firm with a minor as a partner. Section 579(3) CAMA.
ITEMS TO BE INCLUDED IN A PARTNERSHIP AGREEMENT.
• (Particulars) Names and address of partners.
• Name of partnership.
• Nature of business.
• Place of business.
• Commencement of business.
• Duration of the partnership.
• Premium: This is the money paid by a partner to be admitted into the partnership.
• Management: Unless otherwise stated, every general partner has right to participate in the management of the partnership.
• Profit and loss.
• Payment of salaries.
• Expulsion and suspension.
• Banker and signatories to the bank account.
• Accounts of the partnership agreements.
• Dissolution: Unless otherwise stated, a partnership is deemed dissolved by the death bankruptcy of one of the partners.
ITEMS TO BE INCLUDED IN THE FORMAL CONSTITUTION OF INCORPORATED TRUSTEES.
• Name of the association.
• Nature of the Association.
• Aims and objectives.
• Sources of Fund.
• Board of Trustees: Appointment, duties, functions and powers.
• Common seal – Custody and use of common seal.
• Auditors – appointment, functions, duties etc.
• Officers of the association.
• Functions of officers.
• Election of officers.
• Tenure of office of officers.
• Vacation of office of officers.
• Remuneration of officers.
• Power and duties of trustees.
• Date and signature of the chairman and secretary of the association.
• A lawyer shall not form a partnership with a non-lawyer or with a lawyer who is not admitted to practice law in Nigeria if any of the activities of the partnership consists of the practice of law Rule 5(1) RPC 2007.
• Where lawyer practices alone, he shall not hold himself out as a partner in a firm of lawyers using a firm. Rule 5(4) RPC 2007.
CORPORATE LAW PRACTICE – WEEK 6.
PROMOTION OF COMPANIES AND PRE-INCORPORATION CONTRACTS.
Promotion activities deals with Promoters of a company. This can be found under section 61 of CAMA.
The idea of forming a company is usually conceived by a person or group of persons who in furtherance of this idea, will begin to take necessary steps to incorporate the company. For example, they may have to source for funds, find directors, acquire properties, prepare the prospectus and may also have to pay for the printing and all other expenses incidental in bringing the company into the world. The law regard such persons as promoters of the company.
The provisions of section 61 of CAMA provides thus:
“Any person who undertakes to take part in forming a company with reference to a given project and to set it going and who takes the necessary steps to accomplish that purpose, or who, with regard to a proposed or newly formed company, undertakes a part in raising capital for it, shall, prima facie be deemed a promoter of the company:
Provided that a person acting in a professional capacity for persons engaged in procuring the formation of the company shall not thereby be deemed to be a promoter.”
What this proviso means is that a solicitor or valuer does not become a promoter merely by acting in a professional capacity to a promoter. The only exception is where a solicitor negotiates property for the proposed company at a profit. In Twycross v. Grant (1877) 2 CPD 469 at 541, Cockburn C. J said that:
In “a promoter is one who undertakes to form a company with reference to a given project and to set it going and who takes the necessary steps to accomplish that purpose. They framed the scheme; they not only provisionally formed the company but also were to the end its creators. They found the directors and qualified them. They prepared the prospectus, they paid for the printing and advertise the undertaking before the world….”
Adeniji v. Starcola Ltd. (1972) 1 SC 202, Kazeem J. described a promoter as:
“Any person who undertakes to take part in forming a company or who with regard to a proposed or newly formed company undertakes a part in raising capital for it is prima facie a promoter of the company provided he is not acting in his professional capacity.”
It should be noted that a promoter is also someone who instructs a solicitor to prepare a Memorandum and Articles of Association and register a company for him. In Spicer (Keith) Ltd. v. Mansell (1970) 1 WLR 333, the Court held that a person who purchased a property expressly as trustee for an intended company would by so doing be deemed a promoter.
A person may become a promoter of a company even after registration of a company. For example, if he had assisted in procuring capital for the company to pay promotion expenses when the company was newly formed.
It should be noted also that an existing company may be a promoter for another new company.
However, a solicitor who prepared the Articles and Memorandum of Association and registered a company for his client who paid him (the solicitor) his professional fees is not a promoter. In RE: Great Wheal Poolgooth Ltd (1883) 53 LJ CH 42, the Court said inter alia that a solicitor who drafts the Memorandum and Articles of Association in line with the promoters instructions and the accountant who values the assets of a business to be purchased are only giving expert or professional assistance to the promoters and will be paid for their services; they are not promoters.
If, however, the solicitor and accountant did more by way of helping his client to obtain directors for the company, they would be regarded as promoters. The law looks at the facts in determining whether or not a person is a promoter. In the case of GLUCKSTEIN V. BARNES (1900) AC 240 the court held that a person who purchased property for his own use and later decided to form a company to acquire the property became a promoter only from the time when he took steps to form the company.
A promoter cannot be regarded as an agent or trustee of a company but he occupies a fiduciary relationship with the company – Garba v. Sheba International (Nigeria) Ltd. [2002] 1NWLR (Pt.748) 372 at 401.
It should be noted that a person becomes a promoter from the very moment he begins to take part in forming a company or in setting it going.
CONTRACTS OF PROMOTERS.
In contrast to the Common law rule, Section 72 of CAMA provides that a contract or other transaction purporting to be entered into by the company or by any person on behalf of the company prior to its formation may be ratified by the company after its formation and thereupon the company shall become bound by and entitled to the benefit thereof as if it has been in existence at the date of such contract or other transaction and had been a party thereto.
Section 72(2) of CAMA provides that:
“Prior to ratification by the company, the person who purported to act in the name of or on behalf of the company shall, in the absence of express agreement to the contrary, be personally bound by the contract or other transaction and be entitled to the benefit thereof.”
DUTIES AND LIABILITIES OF PROMOTERS.
Because promoters stand in advantage position as against the company, the law imposes a duty on promoters. Lord Cairns said in Erlanger v. New Sombrero Phosphate Company (1878) 3 AC 1218 at 1236 that:
“Promoters have in their hands the creation and moulding of the company. They have the power of defining how and when and in what shape and under what supervision it shall start into existence and begin to act as a trading corporation”.
1) Duty of fiduciary relationship – The promoter stands in a fiduciary relationship to the company and must observe utmost good faith in transaction entered on behalf of the company. Section 62(1) of CAMA provides that a promoter stands in a fiduciary position to the company and shall observe the utmost good faith towards the company in any transaction with it or on its behalf and shall compensate the company for any loss suffered by reason of his failure so to do.
2) Duty of accountability – The promoter must account for any profit made from the use of information on property acquired in the course of his duty to the company. Section 62(2) of CAMA provides that a promoter who acquired any property or information in circumstances in which it was his duty as a fiduciary to acquire it on behalf of the company shall account to the company for such property and for any profit which he may have made from the use of such property or information. In Jubilee Cotton Mills v. Lewis (1924) AC 958, it was held that a promoter who received, by way of a secret reward for his part in promoting a company, an allotment of shares which had been allotted before a statement in lieu of prospectus, which was then required by law, has been filed was liable to account for the profit made on the resale of the shares.
The transaction between the promoter and the company can be rescinded by the company except where after full disclosure by the promoter, such transaction is ratified on behalf of the company by either an independent Board of directors (that is, independent of the promoter) or at a General Meeting at which such promoter cannot vote – section 62(3) of CAMA. In ERLANGER’s case (supra), a syndicate of which he was the head, purchased an island in the West Indies said to contain valuable mines of phosphate for 55,000 pounds. He formed a company to buy this island and a contract was made between “X”, a nominee of the syndicate, and the company for its purchase at 110,000 pounds. It was held that there had been no disclosure by the promoters of the profit they were making. Therefore, the company was entitled to rescind the contract and recover the purchase money from him and other members of the syndicate.
There is no limitation period for company to sue promoter under this section but the court may give relief from liability to the promoter if it deems it equitable to do so – section 62(4) of CAMA.
REMEDIES FOR BREACH OF DUTIES.
Basically, there are three major remedies:
1. The company may sue the promoter for damages for breach of his fiduciary obligation to the company – Re: Leeds And Hanley Theatre Of Varieties Ltd (1902) 2 CH 809.
2. The company may rescind the contract and recover the purchase money paid where the promoter sold his own property to the company. In Erlanger v. New Sombrero Phosphate Ltd. (supra), the Court held that the law requires the promoter to disclose such fact before he can be relieved of any liability for failure to disclose. Where he discloses such facts, it will no longer be regarded as secret profit and he may be allowed to keep it. Disclosure must be made to:
(a) The Board of Directors who must be independent of the control of the promoters; ou.
(b) Where no such Board exists then disclosure must be made to the shareholders either in a General Meeting or in a circular or prospectus issued by the promoters on behalf of the company.
3. The promoter may be compelled by the company to account for any profit he made – Gluckstein v. Barnes (supra).
REMUNERATION OF PROMOTERS.
The services of promoters are very peculiar, and a great skill, energy and ingenuity may be required and employed in the promotion exercise. Though, a promoter has no right against the company to payment for his promotion services and expenses unless there is a valid contract for him to do so – Re English and Colonial Produce Company (1906) 2 CH. 435 CA. And, since pre-incorporation contracts are not binding on, or enforceable by, or against the company, it may be difficult for promoters to have an enforceable contractual right to remuneration for their services and indemnify for their expenses. In Re National Motor Mail Coach Co. Ltd., Clinton’s Claim (1906) 2 Ch 515 CA , it was held that the promoters were not entitled to prove or recover the expenses they incurred in incorporating the company. This difficulty is more real in theory than in practice because recovery of preliminary expenses and remuneration does not present much difficulty. Usually, the Articles of Association will contain a provision authorising the directors to pay them though it does not go to the extent of constituting a contract between the company and the promoter(s).
The reward of a promoter may take many forms. He may purchase an undertaking and promote a company to repurchase it at an enhanced price, thus, making profit. Alternatively, he may receive commission on a sale to the company from a vendor (it should be noted that all this is subjected to the rule of full disclosure as a duty of the promoter). Also, he may be given an option to subscribe for shares at a particular price within a specified limit. Where this happens, it is very significant that there is full disclosure of same by the promoters to the company and also by the company in the prospectus.
Unlike the common law position, a promoter can now recover remuneration by action against the company if the contract is ratified or adopted by the company after incorporation since by section 72 of CAMA, such a contract or transaction may now be ratified. In Garba v. Sheba (supra) at 401, the court held that it has always been the case that a promoter has no right against the company for payment of services rendered before the incorporation of the company and that a promise to pay him by the company is neither binding nor enforceable against the company because the consideration is a past consideration.
Pre-incorporation contracts are contracts purported to be made usually by promoters on behalf of a company before it is incorporated – Sparka Electrics Nig. Ranor v. Ponmile (1986) 2 NWLR (Pt. 23) 519 at 525. That is, before a company is formally registered, a promoter may have entered into some contracts on behalf of the company before incorporation.
In Kelnar v. Baxter (supra), it was held that at Common Law, a pre-incorporation contract was not binding on the company because there was no principal on behalf of whom an agent could have contracted and that the company was not permitted to ratify or adopt it. This was also the decision in Trans Bridge Co Ltd. V. Survey Int’l Co. Ltd (1986) 17 NSCC 1084; Edokpolor and Co. Ltd v. Sem-Edo Wire Industry Ltd (1984) 7 SC 119; Re English Colonial Produce Co. Ltd (supra); Kelner v. Baxter (1886) LR 2 CP; Enahoro v. Bank of WA Ltd (1971) 1 NCLR 180.
The only way in which the company could be party to the contract was to enter into a new contract in terms of the one purportedly entered into on his behalf. The reason for this is that such a company is not yet a person in the eyes of the law. A pre-incorporation contract at Common Law is, therefore, not binding on the company. In the case of Caligara v. Giovanni Ltd. (1961) 1 ALL NLR 534, the Court held that a company cannot ratify or adopt a contract purported to have been entered into on its behalf by its promoters prior to its incorporation.
Where the promoter signed the contract for and on behalf of the company, he is personally liable – Kelnar v. Baxter (supra) but where the promoter signed the contracts in the proposed name of the company, then there is no contract at all. In Newbourne v. Sensolid (Great Britain) Ltd 1954 1 QB 45, it was held that the contract was not made with the plaintiff but with a non-existing limited liability company. Therefore, the contract was a nullity and the plaintiff could not adopt it and sue upon it as his own contract.
But Section 72 of CAMA has now modified this rule. It provides thus:
“Any contract or other transaction purporting to be entered into by the company or by any person on behalf of the company, prior to its formation, may be ratified by the company after its formation and thereupon the company shall be bound by and entitled to the benefit thereof as if it has been in existence at the date of such contract…”
In other words, the company can ratify after formation as if it were in existence when the contract was entered into. The company then becomes bound and entitled to the benefits therein.
Although, it is significant to treat the word “ratified”, as used in this section could have been used in its strict legal connotation. This observation accords with legal principles since there cannot be ratification of a contract or transaction by a principal who was not in existence at the material time of contract. The law in this context, merely treats the company as if “it has been in existence at the date of such contract or other transaction and had been a party thereto”. The theoretical basis of the power of ratification which companies are given under this section, is, obviously, predicated on agency principle by which a principal has the legal competence to ratify unauthorised acts of his agent. The power of ratification endowed upon incorporated companies in this section, it must be pointed out, is co-existence with that exercisable under normal agency relationship. Therefore, ratification may be express or implied.
The question whether or not the insertion of a pre-incorporation contract in the object clause of a memorandum of a company would make it binding on the company came up in the case of Edokpolor and Company Ltd. v. Sem-Edo Wire Industries (supra). The apex court per Nnamani, JSC stated the position in the following way:
“The object Clause is no more than a list of the objects the company may lawfully carry out. They are certainly not objects that the company must execute. The inclusion of the terms of the pre-incorporation contracts in the Memorandum of a company is an indication of a strong desire… that the proposed company after incorporation should execute the terms of the agreement so included.
On when can pre-incorporation contract be binding, the court stated in the case of Garba v. Kic Ltd. (2005) 5 NWLR (PT. 917) 160 at 117, that before a company can become bound by any contract or transaction entered on its behalf before its formation, there must be evidence of ratification by the company upon its formation.
Before such ratification, any person who claims to have entered into a contract on behalf of a company before its formation is presumed to have done so personally – ET and EC Nigeria Ltd. v. Nevico (Nigeria) Ltd. (2004) 3 NWLR (PT. 860) 327 at 347.
TYPES OF PRE-INCORPORATION CONTRACT.
The following are types of pre-incorporation contract:
1. Joint Venture Agreement especially between Nigerians and Aliens.
2. Shareholders’ Agreements.
3. Contract for Payment of Promoters’ expenses.
4. Directors’ service contract (appointment of the Managing Director).
5. Contract Agreement for the acquisition of business or property (Takeover agreement).
6. Contract for Conversion of partnership to incorporated companies.
FEATURES OF A PRE-INCORPORATION CONTRACT.
1) Such contracts (pre-incorporation contracts) are said not to be binding on the company until it has been ratified or adopted by the company.
2) Such contracts are made prior to the existence and incorporation of the company.
3) Such contracts are binding on the promoter and not the company except in cases where a company has ratified the contract.
4) It is usually made by a promoter with a third party on behalf of the company before incorporation.
5) Promoters are personally answerable under pre-incorporation contracts.
RELATIONSHIP BETWEEN MEMORANDUM AND ARTICLES OF ASSOCIATION AND PRE-INCORPORATION CONTRACTS.
The Memorandum of Association is the dominant instrument and the Articles of Association are subordinate to and controlled by the memorandum – Liquidator of Humbold Redwood Co. Ltd. v. Coasts (1908) SC 751 at 753. A company’s power to alter its articles is subject to the conditions in the memorandum – section 48(1) of CAMA. Consequently, an alteration of articles must not conflict with the memorandum.
Where parties have a joint venture agreement, it is important that the terms of the joint venture agreement are incorporated into the memorandum of association of the company. This is done by providing in the first object clause of the memorandum of association as follows:
“To give effect to the Joint Venture Agreement, dated this ………….. day of ……….. between …………………. And ………………………..”
However, where there is a conflict between the joint venture agreement and the memorandum and articles of association, the joint venture agreement will prevail if there is a supremacy clause in the joint venture agreement – Edokpolor’s case (supra).
The main objectives of a Joint Venture Agreement (JVA) would be:
a) To record how the company and its business are to be run with the least possible friction;
b) To make sure the rights of each shareholder are secured and that so far as possible, each shareholder gets what he expects from the venture; e.
c) To determine what happens if something goes wrong.
EFFECT OF INCORPORATING THE JOINT VENTURE AGREEMENT INTO THE MEMORANDUM OF ASSOCIATION.
This is to the effect that the members of the company have a strong desire to perform the terms of the joint venture agreement. However, the terms are not binding on the company because the object clause in the memorandum of association of a company is no more than an object that the company may lawfully carry out. This does not mean that the company must carry out the object – Edokpolor v. Sem-Edo Wire Industries (supra).
EFFECT OF MEMORANDUM AND ARTICLES OF ASSOCIATION.
Subject to the provisions of CAMA, the memorandum and articles when registered, shall have the effect of a contract under seal between the company and its members and officers and between the members and officers themselves whereby they agree to observe and perform the provisions of the memorandum and articles, as altered from time to time in so far as they relate to the company, members or officers as such – section 41(1) of CAMA; Longe v. FBN (2006) 3 NWLR (Pt. 967) 228 at 269.
The effect of the above provision is that the articles of association (and memorandum) constitute a contract not merely between the shareholders and the company, but between each individual shareholders – Per Stirling J. in Wood v. Odessa Waterworks 42 Ch. D. 636 at 642.
Isso significa que:
1. A shareholder may bring an action to enforce any personal right contained in the articles. In Burdett v. Standard and Exploration Co. (1889) 16 TLR 112, Conzens Hardy J held that a member was entitled to enforce compliance by the company with a clause in articles giving him a right to a share certificate.
2. The company is entitled to sue its members for the enforcement and to restrain the breach by them of its articles, and to treat as irregularly anything which is done in contravention thereof – Blackpool v. Hampson (1882) 23 Ch D. 1.
3. A member can sue a member for the enforcement of his right in the articles – Hudges, King (Nig.) Ltd. v. Ronald George Harris (1972) 2 UILR 63.
4. The company, directors and officers will be treated as having made a contract in terms of the clause in the articles and are bound accordingly. In Swabey v. Port Darwin Gold Mining Co. (1889) I Meg. 385, the court held that he was entitled to recover on the footing of an implied contract in the terms of the clause.
5. The directors/officers of a company are bound by the articles and if they act otherwise than in accordance with the provisions of the articles, they may render themselves liable to an action at the instance of the members and if as a result of the breach of duty any loss is suffered by the company, the directors are liable to refund of the company any damage so suffered.
6. Where the memorandum or articles empower any person to appoint or remove any director or other officer, he cannot be prevented from doing so and such power shall be enforceable by that person notwithstanding that he is not a member or officer of the company – section 41(3) of CAMA; Longe v. FBN Plc (supra) at 272.
7. Any alteration to the articles is, for the purpose of section 41(1) treated as if it were part of the original articles and will bind the company members and directors and officers of the company accordingly.
8. The contractual relations created by the articles have statutory operation – Evans v. Chapman (1902) 86 LT 381; and the court cannot rectify them under its equitable jurisdiction even if it is proved that they do not reflect the intention of the parties – Scott v. Frank F. Scott (London) Ltd. (1940) Ch. 794.
9. All money payable by any member to the company under memorandum or articles shall be a debt due from him to the company and shall be of the nature of a specialty debt.
CONTENTS OF SHAREHOLDER AGREEMENT.
4. Definition and Interpretation.
8. Auditors and Bankers.
9. Registered Office.
10. Accounting Reference Date.
13. Dividend Policies.
14. Further Financing.
15. Guaranties and Indemnities.
16. Company’s Business.
17. Directors and Chairman.
18. Important Management Decisions.
20. Transfer of Shares.
21. Material Breach.
23. Restrictive Covenants.
25. Shareholders Consent.
CONTENTS OF JOINT VENTURE AGREEMENT.
3. Capital Contribution.
4. Management Composition of the Board.
5. Place of the Business.
6. Nature of the Business.
7. Supremacy Clause.
8. Joint Venture Sharing Ratio.
9. Dissolution Clause.
11. Governing Law.
12. Arbitration (that is, how should a matter be solved in the event of dispute).
1. Rule 1 of Rules of Professional Conduct (RPC), 2007 – A lawyer shall uphold and observe the rule of law, promote and foster the cause of justice, maintain a high standard of professional conduct, and shall not engage in any conduct which is unbecoming of a legal practitioner.
2. Rule 7(2)(b) of RPC – A lawyer shall not practice as a legal practitioner while personally engaged in the business of a commission agent.
3. Rule 7(3)(a) of RPC – A lawyer shall not participate in any business that involves either executive, administrative or clerical functions.
4. Rule 23 of RPC – A lawyer shall deal with his client’s property diligently and shall not use his client’s property for personal gain. He must also be accountable to his client as regards to client’s money.
5. Rule 52 of RPC – The professional fee charged by a lawyer for his services shall be reasonable and commensurate with the service rendered.
6. Rule 14 of RPC – A lawyer shall devote his attention, energy and expertise to the service of client.
A DRAFT OF PRE-INCORPORATION DOCUMENT (SAMPLE)
AGREEMENT BETWEEN PARTNERS FOR FORMATION OF A COMPANY TO ACQUIRE THEIR BUSINESS.
This agreement is made this ………….. day of ………… 20…….
BETWEEN …………………. (name), first partner of ……………………… (address) and …………………. (name), second partner of ……………………. (address).
WHEREAS, the parties have agreed to form a company for the purpose of acquiring as a going concern, the business of the parties …………………. (state the kind of business) now carried on by them in partnership under the name …………………….. (name of the business).
NOW IT IS AGREED as follows:
Formation and capital of the company.
The parties shall procure the incorporation of a company having an authorised share capital of ………………… (amount) divided into ordinary shares of ……………. (amount) each.
The company shall be called “………………….. (name of the company) Limited” if such name is available for registration or by other available names as may be agreed between the parties (or in default of such agreement (name of one of the parties) shall sect).
Memorando e artigos de associação.
The Memorandum and Articles of Association of the company shall be in the form of draft and attached and marked as “A” with such modifications as the parties may agree in writing.
The Memorandum and Articles of Association shall be subscribed by the parties or their respective nominees each of whom shall agree in the memorandum to take up ordinary shares of ………………… (amount) each in the capital of the company.
The parties will procure their appointment as the sole first directors of the company. Each of the parties will exercise his voting right for the time being in the company and take other such steps as lie within his power to procure that the other parties retain their appointment to the office of director.
That each of the parties shall remain a director of the company until the ……… day of ……… (date) and so long after that as he holds beneficially (ordinary) shares of stock in the capital of the Company having an aggregate nominal value of not less than …………………. (amount) (or not less than ………….. per cent in nominal value of the issued share capital of the Company).
That ………………. (name) shall be the Chairman of the Company until ………… day of ……….. (date) and so long after that as he remains a director of the Company.
That so long as any of the parties is entitled to remain a director of the Company in accordance with the provisions of this clause, the maximum number of directors of the Company shall not exceed ……………. (number).
Sale of the business and cost and expenses.
The parties and the company will enter into an agreement for the sale of their business to be in the form of the attached draft marked “B” and the company will bear the costs, fees and expenses of solicitors and accountants to the preparation of this agreement the formation of the Company and the sale of the business to the company.
Nothing contained in this agreement shall in any way affect the free exercise by any person of his powers as a director of the company.
IN WITNESS of which we set out our hands the day first above written.
In the presence of.
WEEK 7 PREPARATION OF DOCUMENTS OF BUSINESS AND NON-BUSINESS ORGANISATION AND REGISTRATION.
• Present to the Federal commissioner of stamp duties, two copies of the MEMOART and statement of authorized share capital.
• Commissioner assesses the amount payable ad-valorem ie N1.50k for N200. Get bank draft, payable to FEDERAL GOVERNMENT OF NIGERIA, FBIR ACCOUNT.
• After payment, documents shall be stamped. One copy of each will be returned to you.
FILING AT CAC AND OBTAINING CERTIFICATE OF INCORPORATION.
• Deliver to the CAC, the ff documents and pay appropriate fees as set out in CAM (Fees) Regulations 1995, as amended.
• FORM CAC 1 (Reservation and Availability of Name)
• MEMOART duly stamped as a deed.
• FORM CAC 3 Notice of the Address of registered office of the company and Head Office if different.
• FORM CAC 2 SIGNED BY AT LEAST ONE DIRECTOR (STAMPED)
• Any other document required by the commission to satisfy the requirement of any law relating to the formation of a company.
• Whilst @ CAC, pay filing fee and get receipt. (N10,000 for every million)
• After the delivery of the documents and payment of the required filing fees to the CAC, an official examination of the documents will be carried out by the CAC.
• Rule against aiding the unauthorized practice of the law. Rule 3 RPC 2007.
• Representing client within the bounds of the law. Rule 15 RPC 2007.
WEEK 8 FOREIGN PARTICIPATION IN NIGERIAN BUSINESS SECTOR.
LAWS REGULATING FOREIGN PARTICIPATION IN BUSINESS.
• CAMA, CAP C20 LFN 2004.
• COMPANIES AND INCOME TAX ACT.
• NIGERIAN INVESTMENT PROMOTION COMMISSION ACT CAP N117 LFN 2004.
• FOREIGN EXCHANGE (MONITORING AND MISCELLANEOUS PROVISIONS) ACT CAP F34 LFN 2004.
• INVESTMENTS AND SECURITIES ACT CAP 124 LFN 2004.
• IMMIGRATION ACT CAP 11 LFN 2004.
• NATIONAL OFFICE FOR TECHNOLOGY ACQUISITION AND PROMOTION ACT CAP N62 LFN 2004.
• INDUSTRIAL INSPECTORATE ACT CAP 18 LFN 2004.
• SECURITIES AND EXCHANGE COMMISSION RULES 2004.
COMPANIES EXEMPTED FROM REGISTRATION.
• Any foreign company which before the commencement of this Act was granted exemption from compliance with Part X of the Companies Act 1968. S. 54(3)(a)
• Any foreign company exempted under any treaty to which Nigeria is a party. S.54(3)(b)
EXEMPTION BY APPLICATION.
By Section 56, a foreign company may apply to the National Council of Ministers for exemption from the requirement to register locally if it belongs to one of the following categories:
• Foreign companies (other than those specified in paragraph (d) of S. 56 CAMA, invited to Nigeria by or with the approval of the Federal Government to execute any specified individual project;
• Foreign companies which are in Nigeria for the execution of specific individual loan project on behalf of a donor country or international organization;
• Foreign government-owned companies engaged solely in export promotion activities;
• Engineering consultants and technical experts engaged on any individual specialist project under contract with any of the governments in the Federation or any of their agencies or with any other body or person, where such contract has been approved by the FG.
By S.56(2) CAMA the letter applying for the exemption shall be addressed to the Secretary to the Federal Government.
STATUS OF EXEMPTED COMPANIES.
• An exempted company has the status of an unregistered company. S.58 CAMA.
FOREIGN DIRECT INVESTMENT (FDI)
• The form of investment where a foreigner operates alone or in joint venture with Nigerians by incorporating a company with CAC and NIPC, see Ss.17, 20 & 27 NIPC.
FOREIGN PORTFOLIO INVESTMENT (FPI)
• This form of investment does not include incorporating a company in Nigeria, but buying/acquisition of shares in Nigerian companies in any convertible currency.
• Investment will be effected with foreign currency imported freely into Nigeria through an authorized dealer and converted into the Naira at the official foreign exchange market.
PERMITS AND APPROVALS.
• No person other than a Nigerian citizen shall on his own account or in partnership with any other person practice a profession or establish or take over any trade or business whatsoever or register or take over any company with limited liability for any such purpose without the written consent of the Minister of Internal affairs.
• No person other than a citizen of Nigeria shall accept employment (not being employment with the Federal or a State government) without the written consent of the Chief Federal Immigration Officer. Initial expatriate quota is sought and obtained usually along with the business permit. There are two types of expatriate quota:
uma. Permanent Until Reviewed (PUR) usually for the post of Chairman of the company’s Board of Directors or the Managing Director.
b. Temporary: Directors and other employees of the company. The maximum number of years granted in the first instance is five years renewable for a further period of two years.
• Initial expatriate quota is sought and obtained usually along with the business permit.
• Application is made on Immigration Form T/2. It is the duty of the company and not that of the employee, to apply for expatriate quota.
• Every alien may enter Nigeria and stay therein for three months without a residence visa (Tourist Visa). Any person who is not a citizen of Nigeria who desires to enter Nigeria for purpose of residence (i. e. beyond three months) must obtain a residence permit. Application is by letter (2 copies) accompanied by a valid passport of the alien, from company requesting permission to employ the alien, to the Immigration Department (via Consular Authorities)
Registration of Securities by SEC.
• The Securities and Exchange Commission is required to keep and maintain separate registers of foreign direct investments and foreign portfolio investments. S.13(i) ISA 2007.
Transfer of Technology.
• Every contact or agreement entered into by any person in Nigeria with another person outside Nigeria involving the transfer of foreign technology to Nigerian partners shall be registered with the National Office for Technology Acquisition and Promotion (NOTAP) in the prescribed manner not later than sixty days from the execution or conclusion of the agreement. S.5(2) NOTAP Act.
• A contract or agreement involves transfer of technology if it includes:
a) The use of trade marks.
b) The right to use patented inventions.
c) The supply of technical expertise in the form of the preparation of plans, diagrams, operating manuals or any other form of technical assistance of any description whatsoever;
d) The supply of basic or details engineering;
e) The supply of machinery and plant; e.
f) The provision of operating staff or managerial assistance and the training of personnel. S.4(d) NOTAP Act.
• Every application for the registration of a contract or agreement shall be addressed to the Director of NOTAP and shall be accompanied by such number of certified true copies of such contract or agreement and all other related documents and information as may be specified in any particular case by the Director. S.6(1) NOTAP Act.
• Non-registration does not render the contract void or unenforceable between the parties but merely frustrates the transfer of any fees or payment due under the contract to the account of the alien outside Nigeria.
Intention to incur capital expenditure.
• Any person proposing to start a new undertaking involving the expenditure of not less than N20,000.00; or to incur additional capital expenditure of not less than N20,000.00 in respect of an existing undertaking shall give to the Director of the Industrial Inspectorate Division of the Federal Ministry of Industry, notice of his intention. S. 3(1) Industrial Inspectorate Act.
• Application is on Form 1 (2 copies) obtainable from the Federal Ministry of Industry, Industrial Inspectorate Division. If the Director is satisfied with the valuation for the property, he will issue a certificate of acceptance which will bind other government agencies eg The Board of Customs and Excise, the Federal Board of Inland Revenue.
Fiscal Approval in respect of fees for management, technical, consultancy agreement for alien participation.
INCENTIVES AVAILABLE UNDER THE LAW TO ENCOURAGE FOREIGN PARTICIPATION IN BUSINESS IN NIGERIA.
1 PIONEER STATUS: Tax exemption (3-5 years) provided by the NIPC.
• The line of business of the applicant industry is listed as a pioneer industry.
• The industry is not carried on in Nigeria on a scale suitable to economic development of Nigeria and there are prospects for further development of such industry in Nigeria.
2. TAX RELIEFS UNDER THE COMPANIES INCOME TAX ACT, CAP C21 LFN 2004 (CITA)
• Profit exempt from taxation: Co-operative, religious/charitable organizations, Nigerian export companies, provided that the proceeds from such export are repatriated to Nigeria and are used exclusively for the purchase of raw materials, plants, equipment and spare parts. S. 26 CITA.
• Relief from tax for the first N6,000.00 of the total profit. S. 42 CITA.
• Relief in respect of Commonwealth Income Tax (Double Taxation Treaties). S. 24 CITA.
• If the foreign rate is less than Nigeria’s, the rate of relief would be one half of the foreign rate. But if the foreign rate is more than the Nigerian rate, the relief will be equal to the amount by which the foreign rate exceeds the Nigerian rate.
• Relief in respect of interest on:
Foreign Loans – Companies Income Tax Act. S. 11.
Bank loans for agric; Bank loans to a company engaged in the fabrication of local plant or machinery pr as working capital for any cottage industry established under the Family Economic Advancement Programme Establishment; Deposit accounts or domiciliary accounts of a foreign non-resident company are exempted from tax, provided the accounts consists mainly of foreign currencies imported into Nigeria on or after 1/1/1990 through CBN or any of the authorized Banks. S.23(1)(m) CITA; Banks loans for manufacture of goods for export. S. 9 CITA, Interest payable on any loan granted by a bank on or after 1/4/1980 for the purpose of manufacturing goods for export, shall be exempted from tax on the presentation of a certificate issued by the Nigerian Export Promotion Council stating that the level of export specified has been achieved by the company.
A company shall be deemed to be engaged in manufacturing for export if the Nigerian Export Promotion Council certifies that no less than one half of its manufactured goods disposed of in its year of account is sold outside Nigeria and is not re-exported to Nigeria.
3. DUTY DRAWBACK AND SUSPENSION SCHEME: (DDSS)
• Raw materials including packaging materials used in manufacturing goods that are exported 100% of import duty.
• Paper used for the manufacture of goods supplied for educational purposes to educational establishment recognized by the Federal Adviser on Education 100% of import duty.
• Goods exported in the same state as that in which they were imported. Customs and Excise Management Act Cap C45 LFN 2004.
4. EXPORT INCENTIVES. EXPORT INCENTIVES AND MISCELLANEOUS ACT CAP E19 LFN 2004.
5. TAX RELIEF FOR UTILIZATION OF ASSOCIATED GAS (UAG) PETROLEUM TAX ACT CAP P13 LFN 2004.
6. TAX RELIEF FOR INVESTMENTS IN EXPORTS PROCESSING ZONES (IEPZ)
The profits or gain of a 100% export oriented undertaking established within and outside an Export Free Zone shall be exempted from tax for the first three consecutive assessment years provided, among other conditions, it manufactures, produces and exports articles during the relevant year and the export proceeds form 75% of its turnover. S. 35 CITA.
The Act further provides that the profits of any Nigerian company in respect of goods exported from Nigeria, provided that the proceeds from such export are repatriated to Nigeria and are used exclusively for the purchase of raw materials, plant, equipment and spare parts.
7. INVESTMENT IN SOID MINERALS (ISM)
A new company going into mining of solid minerals shall be exempted from tax for the first 3 years of its operation, which maybe extended for one further period of two years, capital allowances, exemption from customs duties and other benefits. S. 36 Minerals and Mining Act Cap M12 LFN 2004; S. 18 Minerals and Mining Act; S. 19 Minerals and Mining Act.
8. RESEARCH AND DEVELOPMENT (R&D)
uma. Companies engaged in research and development activities for commercialization are allowed 20% investment tax credit on their qualifying expenditure. S 26 CITA.
b. Expenses incurred on R&D including the amount paid to the national Science and Technology Fund are allowed as deductible expenses.
9. RURAL INVESTMENT ALLOWANCE (RIA) provides graduated allowances for capital expenditure on such facilities as electricity, water, trred road and telephone located at least 20 kilometers away from such facilities provided by the government. S. 34 CITA; S.28 (j).
10. INCENTIVES FOR INTENSIVE LABOUR UTILIZATION (ILU)
MY NOTE ON CORPORATE LAW PRACTICE – WEEK 8.
FOREIGN PARTICIPATION IN NIGERIAN BUSINESS SECTOR.
This also means alien participation. Section 567 of CAMA defines an alien as a person or association, whether corporate or incorporated, other than a Nigerian citizen or association.
Section 20(4) of CAMA provides:
“subject to the provisions of any enactment regulating the rights and capacity of aliens to participate or undertake in trade or business, an alien or a foreign company may join in forming of a company”.
Section 17 of Nigerian Investment Promotion Commission (NIPC) provides that a non-Nigerian whether company or individual may invest and participate in the operation of any enterprise in Nigeria except those in the negative list.
It is clear from the above provisions that a foreigner is allowed to participate in business in Nigeria but subject to some enactments.
An alien (foreigner) may choose to register a business name as a sole proprietor (or partnership), he may wish to incorporate a company with other aliens or Nigerians, he may wish to buy shares into an existing company. Where he is incorporating a company, he may do business in any area except the negative list. The negative list include: arms and ammunition; narcotic drugs and psychotrophic substance; para-military and military wears and accoutre.
VARIOUS LAWS REGULATING FOREIGN PARTICIPATION IN BUSINESS IN NIGERIA.
1. Companies and Allied Matters Act (CAMA), Cap. C.20 LFN 2004 – Sections 148 and 155 of CAMA. Section 148 of the Act requires the production of a document which is by law sufficient evidence of probate of a Will or letters of administration of an estate. Section 155, on the other hand, deals with transmission of shares.
2. Nigerian Investment Promotion Commission (NIPC) Act, Cap NI 17 LFN 2004 – Section 17 of the Nigerian Investment Promotion Commission Act which requires alien to register with the Commission before commencing business in Nigeria.
3. Immigration Act Cap I 1 LFN 2004 – Obtaining business permit under Section 8 of the Immigration Act, 1963.
4. Investments and Securities Act (ISA) 2009 – Section 8 of the Investments and Securities Act which empowers the Securities and Exchange Commission (SEC) to keep and maintain Foreign Direct Investments (FDI) and Foreign Portfolio Investments (FPI) in Nigeria.
5. Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, Cap F.34 LFN 2004.
6. Industrial Inspectorate Act Cap. I 8 LFN 2004.
7. National Office for Technology Acquisition and Promotion Act, Cap N. 62 LFN 2004.
GOVERNMENT AGENCIES REGULATING FOREIGN PARTICIPATION IN NIGERIA AND THEIR FEATURES.
There are basically three government agencies regulating foreign participation in Nigeria and these are:
1. Nigerian Investment Promotion Commission (NIPC);
2. National Office of Technology Acquisition and Promotion (NOTAP); e.
NIGERIAN INVESTMENT PROMOTION COMMISSION.
This was established in 1995 as a body corporate with perpetual succession under the Nigerian Investment Promotion Commission (NIPC) Decree, 1995. It is now Nigerian Investment Promotion Commission (NIPC) Act, Cap NI 17 LFN 2004. The commission shall encourage, promote and coordinate investment in the Nigerian economy.
An enterprise in which foreign participation is permitted must apply for registration with the Nigerian Investment Promotion Commission (NIPC) before commencing business in Nigeria – section 20 of NIPC Act.
FEATURES OF NIPC.
1) To be the agency of the Federal Government to coordinate and monitor all investment promotion activities to which this Act applies;
2) Initiate and support measures which shall enhance the investment climate in Nigeria for both Nigerian and non-Nigerian investors;
3) Promote investments in and outside Nigeria through effective promotional means;
4) Provide and disseminate up-to-date information on incentives available to investors;
5) Assist incoming and existing investors by providing support services;
6) Evaluate the impact of the Commission in investments in Nigeria and recommend appropriate recommendations; e.
7) Maintain liaison between investors and ministries, government departments and agencies, institutional lenders and other authorities concerned with investments.
NATIONAL OFFICE OF TECHNOLOGY ACQUISITION AND PROMOTION (NOTAP)
Every contract or agreement entered into by any person in Nigeria with another person outside Nigeria (foreigner) involving the transfer of foreign technology to Nigerian partners shall be registered with the National Office of Technology Acquisition and Promotion (NOTAP) in the prescribed manner, that is, not later than 60 days from the execution of the agreement – Section 5(2) of the National Office of Technology Acquisition and Promotion (NOTAP) Act.
FEATURES OF NOTAP.
1. Promote investments of foreign technology in and outside Nigeria;
2. Assist incoming and existing investors by providing support services; e.
3. Promote investments in and outside Nigeria through effective promotional means.
TYPES OF COMPANIES AND ENTITIES EXEMPTED FROM REGISTRATION.
Section 56(1) of CAMA provides that a foreign company or entity may be exempted from registration if it belongs to any of the following categories or types of companies –
a) A foreign company invited to Nigeria by or with the approval of the Federal Government to execute a specified individual project.
b) A foreign company which is in Nigeria for the execution of a specific individual loan project on behalf of the donor organisation or agency.
c) A foreign government-owned company engaged solely in export promotion activities.
d) Engineering consultants and technical experts engaged on any individual specific project under contract with any of the governments of the Federation or any of their agencies or with any person where the Government has approved such contract.
STEPS INVOLVED IN APPLYING TO RELEVANT GOVERNMENT AGENCIES.
Section 56(2) of CAMA further provides that application for exemption is to be made to the Secretary to the Federal Government setting out eight (8) specified particulars and such other particulars as may be required by the Secretary to the Federal Government.
The application which must be in writing must set out the following particulars –
1) The name and place of business of the foreign company outside Nigeria;
2) The name and place of business or the proposed name and place of business of the foreign company in Nigeria;
3) The name and address of each director, partner, or other principal officer of the foreign company;
4) A certified copy of the charter, statute or memorandum and articles of association of the company or other instrument constituting or defining the constitution of the company, and if the instrument is not written in English language, a certified translation thereof;
5) The names and addresses of persons resident in Nigeria authorized to accept on behalf of the foreign company service of process and any notices required to be served on the company;
6) The business or proposed business in Nigeria, of the foreign company and the duration.
7) The particulars of any project previously carried out by the company as an exempt company; e.
8) Such other particulars as may be required by the Secretary to the Federal Government.
After receiving and considering the application, the Government may, if it considers it expedient in the circumstances, grant it specifying the period and/or project for which it is granted – section 56(3) of CAMA. The Government may, however, revoke any exemption granted if it is necessary to do so. Both the grant of exemption and any revocation are required to be published in the Gazette – section 56(6) of CAMA.
DIFFERENCE BETWEEN FOREIGN DIRECT INVESTMENTS AND FOREIGN PORTFOLIO INVESTMENT.
Foreign Direct Investment (FDI) is a measure of foreign ownership of productive assets, such as factories, mines and land. Increasing foreign investment can be used as one measure of growing economic globalization. While Foreign Portfolio Investment (FPI), is the entry of funds into a country where foreigners make purchases in the country’s stock and bond markets. Thus, if an alien wants to invest in the shares of a company, whether public or private, he can do so through Foreign Portfolio Investment.
DOCUMENTS TO BE SUBMITTED TO THE RELEVANT GOVERNMENT AGENCIES SEEKING RELIEFS AND APPROVAL ON BEHALF OF COMPANIES.
1. BUSINESS PERMITS – No person other than a Nigerian citizen shall on his own account or in partnership with any other person practice a profession or establish or take over any trade or business whatsoever or register or take over any company with limited liability for any such purpose without the written consent of the Minister of Internal Affairs – Section 8(1)(b) Immigration Act. This is the operational licence granted to an expatriate to enable him carry on business activities in Nigeria. The consent of the Minister of Internal Affairs is issued in the form of Business Permit.
Note that the permit is now issued through the NIPC.
2. EXPATRIATE QUOTA – This is the official approval granted to a company to enable it employ individual expatriates to specifically designated jobs and the quota must state its duration. Section 8(1)(a) of the Immigration Act provides that “no person other than a citizen of Nigeria shall accept employment, not being employment with the Federal or a State Government, without the approval of the Chief Federal Immigration Officer. The approval is what is known as “Expatriate Quota”.
There are two types of expatriate quotas viz:
(i) Permanent until Reviewed – This is usually granted to the Chairman of the Board of a company or the Managing Director. As the name implies, it is permanent until there is a supervening circumstance, which will necessitate its review.
(ii) Temporary Quota – This is usually granted to the directors or other employees of the company. The maximum number of years granted in the first instance is five (5) years renewable for a further period of two years.
It should be noted that the quota position attaches to a particular post hence different persons can be covered by the same quota. It is the duty of the company to apply for the quota and not that of the employee – Oil Fields Supply Centre Ltd v. Johnson (1987) 18 NSCC 725.
3. RESIDENCE PERMIT – Every alien may enter Nigeria and stay therein for three months without a residence visa (Tourist Visa). However, any person who is not a citizen of Nigeria who desires to enter Nigeria for purpose of residence (that is, beyond three months) must obtain a residence permit. The application for residence permit is made by the employer company to the Nigerian Embassy or Consular Officer in the country where the applicant resides by way of a letter (two copies) accompanied by a valid passport of the alien from the company requesting permission to employ the alien to the Immigration Department (via Consular authorities). Also to be attached is a letter of employment and the photocopy of the Expatriate Quota.
On approval, the alien is then granted an STR Visa which on arrival in Nigeria will be regularised and the alien issued a work permit.
RELIEFS AND INCENTIVES.
TAX REBATE AND CONCESSION.
A wide range of incentives and reliefs have been designed by the Federal government to boost industrial and agricultural production for export. Esses são:
1. PIONEER STATUS – Tax exemption is granted for a period of three years in the first instance but may be extended to a further period of two years under the Industrial Development (Income Tax Relief) Act Cap. 17 LFN 2004. To qualify,
a) The applicant must be a public company;
b) The investment must be in respect of industry or products designated as pioneer, for example, agro-allied or export goods and solid minerals; e.
c) The estimated cost of qualifying capital expenditure on or before the production date is not less than N50,000 for an indigenous company and N150,000 in any other case. See Sections 1 and 10 of the Industrial Development Act.
2. TAX RELIEF UNDER THE COMPANIES INCOME TAX (CIT) ACT, CAP 60 LFN, 1990 – Profit exempted from taxation - section 19 of the CIT Act e. g. co-operative societies, religious/charitable, etc. organization, sporting activities. Similarly the profits of any Nigerian company in respect of goods exported from Nigeria are exempted from taxation, provided that the proceeds from such export are repatriated to Nigeria and are used exclusively for the purchase of’ raw materials, plants, equipment and spare parts – Finance (Miscellaneous Taxation Provisions) (No.3) Decree No. 32, 1996.
Also to enjoy exemption from taxation is the profit of a company for the first six thousand naira (N6,000.00) – Section 29 of the CIT Act.
Relief is also available where a Nigerian company is liable to pay a Commonwealth Tax – Section 33 of the CIT Act.
Also there is relief from payment of double taxation if there are bilateral agreements with other countries – Sections 34 and 35 of the CIT Act. Note the arrangement between the Government of the Federal Republic of Nigeria and the Governments of Great Britain and Northern Ireland.
It should be noted that there is also tax exemption for foreign loans not less than One hundred and fifty thousand naira (N150,000) granted to a Nigerian company when it is not repayable within 10 years – Section 9(1) of the CIT Act.
Interests payable on bank loan granted for agricultural trade and business also enjoy tax concession. Bank loan granted to a company engaged in agricultural business and fabrication of local plant and machinery also enjoys concession. Deposit accounts or domiciliary accounts of a foreign non-residence company are also exempted from taxation provided that the account consists mainly of foreign currencies imported into Nigeria on or after 1st January 1990 though the CBN or any other authorised bank.
Bank loans granted for manufacture of goods for export are also tax-free. It should however be noted that stocks and shares of any description have been removed from the list of assets liable to Capital Gains Tax (CGT).
3. DUTY DRAWBACK AND SUSPENSION SCHEME – The Customs and Excise Management Act, Cap 84, LFN 1990 and also the Customs Duty Drawback Scheme/Regulation provides for the refund of import duties on:
a) Raw materials including packaging materials used in manufacturing goods that are exported – 100% of import duty.
b) Paper used for the manufacture of goods supplied for educational purposes to educational establishments recognized by the Federal Adviser on Education ¬100% of import duty.
c) Goods exported in the same state as that in which they were imported – Customs and Excise Management Act Cap. C. 45 LFN 2004 and Drawback (Customs) Regulations 1959.
d) Export incentives under the Export (Incentives and Miscellaneous Provisions) . Act Cap. E. 19, LFN 2004.
e) Incentives to a company engaged in the utilization of associated gas under the Petroleum Profits Tax Act Cap. P. 13 LFN 2004 (as amended by Finance (Miscellaneous Taxation Provisions) Decree No. 18, 1998).
f) Investment in the Export Processing Zone. Section 28(3) of the Companies Income Tax Act, (as amended by Finance (Miscellaneous Taxation Provisions) (No.3) Decree No. 32, 1996) the profits or gain of a 100% export oriented undertaking established within and outside an Export Free Zone shall be exempted from tax for the first three consecutive assessment years provided, among other conditions, it manufactures, produces and exports articles during the relevant year and the export proceeds from 75% of its turnover.
g) Investment in economically disadvantaged areas – 100% tax relief for seven years.
h) Local raw materials utilization.
i) Investment in solid minerals – A new company going into mining of solid minerals shall be exempted from tax for the first three years of its operation, which maybe extended for another further period of two years – section 22(2) of Minerals and Mining Act Cap. M. 12 LFN 2004. Section 18 has to do with capital allowances, while section 19 for exemption from customs duties and other benefits.
j) Research and Development (R and D) – Research and Development carried out in Nigeria. Sections 20 and 22(3) of the CIT Act:
Eu. Companies engaged in R and D activities for commercialization are allowed 20% investment tax credit on their qualifying expenditure – Section 22(3) of Companies Income Tax Act (as amended by Finance (Miscellaneous Taxation Provisions) (No.3) Decree No. 32, 1966).
ii. Expenses incurred on research and development including the amount paid to the national Science and Technology Fund are allowed as deductible expenses – Section 20 of Companies Income Tax Act (as amended by Finance (Miscellaneous Taxation (Amendment) Decree No.3, 1993)
iii. Rural Investment Allowance – Section 28(b) of the Companies Income Tax Act, (as amended by Finance (Miscellaneous) Taxation (Amendment) Decree No.3 of 1993) which provides graduated allowances for capital expenditure on such facilities as electricity, water, tarred road and telephone located at least 20 kilometers away from such facilities provided by the government.
CHECKLIST OF DOCUMENTS TO BE ATTACHED IN SUPPORT OF APPLICATION TO RELEVANT REGULATORY AGENCIES.
DOCUMENTS REQUIRED FOR APPLICATION WITH NIGERIAN INVESTMENT PROMOTION COMMISSION (NIPC)
2. Receipt of purchase of NIPC Form 1.
3. Payment of a fee of five thousand naira (N5,000).
4. Joint venture agreement (if any)
5. Certified True Copy of the memo and article of the company.
6. Certificate of Incorporation.
7. Tax clearance certificate.
8. Certificate of capital importation.
9. Evidence of acquisition of business premises.
10. Feasibility study report (if any)
11. Profile of expatriate personnel showing their qualifications, experience, positions to be held in the company and duration of each quota position.
PROCEDURE FOR REGISTRATION WITH NIPC.
1. The company seeking registration with NIPC must first obtain the NIPC Form 1. A non refundable deposit of ten thousand naira (N10,000) must be paid and receipt obtained.
2. The form will be completed by the company and submitted at NIPC Headquarters in Abuja or State Ministries of trade with the following:
a) Two copies of receipt of payment of N10,000.
b) Certificate of Incorporation.
c) The memorandum and articles of association of the company.
d) Receipt of payment of stamp duties on the authorized share capital of the company as at the date of the application.
e) Tax clearance certificate of the applicant company.
f) Partnership (Joint Venture) Agreement where applicable.
g) Feasibility Report and Project Implementation Program of the company for its proposed business.
h) Title deeds of land evidencing firm commitment to acquire requisite business premises for the company’s operations.
i) Training program for Nigerian Staff or personnel policy of the company, incorporating management succession schedule for qualified Nigerians.
j) Names, addresses, nationalities and occupations of the proposed Directors of the Company including non-resident directors which should be marked “NRD”.
k) Job title designations of expatriate quota positions required, and the academic and working experience required for the occupants of such positions.
l) Information brochure, if any, on the foreign partner.
m) Evidence of capital importation for wholly foreign companies.
DOCUMENTS REQUIRED FOR APPLICATION WITH IMMIGRATION (MINISTRY OF INTERNAL AFFAIRS)
1. Completed Immigration Form T/1.
2. Certificate of incorporation.
3. Certified True Copies of particulars of directors, share allotment, and memo and articles of the company.
4. Current Tax Certificate.
5. Rent, Lease or Certificate of Occupancy for operating premises.
6. Evidence of imported machineries with perfoma invoices, Form M, etc., or evidence of work on hand with value attached to the contract.
7. Functional feasibility report.
8. Notary public confirmatory letter of office or site location.
9. Proposed salaries of expatriates to be received, designation and qualification.
10. Training programme for Nigerians under studies.
11. Audit account.
CORPORATE LAW PRACTICE – WEEK 9.
NECESSITY AND LEGAL REQUIREMENTS FOR PUBLICATION OF NAME.
This can be found under section 548 of the Companies and Allied Matters Act (CAMA) Cap. C20, LFN 2004.
Section 548 provides thus –
(1) Every company, after incorporation shall –
(a) paint or affix, and keep painted or affixed its name and registration number on the outside of every office or place in which its business is carried on, in a conspicuous position, in letters easily legible;
(b) have its name engraved in legible characters on its seals; e.
(c) have its name and registration number mentioned in legible characters in all business letters of the company and in all notices, advertisements, and other official publications of the company, and in all bills of exchange, promissory notes, endorsements, cheques, and orders for money or goods purporting to be signed by or on behalf of the company, and in all bills or parcels, invoices, receipts, and letters of credit of the company.
What the above means is that the true names and nationality of all the operators of the company as well as the registration number of the company or business must be published in all trade catalogues, trade circulars and business letters in legible letters.
The necessity for publication of name is aimed at identifying the true operators of the business.
CHECKLIST OF STATUTORY BOOKS AND THEIR USES.
The statutory books are:
1. Register of Members – section 83 and 84 of CAMA.
2. Index of Members – section 85 of CAMA.
3. Register of Substantial Interest in Shares – section 97 of CAMA.
4. Register of Charges – section 191 of CAMA.
5. Register of Debenture Holders – section 193 of CAMA.
6. Minutes Book – section 241 of CAMA.
7. Register of Directors’ Share Holdings – section 275 of CAMA.
8. Register of Directors and Secretaries – section 292 of CAMA.
9. Accounting Records – section 331 of CAMA.
1. REGISTER OF MEMBERS – SECTIONS 83 AND 84 OF CAMA.
This is provided under Sections 83 and 84 of CAMA. The register is to contain the names, addresses, descriptions of all the members, and the number of shares and class of shares held by each member. The amount paid on the shares, how cash or other considerations are paid on the shares. The register must also contain the date, the particular name of a shareholder and when he was registered as a member.
It should be noted that the name of a member must be registered within 28 days of his acquiring the shares and in the case of a subscriber within 28 days of incorporating the company.
USES: (1) It is used to keep the names of all registered members in a company. (2) It is also used to keep the addresses of all its registered members.
2. INDEX OF MEMBERS – SECTION 85 OF CAMA.
The name can be found on the Register of Members. This is to contain a sufficient indication to enable the account of that member in the register to be readily found. Where the company arranged that the Register of Members also include an index, there will be no need for a separate book as Index of Members.
It should be noted that the index of members is only required where the membership of the company is more than 50.
USES: This is to list out the names of members.
3. THE REGISTER OF SUBSTANTIAL INTEREST IN SHARES OF THE COMPANY – SECTION 97 OF CAMA.
This is required for public companies.
USES: It is used to register those who have up to 10 per cent and above of the total shares of the company.
4. REGISTER OF CHARGES – SECTION 191 OF CAMA.
Securities or debentures charged on the properties of the company either on land, machinery or unpaid shares of the company or book debt of the company have to be included on the register.
USES: It is used to keep copies of charges affecting property of the company.
5. REGISTER OF DEBENTURE HOLDERS – SECTION 193 OF CAMA.
The register shall contain the names and addresses of the debenture holders, the principal of the debenture and the debentures held by each of them.
USES: It is used to register holders of debentures.
6. THE MINUTES BOOK – SECTIONS 241 OF CAMA.
This is also a must for all companies and it must contain the minutes of proceedings of general meetings, Directors (Board) meetings and Minutes of its Managers’ Meeting. This Minutes Book shall prima facie be evidence of the proceedings.
USES: It is used to keep minutes of the company.
7. REGISTER OF DIRECTORS’ SHAREHOLDING – SECTION 275 OF CAMA.
This register is a must for all companies, whether private or public.
USES: It is used to keep the amount, number and description of director’s shares.
8. REGISTER OF DIRECTORS AND SECRETARIES (SECTION 292 OF CAMA)
This is also for all companies. It must contain the names, usual residential address, nationality, date of birth and particulars of other directorship held by them.
USES: It is used to keep the register of directors and secretaries as regards full names, residential address, occupation, etc.
9. ACCOUNTING RECORDS – SECTIONS 331 OF CAMA.
This is also a must for all companies and it shall show and explain the transactions of the company, that is, the financial position of the company and its assets and liabilities.
USES: It is used to keep accounting records.
ALTERATION OF REGISTERED DOCUMENTS.
ALTERATION OF CONDITIONS OF THE MEMORANDUM.
Except in cases and in the manner and to the extent expressly provided for in CAMA, a company may not alter the conditions in its Memorandum of Association. This means a company cannot go outside the express provisions of the Act to alter the conditions in its Memorandum of Association – section 44(1) of CAMA.
Section 45 of CAMA makes provision for how each condition can be changed. With respect to the name of the company, Section 31 must be complied with in its alteration. Section 31 provides that if a company is registered under a name identical with that by which a company in existence is previously registered or so nearly resembling it as to be likely to deceive, the first mentioned company may, with the approval of the Commission, change its name and if the Commission so directs within six months of its being registered under that name, the company concerned shall change its name within a period of six weeks from the date of the direction or such longer period as the Commission may allow.
As regards the business or object clause of the company, its alteration must be in accordance with Section 46 of the Act, which provides that Special Resolution must give notice to members – section 45(2) of CAMA.
With respect to the alteration of any restrictions on the powers of the company, you have to comply with Section 46 of the Act – section 45(3) of CAMA.
For the alteration of capital, Sections 100 to 111 of the Act must be complied with. These sections deal with alteration of share capital by consolidation, conversion and subdivision of shares, cancellation and reduction of shares etc – section 45(4) of CAMA.
ALTERATION OF THE BUSINESS OR OBJECT CLAUSE IN THE MEMORANDUM.
The business or object clause in a company’s Memorandum may be altered by Special Resolution at a meeting by which notice in writing was given to all members (whether or not otherwise entitled thereto) – sections 46(1) and 45(2) of CAMA.
Thus, a company may alter its business or objects at any time and for any reason as long as the alteration is carried out by special resolution and there is, no minority objection or if there is, the court has affirmed the resolution – Re Parent Tyre Co. Ltd (1923) 2 Ch. 222; Re Government Stock Investment Co. (No. 2) (1907) 1 Ch. 579.
1. By giving 21 days notice of meeting and specifying in the notice the intention to pass a resolution as a Special Resolution. The notice of meeting must be sent to all members of the company and to all holders of debentures secured by floating charge of the company.
2. At the meeting, a Special Resolution must be passed by ¾ of members voting in person or by proxy.
Holders of 15 per cent in nominal value of the company’s issued share capital or holders of debentures shall make application for cancellation of Resolution to the Federal High Court within 28 days of the passing of the Resolution not less than 15 per cent of the company’s debentures secured by a floating charge – section 46(2)(a) and (b), and 46(5) of CAMA.
It should be noted that any member who voted in favour or consented to the resolution cannot apply for cancellation. Also, it is not stated in the CAMA the ground for application for cancellation. It follows from this that an applicant may apply for cancellation on any ground at all as long as he can convince the court.
NOTIFICATION TO CAC.
WHERE AN APPLICATION IS MADE TO COURT FOR CANCELLATION.
The company must forthwith give notice of making such application to the CAC. After the notice and within 15 days of making an order by the court and in the case of refusal to confirm the resolution, a certified true copy of the order must be delivered to the CAC. In the case of confirmation of the resolution, the company shall deliver a certified true copy of the order with a printed copy of the Memorandum as altered. A notice of the Special Resolution must also be delivered.
WHERE NO APPLICATION IS MADE TO THE COURT.
Where no application is made to the court within the specified 28 days, a copy of the Special Resolution must be delivered to CAC within 15 days from the end of the 28 days waiting period. If CAC is satisfied with the resolution then a printed copy of the memorandum as altered will be delivered to it – section 46(8)(a) of CAMA.
But if, on the other hand, CAC is not satisfied, it will notify the company in writing of its dissatisfaction and the company has 21 days from the date of receipt of the notice to appeal against the decision of the CAC. If, for any reason, the company fails to serve the notice, it may apply to court for an extension of time to deliver the document – section 46(8)(b) of CAMA.
The circumstance in which such application can be made is when the company fails to notify CAC of the order of the court made upon application for cancellation.
However, where the alteration has not been properly made application may be made to the court within 21 days of the passing of the resolution to have the alteration declared invalid. And any member can apply to have the resolution declared invalid notwithstanding the number of shares he has subscribed to.
ALTERATION OF THE CAPITAL CLAUSE.
By virtue of section 100(1)(a) of CAMA dealing with consolidation of shares provides that a company may consolidate and sub-divide its shares into larger amount. For example, if a company has 10,000 shares of N1.00 each, it can consolidate the shares to 5,000 shares and sub-divide it to N2.00 each.
Section 100(1)(b) of CAMA dealing with conversion of shares into stock and conversion of stock into shares provides that a company can convert paid-up shares into stock and to also reconvert stock into paid-up shares. A company however, cannot issue stock directly but can only convert paid up shares into stock, and any direct issue of stock is ultra vires – Re Home and Foreign Investment and Agency Co. Ltd (1912) 1 Ch. 72
Section 100(1)(c) of CAMA dealing with subdivision of shares provides that a company can sub-divide its shares or any of them into shares of smaller amount. For example, 5,000 shares of N2.00 each can again be sub-divided into 10,000 shares of N1.00 each.
CANCELLATION OF UNISSUED SHARES.
Section 100(1)(d) of CAMA provides for cancellation of an unissued shares. The company may cancel shares which have not been issued because so long as the shares have not been issued to members, no member is committed to pay for them and if the shares are cancelled, no member will be prejudiced by so doing.
It should be noted that where a company takes any of the steps in section 100 of CAMA, it must give notice to the CAC specifying, as the case may be, the shares consolidated, divided, converted, sub-divided, cancelled or the stock re-converted within one month of so doing.
However, for there to be an agreement to take unissued shares there must be an offer and a valid acceptance – Re Swindon Town Foodbal Co. Ltd. (1990) B. C.L. C 467.
ALTERATION OF INCREASE OF SHARE CAPITAL.
This may be made by Ordinary Resolution provided under section 102(1) of CAMA.
A company limited by shares may in a General Meeting and not otherwise increase its share capital by creating new shares. This is done by Ordinary Resolution except the Articles of Association provide otherwise.
PROCEDURE FOR INCREASE.
1. There must be a Board resolution to the effect that the capital of the company be increased and also authorising its Secretary to take necessary steps to effect the increase.
2. Notice of meeting must be given to members who are entitled to attend the General Meeting of the company. The notice must specify the amount of the proposed increase – Mac Connell v. E. Prill & Co. Ltd (1916) 2 Ch. 57
3. A General Meeting will be convened where an Ordinary Resolution to increase the capital of the company will be passed.
4. After the resolution is passed and within 15 days of the passing of the resolution permitting the increase, the following documents must be delivered to the CAC.
a) A copy of the resolution authorising the increase – section 102(4) of CAMA.
b) A notice of increase stating the class or classes of shares involved and special rights attached to them, if any – section 102(2) & (4) of CAMA.
c) A statement of increase duly stamped (Form CAC 2). It should be noted that two copies of statement of increase must be taken to the Federal Commissioner of Stamp Duties. The stamp duty to be paid is calculated at the same rate with the stamp duty paid on the authorised capital when incorporating the company originally. The Commissioner for Stamp Duty will retain a copy of the statement of increase (Form CAC 2) and return a stamped copy to the person applying, which the applicant will include in the documents to be filed with the CAC.
5. Within 6 months of giving the notice of increase to the CAC, the applicant must ensure that not less than 25 per cent of the share capital including the increase has been issued and unless this is done, the increase cannot take effect – section 103 of CAMA.
6. The increase shall not take effect unless the directors have delivered to CAC a statutory declaration verifying that fact – section 103(b) of CAMA.
7. A certificate of increase must be obtained from the CAC.
8. A copy each of the resolution and certificate of increase must be annexed to the Memorandum of the company.
REDUCTION OF SHARE CAPITAL.
Section 105 – 111 of CAMA provides for restriction on reduction of issued capital except in accordance with the procedure laid down in CAMA.
Under section 106(1) of CAMA, a company limited by shares may reduce its capital by Special Resolution if authorised by its Articles and subject to confirmation by the court.
MODES OF REDUCTION OF SHARE CAPITAL.
Section 106(2) of CAMA provides that a company may:
a) Extinguish or reduce the liability on any of its shares in respect of share capital not paid up; ou.
b) Either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is lost or unrepresented by available assets; ou.
c) Either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the company’s wants, and the company may, if and so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its shares accordingly.
In Re Saltdean Estate Co. Ltd (1968) 1 WLR, the court confirmed the reduction which involved repaying the capital paid up on each of the company’s preference shares of 50p each plus a premium of 25p per share.
MODE OF REDUCTION OF SHARE CAPITAL.
This can be done in three ways:
1. The article must provide for it.
2. The company must pass a special resolution to reduce share capital.
3. The court must confirm the reduction of share capital.
PROCEDURE FOR REDUCTION OF CAPITAL.
1. Directors must meet to resolve that the share capital be reduced.
2. The scheme of reduction will be prepared.
3. The General Meeting has to be convened. The Notice of Meeting should be accompanied by explanatory circular and the scheme of reduction.
4. At the meeting, a Special Resolution must be passed reducing the capital and approving the scheme of reduction – Re Moorgate Mercantile Holdings Ltd. (1980) 1 All E. R 40.
5. Application must be made to the Court to confirm the reduction and also approve the Scheme of Reduction. If the court is satisfied that the creditors have duly consented or that adequate provisions have been made to discharge or secure their debts or claims or that the debts as determined and the capital does not by this reduction fall below the authorised minimum, it may by order confirm the reduction – section 108(1) of CAMA.
It should be noted that creditors who would be entitled to make a claim on the company are entitled to object to the reduction – section 107(2) and (3) of CAMA.
6. After the order of the court confirming the reduction, a copy of the order and a copy of the minutes approved by the courts showing particulars of the capital as altered must be delivered to CAC.
uma. A certificate of registration of the order and Minutes will be obtained from the CAC.
b. The approved Minutes and order of reduction shall be annexed to the Memo of the company. Note that the Minutes are deemed to be substituted for the corresponding part of the company’s memorandum as well as an alteration of the memo of the company – section 109(5) and (6) of CAMA.
ALTERATION OF THE REGISTERED OFFICE CLAUSE.
There is no specific provision in the CAMA for the alteration of the Registered Office clause. However, complying with section 46 of CAMA, unless there is a provision to the contrary, a company may alter any other provisions in the Memorandum of Association of the company the alteration of which is not specifically provided for in the Act – section 45(5) of CAMA.
It should be noted that if the Memorandum states that the registered office will be situated in Nigeria, then there is no need for it to be altered but if the Memorandum states that the registered office should be situated in a particular place or state, for example, Lagos or Abuja, the clause may need to be altered if such a place or State is changed.
ALTERATION OF THE RESTRICTION OF THE POWERS OF THE COMPANY CLAUSE.
The procedure to alter the restriction of the powers of the company clause is the same as that of the object clause – section 45(2) of CAMA.
ALTERATIONS OF PROVISIONS IN THE MEMORANDUM IN CERTAIN CASES.
This deals with cases like the restriction on the powers of directors. This can be altered by Special Resolution but if application is made to the court for the alteration to be cancelled, it will not have effect except in so far as it has been confirmed by the court – section 47(1) of CAMA.
PROCEDURE FOR ALTERATION OR CANCELLATION.
The procedure to be adopted for alteration or cancellation is that under Section 46 earlier discussed with the exceptions of the provisions under Section 46 of the Act relating to debenture holders, that is, Section 46(2)(b), (5), (6) and (10).
However, the provision in Section 47 will not apply where the Memorandum provides or prohibits the alteration of those provisions.
ALTERATION OF ARTICLES OF ASSOCIATION.
Section 48 of CAMA gives a company power to alter or add to its Articles by Special Resolution but subject to the provisions of the Act and to the conditions or other provisions contained in the Memorandum of the company. Any alteration so made shall be as valid as if originally contained therein and be subject in like manner to alteration by Special Resolution – section 48(1) and (2) of CAMA. In Andrews v. Gas Meter Co. (1897) 1 Ch 361, the original Articles contained no provision to issue preference shares but the company by Special Resolution, altered its Articles so as to have power to issue preference shares accordingly. The alteration was held to be effective.
PROCEDURE FOR ALTERATION OF ARTICLES.
1. There must be a Board meeting whereby a resolution will be passed to alter the Articles.
2. A notice of 21 days must be given to the Members accompanied with the proposed Special Resolution.
3. A general meeting will be convened whereby a Special Resolution to alter the Articles will be passed.
4. The printed copies of the amended Articles and printed copy of the Special Resolution must be delivered to the CAC within 15 days of the passing of the resolution for registration – section 237(1) & (4)(a) of CAMA.
5. The resolution must be annexed to every copy of the Articles issued after the passing of the resolution.
It should however be noted that the alteration must not go contrary to the Act, particularly Section 49 which provides that a member of a company shall not be bound by any alteration made in the Memorandum or Articles of the company requiring him on or after the date of the alteration to –
(a) Take or subscribe for more shares than he held at the date on which he became a member; ou.
(b) Increase his liability to contribute to the share capital of the company; ou.
(c) Pay money by any other means to the company.
However, the question sometimes arises as to the right of a company to alter its articles in breach of a contract with a third party, for example, a director. The rule is that the company “cannot be precluded from altering its articles thereby giving itself power to act upon the provisions of the altered articles, but so to act may nevertheless be a breach of a contract if it is contrary to a stipulation in a contract validly made before the alteration. It was, however held in Lapite v. Nigeria Airways Ltd. (Suit No. CA/L/158/87 of 11th January 1988 (unreported) that “any decision taken by the company in breach of (or not in compliance with) the articles of association is valid against the whole world, save members who complain about it” and that since the articles do not constitute a contract between the company and an outsider, even where aggrieved third party proves a breach of the articles which is the basis of his claim, he cannot succeed. He will have no locus standi.
CONVERSION OF COMPANIES.
This has to do with a company changing its status without incorporating a new company. But this does not imply that it has changed its legal personality or that its former rights and liabilities are extinguished. Thus, all its former rights and liabilities continue with it despite the conversion.
A private company can be converted to a public company by following the procedure laid down in section 50 of CAMA. A company limited by shares may be converted to an unlimited company – section 51 of CAMA. An unlimited company may be converted to a company limited by shares – section 52 of CAMA. A public company may be converted to a private company – section 53 of CAMA.
BIJALO & MIMZ NIGERIA LTD.
RESOLUTION FOR CONVERSION OF PRIVATE COMPANY TO PUBLIC COMPANY.
(Pursuant to section 50(2) of CAMA)
At the general meeting of Bijalo & Mimz Nigeria Ltd held on 14th January, 2010 at the registered office of the company situated at No. 3 Bwari Crescent, Abuja at 9:00am, the following resolution was proposed and duly passed:
THAT the company be converted to a public company by the name of Bijalo & Mimz Plc and that the following consequential alterations be made in the Memorandum of Association and Articles of Association of the company;
1. That the Memorandum of Association of the company be altered by:
(a) Substituting Clause 1 with: “The name of the company is Bijalo & Mimz Public Limited Company”
(b) Substituting Clause 2 with: “The company is a Public company”.
(c) Substituting Clause 8 with: “The new share capital of the company is One hundred thousand naira (N100,000) divided into 100,000 Ordinary Shares of N1 each.
2. That the Articles of Association of the company be altered by:
(a) Deleting in Article 1 the word “restricted” and replacing it with the word “open”
(b) Deleting in Article 5 the word “members” and replacing it with the word “public”.
Dated this 14th day of January, 2010.
BIJALO & MIMZ NIGERIA LTD.
SPECIAL RESOLUTION FOR CHANGE OF NAME.
(Pursuant to section 31(3) of CAMA)
At the general meeting of Bijalo & Mimz Nigeria Ltd held on the 14th day of January, 2010 at No. 3 Bwari Crescent, Abuja at 9:00am, the following special resolution was proposed and duly passed:
THAT with the consent of CORPORATE AFFAIRS COMMISSION (C. A.C.), the name of the company be changed to SOULBEEZ NIGERIA LTD.
Dated this 14th day of January, 2010.
BIJALO & MIMZ NIGERIA LTD.
RESOLUTION FOR INCREASE OF SHARE CAPITAL.
(Pursuant to sections 102 and 103 of CAMA)
At the general meeting of Bijalo & Mimz Nigeria Ltd held on the 14th day of January, 2010 at No. 3 Bwari Crescent, Abuja at 9:00am, it was resolved:
THAT the share capital of the company be increased from 1,000,000,000 to 5,000,000,000 shares by the creation of additional 2,000,000,000 shares ranking the same with the existing shares in the capital of the company.
Further that the Secretary of the company should and is hereby directed to prepare and file every necessary documents for the registration and obtaining of certificate of increase from C. A. C.
Dated this 14th day of January, 2010.
BIJALO & MIMZ NIGERIA LTD.
RESOLUTION FOR REDUCTION OF SHARE CAPITAL.
(Pursuant to section 106 of CAMA)
At the general meeting of Bijalo & Mimz Nigeria Ltd held on the 14th day of January, 2010 at No. 3 Bwari Crescent, Abuja at 9:00am, the following special resolution was proposed and resolved:
THAT, subject to the confirmation of the Federal High Court, the share capital of the company be reduced from N1,000,000 divided into 1,000,000 Ordinary Shares of N1 each to N500,000 divided into 500,000 Ordinary Shares of N1 each by refunding in proportion the amount already paid on those shares and that the Board of Directors be and are hereby empowered to take necessary action on this behalf.
Further that the Capital Clause of the Memorandum of Association of the company be accordingly altered.
Dated this 14th day of January, 2010.
WEEK 10 CORPORATE GOVERNANCE 1: OFFICERS OF THE COMPANY.
DIRECTORS AND SECRETARY.
• Directors of a company registered under CAMA are persons appointed to direct and manage the business of the company. S. 244(1). Directors need not be shareholders except where there is shares qualification in the Articles of Association. Every company registered under CAMA must have a minimum of 2 directors S. 246(1). There is however no statutory maximum for the number of Directors but the company may by its Articles provide for maximum number of Directors.
• S.247 CAMA provides that the number of the directors and names of the FIRST DIRECTORS shall be determined in writing by the subscribers of the memorandum of association or a majority of them or the directors may be named in the articles.
• SUBSEQUENT APPOINTMENT: The members at the AGM may re-elect or reject directors and appoint new ones, and in the event of all the directors and shareholders dying, any of the personal representatives of the shareholders may apply to the court for an order to convene a meeting of all the personal representatives of the shareholders entitled to attend and vote at a general meeting to appoint new directors to manage the company. If they fail to hold a meeting, the creditors, if any, may do so. S 248(2). The articles may give power to some particular persons to nominate a director. The CA held in NIB INVESTMENT W/A V. OMISORE that unless the articles provide otherwise by the provisions of S. 247 and 249 of the Act, the appointment of directors is the business of the general meeting or the board of the company, and not that of any individual member. Note: The Memo or Articles may also empower other persons or officers to appoint subsequent directors and where such power exists, it may be enforced by a third party or a conferee may enforce the power even where he is not a member of the company. S. 41(3) CAMA.
• In the case of CASUAL VACANCIES arising out of death, resignation, retirement or removal, these may be filled by the Board of Directors. S. 249(1) subject to the approval by the next AGM. S. 249(2). Such directors will hold office only until the next AGM when they may be re-elected.
• The directors may increase the number of directors so long as it doesn’t exceed the maximum allowed by the articles, and the company at the general meeting may increase or reduce the number of directors generally and may determine in what rotation the directors will retire. S. 249(3).
• ROTATION OF DIRECTORS: Unless the articles provide otherwise, all the directors must retire from office at the first AGM of the Co., and at the AGM in every subsequent year, one third of the directors for the time being shall retire from office, and if the number is not a multiple of 3, then the number nearest to one-third. S. 259(1). See S. 259(2),(3)&(4).
DISQUALIFICATION FOR DIRECTORSHIP.
• By virtue of S. 257 CAMA, the following persons cannot be appointed as directors:
• An infant (a person under 18 years of age)
• A lunatic or a person of unsound mind.
• Any person disqualified under S. 253 (Insolvent persons), S. 254 (relates to person convicted of fraud in relation to management of a company), S. 258 (circumstances where a director should vacate his office)
TYPES OF DIRECTORS.
• S.245 CAMA provides that directors include any person at whose instructions or directions of directors are accustomed to act. Accordingly, where a person is in the habit of giving instructions or directions to directors and the directors are in the habit of obeying such instructions or directions, that person is deemed to be a shadow director.
• A shadow director is never appointed by anybody.
• An executive director is salaried employee in the full time employment of a company, example managing director.
• These are directors who are not employees of the company. They are also not entitled to remuneration except for reasonable expenses incurred for attending meetings which must be deemed to accrue on daily basis.
• An alternate director is appointed by a director to sit on the appointment must be provided in the articles and details of the creation between the director and his alternative director, the remuneration and other matters should also be clearly stated in the Articles.
• S. 255 CAMA provides that a person may be appointed a DIRECTOR FOR LIFE, in which case no re-election is necessary, but he is nevertheless removable under S. 262. If a director claims to be appointed for life or some indefinite period, the terms of the appointment must be clear and definite.
• Reappointment of retiring directors is one of the ordinary business at an AGM. S. 258(2) CAMA provides that where a director presents himself for re-election, a record of his attendance at the meeting of the Board during the preceding one year must be made available to the members at the annual meetings where he is to be re-elected.
AGE OF DIRECTORS.
The minimum age of appointment of a person as a director is 18 years and above. Generally, there is no maximum age for directors except that restriction has been placed in respect of a director of a public company who is 70 years or more. A person may be appointed a director of a public company notwithstanding that he is 70 or more of age but special notice of the resolution for appointment or approving the appointment, of the director must be given to the company. The notice to the company and to the members must state the age of the director. S. 255(a) CAMA; S. 256 CAMA.
A person who is 70 years or more who is appointed or to his knowledge is proposed to be appointed director of a public company must disclose this fact to the members at the general meeting. S. 252(1) CAMA.
DUTIES OF DIRECTORS.
1. STATUTORY DUTIES SECTION 279(1) – (9)
2. DUTY TO EXERCISE POWER FOR THE BENEFIT OF THE COMPANY.
• There is a conflict of interest where the director is put in a situation where he may sacrifice the interest of the company, which is the duty to protect, for his personal interest.
• A director must not in the course of his management of the company’s affairs obtain a secret profit by using the company’s property, opportunities or information, and he will be accountable to the company where he makes such secret profits. S. 280(2) CAMA. A secret profit is one that’s not authorized by or disclosed to the company. The fact that the company fails or is unwilling to use an opportunity is not justification for the director making such a secret profit. S. 280(5). The Golden Rule is that a director must not, without the consent of the company, make any profit out of his position in the company beyond his agreed remuneration. REGAL (HASTINGS) LTD. V. GUILLIVER.
• The duty of a director not to misuse information obtained from the company by virtue of his position continues even after he has ceased to be a director or officer of the company. S. 280(5).
• The director should not deal on behalf of the company with himself in any business transaction unless his interest is disclosed to the company which consents to, affirms or adopts his acts. But such adoption should not be obtained by any unfair or improper means.
• A director must not accept a secret benefit in the form of a bribe, a gift or a commission from any person or a share of the profits of that person in respect of any transaction involving the company and that person. S. 287(1)
3. DUTY OF CARE AND SKILL.
• The standard of care and diligence is set out in S. 282(1) which provides that every director of a company shall exercise the powers and discharge the duties of his office honestly, in good faith and in the best interests of the company, and shall exercise that degree of care, diligence and skill which a reasonably prudent director would exercise in comparable circumstances. If he fails to observe that degree of care and diligence, he may be liable for negligence and a breach of duty S. 282(2). The same standard of care ir required for all directors unless there is justification for exception. S. 282(4).
REMOVAL OF DIRECTORS.
• The articles / contract appointing a director may provide for his removal from office. However, a company may an ordinary resolution of which special notice is given, remove a director before the expiration of his period of office notwithstanding anything in its articles or in any agreement between it and the director. S. 262(1).
• Special notice is required also of any resolution to appoint as director some other person instead of the director so removed, at the meeting at which he is removed. S. 262(2).
• If the vacancy created by the removal of the director is not filled at the meeting where he has removed, it may be filled as a casual vacancy. S. 262(4). A person appointed to replace a removed director is to be treated, for the purpose of determining the time of retirement as director, as if he had become director on the day on which the person in whose place he is appointed was last appointed a director. S. 262(4)
• If the resolution to dismiss or remove a director is in contravention of the Act, the purported dismissal or removal is null and void and will be set aside. It is not an answer to plead the master’s common law right to remove an employee since there is a statutory provision for the removal. AWOYEMI V. SOLOMON.
THE PROCEDURE FOR REMOVAL.
1. Check to find out if direct and simpler power if removal other than section 262 is provided by the articles or contract and apply it if available.
2. A general meeting is summoned.
3. An ordinary resolution is prepared for the purpose.
4. Special notice is given to the company of the resolution.
5. On receipt of the notice, the company will forthwith send a copy to the director concerned who will be entitled to be heard on the resolution at the meeting. S. 262(2)
6. The director may take a representation in writing to the company and request that this be notified to members.
7. The company will then give notice of the meeting to the members together with notice of the resolution and of any representation made by the director. If a copy of the representation is not sent because it is received too late or because of the company’s default, the director may (without prejudice to his right to be heard orally) require that the representation be read out at the meeting. Any aggrieved person is entitled to apply to the court to stop the circulation of the representation; if the court is satisfied that this procedure is being abused to secure needless publicity for defamatory matters, it may order that copies of the representation should not be sent out or read at the meeting. S. 262(3).
ENFORCEMENT OF THE DUTIES OF DIRECTORS.
• Petition for winding-up the company on the ground that it is just and equitable to do so. S. 408(e)
• Relief on the ground that the affairs of the company are being conducted in an illegal and oppressive manner. S. 311.
• Misfeasance proceedings in a winding up. S. 507.
• Investigation of company’s affairs under S. 314 -315.
• Every company must have a secretary. S. 293 CAMA. He is appointed by the directors. S. 296(1) and the articles may provide for his term of office and the conditions of his appointment subject to the Act. A person can be a Director and Secretary at the same time but acts required to be done by a Director and Secretary must be done by two separate persons. In other words, whenever the law stipulates that a document should be signed by a director and secretary, such document cannot be signed by the same person who is a secretary and a director. S. 294 CAMA.
QUALIFICATION FOR APPOINTMENT AS COMPANY SECRETARY.
S. 295 provides that it is the duty of the directors to take all reasonable steps to ensure that the secretary is a person who appears to them to have the requisite knowledge and experience to discharge the functions of the secretary of the company.
PRIVATE COMPANY: Any person who appears to the Directors to have requisite knowledge and experience to discharge the functions of a secretary of a company may be appointed.
• A member of the Institute of Chartered Secretaries and Administration.
• A Legal Practitioner.
• A member of Institute of Chartered Accountants of Nigeria or a similar body.
• A person who has held the office of the secretary of a public company for at least 3 years of the five years immediately preceding his appointment in a public company.
• A body corporate of firm consisting of members each of whom is qualified under any of the aforementioned paragraphs.
DUTIES OF A COMPANY SECRETARY.
The main duties are provided for in S. 298 CAMA.
DUTIES OF DIRECTORS.
Directors have a general duty to manage the company to display utmost good faith in accordance with the provisions of the law and the constitution of the company – section 279(1) of CAMA. Thus, directors are liable to the company for loss caused by their illegal or ultra vires acts – Wallersteiner v. Moir (1974) 1 WLR 991.
The relationship between a company and director is that of agent and principal. Thus, directors as agents owe two major duties to the company viz: fiduciary duty; and duty of skill.
Directors occupy a fiduciary position in the exercise of their management powers. Section 279(2) of CAMA states that a director shall owe fiduciary relationship with the company where he is acting as agent of a particular shareholder; and where even though he is not, such a shareholder or other person is dealing with the company’s securities. Thus, it means that they also owe a fiduciary duty to shareholders also.
A director of a company stands in a fiduciary relationship towards the company and shall observe utmost good faith towards the company in any transaction with it or on its behalf – Okeowo v. Milgore (1979) 11 SC 133, Per Eso JSC.
There are however several aspects of fiduciary duties owed which are:
a) Duty to exercise power for the benefit of the company – He must display utmost good faith in exercising such powers which must be intra vires – Hogg v. Cramphom Ltd. (1967) Ch. 254. It is not enough that the transaction is honest. If it is not in the best of the company, it shall not be binding on the company – section 279(3) of CAMA.
b) Duty not to fetter freedom to exercise discretion – He shall not restrict their right to exercise their duties and powers freely and fully. Thus, it will be a breach of this duty for directors to contract with one another or third parties as to how they shall vote at future board meetings – section 279(6) of CAMA. In Clark v. Workman (1920) 1 Ir. R. 107, it was held that the directors of a company must act strictly as trustees in carrying through transfers of shares, unfettered by any undertaking or promise to any intending purchaser.
c) Duty not to allow his personal interest to conflict with that of the company – He must not place himself in a position where there is conflict of interest between him and the company – Mavitex Ltd. v. Bufield (1988) BCLC 104; unless the company consents. He must duly account to the company for any gifts or commission received from outsiders who he has had dealings with. He shall also be accountable to the company for any secret profits made by him – section 280 of CAMA; Boston Deep Sea Fishing Co. v. Ansell (1888) 39 CH. D. 339.
DUTY OF CARE AND SKILL.
Under the duty of care and skill, section 282 of CAMA has replaced the Common Law rule of duty of care and skill that enables a director to be idle or to decide to attend all meetings or not as long as he can delegate his duties.
Section 282(1) provides that every director shall exercise the powers and discharge the duties of his office honestly, in good faith and in the best interests of the company, and shall exercise that degree of care, diligence and skill which a reasonable prudent director would exercise in comparable circumstances. Section 282(3) went further to state that each director shall be individually responsible for the actions of the board in which he participated, and the absence from board’s deliberations, unless justified, shall not relieve a director of such responsibility.
In effect, the new law under CAMA is to the effect that the standard of care required from a director is an objective one, that is, it is a fixed standard depending on the skill and knowledge a reasonable, prudent director of his class would exercise if faced with similar circumstances.
REMEDIES FOR BREACH OF DUTY.
A breach of any of the above stated duties by a director may lead to an order of one or more of the following reliefs which is mainly available under the principles of common law and equity –
1. Injunction or declaration; ou.
2. Damages or compensation (referred to in the provisions of CAMA as cost); ou.
3. Restoration of the company’s property where traceable; ou.
4. Rescission of the contract occasioning the breach; ou.
5. Account for profit; ou.
6. Summary dismissal.
ENFORCEMENT OF DUTIES OF DIRECTORS.
The responsibility of enforcing the duties of directors is in the hands of the company because the directors are the alter ego of the company saddled with the responsibility of management of the company.
The usual way to enforce such duties is for the directors to be removed from office under section 262(1) of CAMA. It also provides for the following remedies –
1. Petition for winding up of the company on the company on the ground that it is just and equitable to do so – section 408(e) of CAMA.
2. Relief on the ground that the affairs of the company are being conducted in an illegal and oppressive manner – section 311 of CAMA.
3. Misconduct of proceedings against a director. Where there has been misappropriation of funds by the directors, an application may be made to court to compel him to repay.
APPOINTMENT OF DIRECTORS.
Every company registered on or after the commencement of CAMA shall have at least two directors and every company registered before that date shall before the expiration date of six months from the commencement of CAMA have at least two directors – section 246(1) of CAMA.
Directors may be appointed in the following ways –
1. By subscribing to the memorandum of association.
2. By naming the first directors in the article of association.
3. By an ordinary resolution of the members at a general meeting – section 247 of CAMA.
4. By members at annual general meeting re-electing in case of death of a director – section 248 of CAMA.
5. By the board of directors, in the event of a casual vacancy arising out of death, resignation, retirement or removal – section 249(1) of CAMA.
DISQUALIFICATION OF DIRECTORS.
1. Persons disqualified under sections 253, 254 and 258 of CAMA;
2. Infants, that is, those under the age of 18 years;
3. Persons of unsound mind or lunatic; e.
4. A corporation other than its representative appointed to the board for a given term.
ELECTION OF DIRECTORS OR QUORUM OF DIRECTORS.
It is the articles of association of the company that fixes a quorum generally. Unless the articles provide to the contrary, the quorum of directors necessary for the transaction of the company is 2 (two) in cases where there are not more than 6 (six) directors. But where there are more than 6 directors, the quorum shall be one-third of directors, and where the number of directors is not a multiple of 3 (three), then the quorum shall be one-third of the nearest number.
In all the directors’ meetings, each director shall be entitled to one vote. Any question arising at any meeting shall be decided by a majority of votes, and the chairman shall have a second casting of votes in case there is a tie. However, if the stipulated quorum is not met, the meeting held will be irregular and the proceedings of the board will be invalid – sections 263 and 264 of CAMA.
Where the board is unable to act due to lack of quorum, the general meeting may act in place of a board meeting – section 265 of CAMA.
RETIREMENT OF DIRECTORS.
This is not expressly provided for in CAMA but it can be implied that a director who has attained the age of 70 (seventy) will retire, unless the appointment is made or approved by the general meeting after special notice have been given to the company and its members – section 256 of CAMA.
REMOVAL OF DIRECTORS.
The procedure for removal of directors can well be explained below which is provided under section 262 of CAMA. –
1. Check to find out if direct and simpler power of removal other than Section 262 is provided by the Articles or contract and apply it if available.
2. The person(s) wishing to remove the director must issue(s) notice of the resolution to the company at least 28 days before the date of the meeting – section 236 of CAMA.
3. Upon receipt of the notice, the Secretary to the company will:
(a) send a copy of it to the director concerned;
(b) issue notice of the meeting at least 21 days before the date of the meeting. The notice will be accompanied by any representations made by the director and state the fact of the representations having been made.
(c) At the meeting:
Eu. give audience to the director and read to the members his representations if they were received too late or were not sent to the members owing to the company’s default.
ii. Pass ordinary resolution removing the director.
(d) File form of particulars of directors and of any changes therein, that is, Form CAC 7 to the CAC to reflect the removal within 14 days of remove.
(e) Enter the fact of removal in the Register of Directors and where necessary also amend the Register of Directors’ Shareholding – Yalaju-Amaye v. Associated Registered Engineering Contractors Ltd. [1978] 1 LRN 146; [1978] All NLR 124; (1978) 11 NSCC 220.
REMEDIES FOR WRONGFUL REMOVAL OF A DIRECTOR.
Where a director feels he has been removed wrongly, he may sue for –
1. Declaration for wrongful removal.
2. An injunction restricting the company from the continued removal and barring him from entering the premises.
3. Damages for breach of contract.
4. Compensation – section 262(6) of CAMA.
By the joint provisions of sections 293(1) and 294 of CAMA, every company shall have a secretary and the same person cannot act as both secretary and director.
The secretary is a high-ranking officer of the company and usually part of the management. However, anything required or authorized to be done by or of the secretary may, if the office is vacant, be done by a deputy or assistant secretary, and if there is no deputy or assistant secretary, be done by any officer authorised by the directors of the company – section 293(2) of CAMA.
APPOINTMENT OF COMPANY SECRETARY.
Under section 296 of CAMA, a secretary shall be appointed by the directors. And the articles may provide for his term of office and the conditions of his appointment subject to the Act.
QUALIFICATION OF COMPANY SECRETARY.
Section 295 of CAMA deals with the qualification of a company secretary.
When it is a private company, the secretary of the company shall be a person who appears to the company to have the requisite knowledge and experience to discharge the functions of a secretary of a company.
When it is a public company, he shall be –
uma. A member of the Institute of Chartered Secretaries and Administrators; ou.
b. A Legal Practitioner within the meaning of the Legal Practitioners Act, 1975; ou.
c. A Member of the Institute of Chartered Accountants of Nigeria (ICAN); ou.
d. Any person who has held the office of a Secretary of a public company for at least 3 years of the 5 years immediately preceding his appointment; ou.
e. A body corporate or firm consisting of qualified persons under paragraphs (a), (b), (c) or (d) above.
DUTIES OF COMPANY SECRETARY.
Section 298(1) of CAMA provides that the duties of a company secretary shall include the following:
1. Attending the meetings of the Board of Directors of the company, its general meeting, whether AGM, statutory general meeting or extra-ordinary meeting. He is also charged with rendering all the necessary secretarial services in respect of the meeting and advising on compliance by the meeting with the applicable rules and regulations.
2. The Board of Directors have Committees. When they are meeting, the Company Secretary is the one statutorily empowered to service these meetings. The Company Secretary is the compliance officer, the liasing officer between the company and the CAC.
3. It is the Company Secretary’s duty to keep all statutory books, registers of members, register of debenture holders et cetera. It is his duty to maintain the registers to ensure that they are properly kept.
4. Carrying out such administrative and other secretarial duties as directed by the directors of the company.
By the implied provision of section 66 of CAMA, the secretary may also be assigned other responsibilities as an officer of the company either by the general meeting, the directors or the managing directors. But under section 298(2) of CAMA, the secretary shall not without the authority of the board exercise any powers vested in the directors.
DUAL STATUS OF COMPANY SECRETARY.
In Barnett Hoares and Company v. South London Tramways Company (1887) 18 QBD 818 at 817, the position of the status of a Company Secretary was described thus:
“A Secretary is a mere servant. His position is that he is to do what he is told and no one can assume that he has any authority to represent anything at all…”
However, in Panorama Development (Guildford) Ltd. v. Fidelis Furnishing Fabrics Ltd. (1971) 2 QB 711, Lord Denning stated thus:
“Times have changed. A Company Secretary is a much more important person nowadays than he was in 1887. He is an officer of the company with extensive duties and responsibilities…. He is no longer a mere clerk. He regularly makes representations on behalf of the company and enters into contracts on its behalf which come within the day to day running of the company. He is certainly entitled to sign contracts connected with the administrative side and so forth…”
In Nigeria, the courts have generally followed the same approach. Thus, in Okeowo v. Migliore (1979) 11 SC 138; (1979) NSCC 210, Idigbe JSC observed that in Nigerian law, a company secretary is.
“a principal officer of the company.”
Similarly, in Wimpey Ltd. v. Balogun (1987) 2 NWLR (Pt. 28) 232, where the question was whether service of a process on a clerk secretary employee instead of the company secretary was valid, the Court of Appeal held that the service was bad and that “a company secretary is indeed a high ranking officer in the company set up and is indeed part of the management of the company”. The company secretary has also been described as the “administrative officer of the company” – Migliore v. Metal Construction (WA) Ltd. (1978) NCLR 274. And as an officer of the company with important duties and responsibilities – Adebesin v. May and Baker Nigeria Ltd. (1973) FRCR 232.
Thus, a company secretary is both a member of the company, and a high ranking officer of the company.
REMOVAL OF COMPANY SECRETARY.
Section 296(1) of CAMA provides for the removal of a secretary.
However, the Board of Directors can no longer arbitrarily remove a Company Secretary from office unless as provided under section 296(2) of CAMA.
THE PROCEDURE FOR THE REMOVAL OF COMPANY SECRETARIES.
The procedure for the removal of a company secretary is as follows:
1. The Board of Directors must serve a Notice on the company secretary stating:
uma. that it is intended to remove him from office;
b. the ground for the proposed removal;
c. that he may resign from office within 7 (seven) days; ou.
d. that he may make a defence in writing which must be submitted within 7 days.
2. If after the notice, the secretary neither resigned from office nor made any defence, the Board of Directors may remove him from office and report to the General Meeting at the next meeting.
3. Where the company secretary makes a defence, written or oral, which in the opinion of the Board of Directors is unsatisfactory:
uma. If the ground on which the secretary is to be removed from office is fraud or serious misconduct, the Board of Directors may remove him from office and report the same to the company’s general meeting.
b. If the ground on which the company secretary is to be removed is other than fraud or serious misconduct, the Board of Directors shall not remove him but may suspend him from office pending the next General Meeting of the company when the suspension will be reported and the company will take a decision.
If the next general meeting ratifies the suspension of the company secretary from office, he shall be removed from office and the effective date of removal shall be the date the Board of Directors suspended him from office.
It should be noted that the procedure for the removal of Company Secretaries must be strictly complied with – Eronini v. Habo and Ors. (1957) 1 NSCC 17.
1. A lawyer shall not practice as a legal practitioner while personally engaged in the business of a commission agent except he is a secretary of a company or membership of the Board of Directors (though not executive, administrative or clerical), or a shareholder of a company – Rule 7 of the Rule of Professional Conduct (RPC) 2007.
2. A director of a registered company shall not appear as an advocate in court or judicial tribunal for his company – Rule 8(3) of RPC.
RESOLUTION FOR THE REMOVAL OF A DIRECTOR.
SOULBEEZ & GRAM LIMITED.
No. 3 Bwari Crescent, Bwari, Abuja.
Soulbeez & Gram Ltd.
No. 3 Bwari Crescent,
In accordance with sections 262 and 263 of Companies and Allied Matters Act, Cap C20, LFN 2004, I hereby give special notice of my intention to move the following ordinary resolution at a general meeting of the company, to be held not earlier than 28 days from the date of this notice.
That ……………………………………….. (name of director) be and is hereby removed from office as a director of the company.
RESOLUTION FOR THE APPOINTMENT OF A DIRECTOR.
SOULBEEZ & GRAM LIMITED.
No. 3 Bwari Crescent, Bwari, Abuja.
Soulbeez & Gram Ltd.
No. 3 Bwari Crescent,
I hereby give notice pursuant to sections 246, 247, 248 and 249 of the Companies and Allied Matters Act, Cap C20, LFN 2004, I hereby give special notice of my intention to propose the following ordinary resolution at a general meeting of the company, to be held not earlier than 28 days from the date of this notice.
That ……………………………………….. (name of proposed director) be and is hereby appointed as director of the company.
RESOLUTION FOR THE REMOVAL OF A SECRETARY.
SOULBEEZ & GRAM LIMITED.
No. 3 Bwari Crescent, Bwari, Abuja.
Soulbeez & Gram Ltd.
No. 3 Bwari Crescent,
In accordance with section 296 of Companies and Allied Matters Act, Cap C20, LFN 2004, I hereby give special notice of my intention to move the following ordinary resolution at a general meeting of the company, to be held not earlier than 28 days from the date of this notice.
That ……………………………………….. (name of secretary) be and is hereby removed from office as secretary of the company.
RESOLUTION FOR THE APPOINTMENT OF A SECRETARY.
SOULBEEZ & GRAM LIMITED.
No. 3 Bwari Crescent, Bwari, Abuja.
Soulbeez & Gram Ltd.
No. 3 Bwari Crescent,
In accordance with section 296 of Companies and Allied Matters Act, Cap C20, LFN 2004, I hereby give special notice of my intention to move the following ordinary resolution at a general meeting of the company, to be held not earlier than 28 days from the date of this notice.
That ……………………………………….. (name of proposed secretary) be and is hereby appointed as secretary of the company.
CORPORATE GOVERNANCE (II) – MEMBERSHIP, MEETINGS & RESOLUTIONS.
ACQUISITION OF MEMBERSHIP OF COMPANY.
• A member of a company is a person having constituent proprietary interest by subscription, allotment, transfer, or transmission in the company and whose name has been entered in the Register of Members. Members in general meeting constitute the primary organ of company in corporate governance.
• In PONMILE V. SPARK ELECTRICS (NIG.) LTD, the court distinguished between a shareholder of the company and a member of a company limited by shares and also observed that “entry in the register of the company is another method of proof of being a shareholder, but it is not the only method nor can the absence of that method of proof invalidate other methods.
• In OILFIELDS SUPPLY CENTRE LTD V. JOHNSON, it was also held that the share certificate is not the only means of establishing shareholders and that even oral evidence, if cogent, may suffice. This is not so in the case of membership as entry in the register is an indispensable condition.
• In JETHWANI V. NIGERIA WIRE IND PLC, the court held that by virtue of S. 152(2) of the Act, until the name of the transferee of shares is entered in the register of members in respect of the transferred shares, the transferor shall, so far as concerned the company, be deemed to remain the holder of the shares.
• Rights of a member include:
1. The right to vote.
2. The right to dividend when it is declared.
3. The right to attend meetings.
4. The right to sell, transfer or mortgage his shares.
5. The right to notice of meeting.
6. To receive a copy of the MEMOART.
7. The right to a share in the surplus or reserve upon winding up.
• A person may become a member of company in either of the following ways –
By allotment and registration;
Upon registration, the subscribers of the memorandum of association shall become members and their names must be inserted in the register of members. In essence, they shall be deemed to have agreed to become members. The first members acquire their membership by subscription. They must together subscribe to shares amounting in value to at least 25 per cent of the authorised share capital – sections 79(1) and 27(2)(b) of CAMA.
Section 27(3) of CAMA now enables a subscriber of the memorandum to hold shares as a trustee for another person but he shall disclose in the memorandum that fact and the name of the beneficiary.
A subscriber must take and pay for all the shares subscribed by him when calls are duly made – Alexander v. Automatic Telephone Co. (1900) 2 Ch. 56 CA, and the shares must be taken from the company. Where a subscriber takes equivalent shares from another member, he is still liable to pay for all the shares he subscribed for – Migotti’s case (1867) LR 4 Eq. 238.
ALLOTMENT AND REGISTRATION.
On an application for shares by an individual, the company may allot shares to him by notifying him of the acceptance of offer made in his application. He then becomes a member and entitled to have his name entered in the Register of Members. Thus, there must be an agreement to become a member and an entry in the register – Berliet Nigeria Ltd. v. Mordi Francis (1987) 2 NWLR (Pt. 58) 673, per Kutigi JCA.
Where the company accepts the application, the company is expected to make an allotment to the applicant (delivery of shares certificate) and within 42 (forty two) days notify the applicant of the fact of the allotment and the number of shares allotted to the applicant – sections 124 – 129 of CAMA.
Whenever a company limited by shares makes any allotment of its shares, the company shall within one month thereafter deliver to the Commission for registration.
This is done from one member to another followed by registration or by transmission from a deceased shareholder to his personal representatives – sections 115 and 151 of CAMA.
The transfer from an existing member to another may be by sale, gift or some other transaction which, to all intents and purposes, must be lawful. Consequently, a holder of shares of a company may validly elect to transfer those shares; and a person to whom the shares are transferred becomes the holder of the shares, and a member when his name is entered in the Register of Members to replace the former holder.
Entry into the register of members showing the transfer must be made within 28 days of the transfer. S. 83(3) CAMA.
This is an involuntary transfer occurring on the death or bankruptcy of a member. The owner of the shares on the occurrence of such events will automatically vest (by operation of law) in the personal representatives in the case of a dead member, and trustee in bankruptcy in the case of a bankrupt member respectively, and he shall become a member of the company upon the registration of his name in the Register of members – section 155 of CAMA.
TYPES OF COMPANY MEETINGS.
Meetings are important organs of company management. The effective management of the company can be well achieved through the instrumentality of meetings to enable directors brainstorm and cross fertilise their ideas in the best interest of the company and its members.
There are 3 (three) types of meetings through which shareholders may exercise their powers. Esses são -
1. Statutory meeting;
2. Annual General Meeting (AGM);
3. Extra-ordinary General Meeting; e.
4. Court-ordered meeting.
This is a type of meeting that must be held by every ‘public company’ within a period of six months from the date of incorporation – section 211(1) of CAMA. The directors are required to forward to every member of the company, statutory reports at least 21 days before the meeting which must contain the following –
(a) The total number of shares allotted;
(b) The total amount of cash received by the company in respect of the shares allotted;
(c) The names, addresses and description of directors, auditors, managers, if any, and secretary of the company;
(d) The particulars of any pre-incorporation contracts together with the particulars of any modification thereon;
(e) Any underwriting contract that has not been carried out and the reasons therefore;
(f) Any arrears due on calls from every director; e.
(g) Any particulars of any commission or brokerage paid in connection with the issuance of shares – section 211(3) of CAMA.
Members at the meeting are free to discuss any matter relating to the formation of the company and the commencement of its business or any matter that arises from the statutory report – section 211(8) of CAMA.
The statutory report must be certified by at least 2 directors and delivered to the Corporate Affairs Commission for registration and copies sent to members – section 211(6) of CAMA. By section 408(b) of CAMA, a company would be wound up by a Court where the company fails to deliver its statutory report or to hold its statutory meeting.
It is an offence under the Act not to hold statutory meetings and if any company is in default, the company and its officers are guilty and are liable to the payment of a fine of N50 (fifty naira) for every day that the default continues – section 212 of CAMA.
ANNUAL GENERAL MEETINGS (** NOTE: LIKELY EXAM Q**)
The first AGM must be held within 15 months, but must not exceed a maximum of 18 months.
Every company (private or public) is required to hold its annual general meeting every year in addition to any other meeting and a period of 15 (fifteen) months must not elapse between the date of annual general meeting of a company and another – section 213(1) of CAMA. Such meeting must be between January to December – Gibson v. Barton (1975) LR 10 GB 329. But a company which holds its first annual general meeting within 18 months of its incorporation needs not hold it in that year or in the following year – section 213(1)(a) of CAMA.
For subsequent annual general meetings, Corporate Affairs Commission may extend the time for holding the meeting by not more than 3 (three) months – section 213(1)(b) of CAMA.
Where default is made in holding annual general meeting, any member may apply to the Commission, and the Commission may call or direct the calling of a general meeting and give such ancillary or consequential directions as it thinks expedient. Such directions may include holding that one member of the company present in person or by proxy shall constitute a quorum and any decision made by such company shall bind all the members – section 213(2) of CAMA.
Such meeting done on the direction of the Commission shall be deemed to be an annual general meeting of the company. But where it is held after the year in default of holding the meeting, it will not be treated as that year’s annual general meeting unless at the meeting, the company resolves that it shall be treated as its annual general meeting. Such copy of the resolution shall be filed with the Commission within 15 (fifteen) days after it has been passed – section 213(3) & (4) of CAMA.
Where there is default to hold annual general meeting or to comply with the Commission’s direction, the company and every officer of the company who is in default shall be guilty of an offence and be liable to a fine of N500.00 (five hundred naira); and a fine of N25 (twenty five naira) where there is failure to deliver a copy of the resolution to the commission as regards adopting a meeting as its annual general meeting – section 213(5) of CAMA.
The normal business (ordinary business) that are transacted at the annual general meeting are declaration of dividend, the presentation of the financial statement and reports of the directors and auditors, the election of directors, the appointment and fixing of remuneration of auditors. Any other business aside these shall be considered as special business – section 214 of CAMA.
EXTRA-ORDINARY GENERAL MEETING.
Extra-ordinary general meetings are held where issues cannot wait till the next Annual General Meeting.
The power to convene an extra-ordinary meeting is vested on the board of directors or any other director for that matter, or any member(s) who held, at the date of the requisition not less than 1/10 (one-tenth) of the paid up capital or not less than 1/10 (one-tenth) of the total voting rights of members where the company has no share capital – section 215(1) & (2) of CAMA.
If after 21 days of the deposit of the notice of requisition, the directors fail to call a meeting, the requisitionists may themselves call the meeting. The meeting shall not be held after the expiration of 3 months of the deposit – section 215(4) of CAMA.
All business transacted at an extra-ordinary general meeting shall be deemed special business – section 215(8) of CAMA.
The court may, either of its own motion or on the application of any director of the company or of any member of the company who would be entitled to vote at the meeting order the meeting of the company or board – section 223 of CAMA.
Such meeting that is called and held is deemed to be a meeting of the company or that of the board of directors duly called, held and conducted – section 223(3) of CAMA.
The court may order a meeting suo motu when an action has been brought in the name of the company and the court wishes to ascertain whether the action has the support of the majority of its members – Hogg v. Cramphorm (1967) Ch. 254; Dipcharima v. Ali (1974) 1 All NLR 420.
The court also has powers to give ancillary relief and make consequential orders where it has ordered a meeting in the interest of the company and the members – Italcomm (Western Nig.) Ltd. v. Scavuzzo & Anor. (1974) 3 ALR Comm. 73. Such powers must be in respect of matters to be considered by the court-ordered meeting. In Iro v. Robert Park (1972) 1 All NLR 474, the Supreme Court set aside the ancillary directions granted by the lower court on the ground that it exceeded the powers conferred by the Act to order such meetings – Okeowo v. Migliore (1979) 11 SC 138; Ige-Edaba v. West African Glass Industries Ltd (1977) 3 F. R.C. R 171.
TYPES OF RESOLUTIONS.
This means the decisions taken at company meetings arrived at through voting from members who have voting rights.
There are two types of resolutions viz:
1. Ordinary resolution.
2. Special resolution.
3. Unanimous resolution.
This is defined as a resolution passed by a simple majority of votes cast by members entitled to vote in person or by proxy at a general meeting – section 233(1) of CAMA.
Ordinary resolutions are used for –
1. Ordinary business of an annual general meeting;
2. Increase of capital; e.
3. Removal of a director.
This is a resolution passed by a majority of 75% or not less than ¾ (three-forth majority) at a general meeting of which not less than 21 (twenty-one) days notice specifying the intention to pass the resolution as a special resolution has been duly given – section 233(2) of CAMA. However, a majority of those entitled to attend and vote, holding 95% of the shares giving the right, or 95% of total voting rights (in cases of a company not having a share capital) may agree to shorter notice – section 233(2) of CAMA.
Situations where special resolutions are required can be in any of the following –
1. To alter the objects clause of the memorandum – section 46 of CAMA;
2. To change the name of the company – section 31(3) of CAMA;
3. To alter any provision in the memorandum – section 44(5) of CAMA;
4. To reduce capital, on the authorization of the article of association with the consent of the court – section 106(1) of CAMA;
5. To make the liability of the directors unlimited on the authorization of the articles of association – section 289 of CAMA;
6. To effect a winding-up by the court – section 408(a) of CAMA;
7. Winding-up voluntarily – section 457(b) of CAMA;
8. To re-register a private company with a share capital as a public company – section 50(1)(a) of CAMA;
9. To re-register an unlimited company as a private company limited by shares – section 52(1) of CAMA;
10. To re-register a public company as a private company – section 53(1)(a) of CAMA;
11. To reduce any capital redemption fund – TABLE ‘A’ Article 6 of CAMA;
12. To reduce any share premium account – TABLE ‘A’ Article 6 of CAMA;
13. To create reserve capital – section 134 of CAMA; e.
14. To alter the articles of association – section 48(1) of CAMA.
All resolutions shall be passed at a General Meeting otherwise it shall not be effective. But for a private company a written resolution signed by all members is as valid and effective as if passed in a General Meeting – section 234 of CAMA.
Where there is default, every officer of the company who is in default shall be guilty of an offence and liable to a fine of N500.00 (five hundred naira) – section 235(7) of CAMA.
A resolution requiring special notice is also not effective unless notice of the intention to move it has been given to the company not less than 28 (twenty eight) days before the meeting which is to be moved and notice of the resolution shall be given by the company to the members in the same manner – section 236 of CAMA.
Section 237 of CAMA provides that printed copy of certain resolutions and agreements must be sent to the Corporate Affairs Commission within 15 days of passing the resolution for registration.
These resolution and agreements are enumerated in section 237(4) of CAMA as follows:
(a) Special resolution.
(b) Unanimous resolution, on issue, which requires special resolution.
(c) Unanimous class resolution.
(d) Resolution requiring a company to wind up voluntarily passed under section 457(a).
Where a company fails to submit printed copies of certain resolutions and agreements to the Commission, the company and every officer in default shall be guilty of an offence and liable to a fine of N5 (five naira) for each copy in respect of which default is made – section 237(5).
PREPARATION AND PROCEEDINGS OF MEETINGS.
In Caruth v. ICI Ltd. (1937) AC 707 at 761, it was stated that the proceedings are largely regulated by the Act and the articles and the details of the conduct of the meeting are decided by the meeting itself under the direction of the chairman.
The following should be noted –
1. To maintain effective control over the company and monitor the executive and management, the board should meet regularly and not less than once in a quarter with sufficient notices and have formal schedule of matters specifically reserved for its decision.
2. It should be conducted in such a manner as to allow free flow of discussions. There should be enough time allocated to shareholders (members) to allow them to speak and to enable them to contribute effectively at the meeting.
MINUTES OF MEETING.
This is one of the statutory books to be kept by a company. Thus, every company must keep minutes of the proceedings at general meetings, board meetings, and manager’s meetings, if any – section 241(1) of CAMA.
The minutes, if signed by the chairman of the meeting or the next succeeding meeting, are evidence of the proceedings. They are normally only prima facie evidence – section 241(2) of CAMA. Though section 224(2) of CAMA provide for the exception to the prima facie evidence.
Where minutes have been made in accordance with the Act, the meeting is deemed duly held and convened, the proceedings duly had, and appointments of directors, managers, or liquidators valid, until the contrary is proved – section 241(3) of CAMA.
Failure to keep minutes of the proceedings will make the company and every officer in default liable to a fine of N500.00 (five hundred naira) – section 241(4) of CAMA.
The minutes books of proceedings at general meetings must be kept at the registered office of the company, and must be open to inspection for at least 6 (six) hours a day during business hours to any member free – section 242(1) of CAMA. Though, reasonable restrictions may be imposed by the articles or general meeting.
Any member is entitled to a copy of the minutes within 7 (seven) days on payment of a small charge (a charge not exceeding 10 kobo for every hundred words) – section 242(2) of CAMA.
Refusal of inspection or failure to send a copy within the proper time, the company and every officer in default will be liable in respect of each offence to a fine of N25 (twenty five naira) – section 242(3) of CAMA.
The courts are empowered to order inspection or the provision of copies if the company fails to comply – section 242(4) of CAMA.
The provisions dealing with general meetings of the company shall apply to any class meetings except excluded by the Act – section 243 of CAMA.
Every person who is entitled to receive notice of a general meeting of the company as provided by section 227 of CAMA is entitled to attend a meeting – section 228 of CAMA.
Every member shall have a right to attend any general meeting of the company in accordance with the provisions of section 81 of CAMA – section 227(1) of CAMA.
A proper notice of every general meeting must be given to members unless the articles otherwise provide – Smyth v. Darley (1849) 2 HL Cas 789; Onwuka v. Taymani (1965) LLR 62; Young v. Ladies Imperial Club (1920) 2 KB 523.
Such notice must contain the requisite information, and sufficient time must be allowed and the notice must be properly served – Imonioro v. Seemuth Electro Eng. (Nigeria) Ltd, Suit No. FRC/L45/78 of 12th March 1981 (unreported)
Notice of all types of general meetings is generally fixed at 21 days from the date on which the notice was sent out – section 217(1) of CAMA. However, section 217(2) of CAMA provides for situations where a shorter notice is permissible.
As regards to the contents of the notice; the notice must specify the place, date and time of the meeting, and the general nature of the business to be transacted thereat in sufficient detail to enable those to whom it is given to decide whether to attend or not, and where the meeting is to consider a special resolution, the terms of the resolution must be set out – section 218(1).
A resolution which is not covered by the terms of notice cannot validly be passed and if it is a special resolution, the exact wording of the resolution must be given. In Re Moorgate Mercantile Holdings Ltd. (1980) 1 W. L.R 277; (1980) 1 All ER 40, Slade J. said thus:
“There must be absolute identity at least in substance between the intended resolution referred to in the notice and the resolution actually passed.”
No business must be discussed in the meeting unless notice of it has been duly given – section 218(3) of CAMA. Where a member is entitled to appoint a proxy, the notice must specifically state so; otherwise, every officer of the company who is in default shall be guilty of an offence and liable to a fine not exceeding N500.00 (five hundred naira). Though, failure to comply with giving of notice will not invalidate the meeting unless the officer responsible for the error or omission acted in bad faith or failed to exercise due care and diligence.
Those entitled to receive notice of a general meeting are –
2. Every person upon whom the ownership of a share devolves by reason of his being a legal representative, receiver or a trustee in bankruptcy of a member.
3. Every director of the company;
4. Every auditor of the company for the time being; e.
5. The secretary – section 219(1) of CAMA.
Aside the above persons, no other person shall be entitled to receive notice – section 219(2).
SERVICE OF NOTICE.
Notice may be served in the following ways –
1. Personal service – The notice may be served on the member personally.
2. Post – Notice may be effected through the post and where a notice is sent by post, service of the notice shall be deemed to be effected (by properly addressing, prepaying and posting a letter containing the notice) at the expiration of 7 (seven) days after postage, and in any other case at the time which the letter would be delivered in the ordinary course of post. Where notice is sent by post, the day of service, that is, the day of posting, and the day for which it is given will be excluded – section 220(2) of CAMA.
3. Registered address – This might apply to a registered company which is a member of another company. But section 220(5) also provides that the definition ‘registered address’ means in the case of a member, any address supplied by him to the company for the giving of notice to him.
4. Joint shareholders – Where there are joint shareholders, notice is good if it is served on the person whose name appears first on the register – section 220(3) of CAMA.
5. Deceased and bankrupt members – If the personal representatives or trustees are not registered, then notice is served by sending it to any address which they may have supplied. If they have not supplied an address, notice is good if it is served on the deceased or bankrupt at the address given in the register of members.
It should be noted that a public company must at least 21 (twenty-one) days before any general meeting, advertise a notice of such meeting in at least two daily newspapers – section 222.
If a meeting is called for a date 28 (twenty-eight) days or less after the notice has been given, the notice, though not given within the time required by law, is still deemed to have been properly given. This is made to defeat directors or auditors who are deliberately obstructive to such resolutions – section 236 of CAMA.
The resolution is decided by the votes of members. Only members have a right to vote and so, even directors cannot vote at general meetings unless they are members – Olumody v. Mohammed (1973) NCLR 452.
Voting must be decided on a show of hands unless a poll is demanded before or on the declaration of the result of show of hands – section 224(1) of CAMA.
Unless a poll is demanded, a declaration by the chairman that a resolution has by a show of hands been carried or lost, and on entry to that effect in the book containing the minutes of the proceedings of the company shall be conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favour of or against the resolution – section 224(2)
A poll is demanded when members elect to vote in accordance with number of shares held in the company. Any provision in the article excluding the right to demand a poll at general meeting on any question other than the election of the chairman or the adjournment of the meeting is void – section 225 of CAMA.
In the case of a tie (equality) of votes, whether on a show of hands or on a poll, the chairman shall be entitled to a second or casting vote – section 226(3) of CAMA.
All statutory and annual general meetings must be held in Nigeria – section 216 of CAMA. Since there are no restrictions about other meetings like extra-ordinary general meeting, they may be held either within or outside Nigeria.
However, the Code of Corporate Governance in Nigeria issued jointly by the Securities and Exchange Commission and the Corporate Affairs Commission in October, 2003 provides in paragraph (c) on Page 10 that:
“The venue of a general meeting of shareholders should be carefully chosen in such a way as to make it possible and affordable (in terms of distance and cost) for the majority of shareholders to attend and vote and not to disenfranchise shareholders on account of choice of venue, which is unreasonable to reach.”
This is the total number of those that can be present at a meeting in order for the meeting to take off effectively – section 232 of CAMA.
The quorum shall be 1/3 (one-third) of the total number of members or 25 members (whichever is lesser) present in person or by proxy unless the articles provides otherwise – section 232(2). For the purpose of determining a quorum, all members of their proxies shall be counted – section 232(3) of CAMA.
The agenda is the order of business to be dealt with at the meeting. Many outlines exist to help inexperienced leaders get started. Agendas all have common attributes which help ensure that important items are dealt with, that time is not wasted on trivial matters, and that decisions are arrived at efficiently. An agenda must be flexible enough to accommodate changes agreed upon by all members but consistent enough so members become familiar with the routine.
SAMPLE OF BOARD RESOLUTION TO CALL ANNUAL GENERAL MEETING (AGM)
SOULBEEZ & GRAM LIMITED.
No. 3 Nedu Crescent, Bwari, Abuja.
28th January 2010.
We, being all the directors of Soulbeez & Gram Ltd. who are entitled to receive notice of a meeting of the directors, RESOLVE that an annual general meeting of the Company shall be convened on the ……………… day of ……………. 20….. for the following purposes:
1. Declaration of dividend,
2. The presentation of the financial statement and reports of the directors and auditors, and.
3. The election of directors, the appointment and fixing of remuneration of auditors.
And that the secretary be instructed to give notice of the meeting to all shareholders (and obtain consent of all members to the meeting being held on short notice).
Director’s name and signature.
Director’s name and signature.
Director’s name and signature.
NOTE: Notice of all types of general meetings is generally fixed at 21 days from the date on which the notice was sent out – section 217(1) of CAMA.
CORPORATE GOVERNANCE III: MINORITY PROTECTION, AUDIT, FINANCIAL STATEMENTS AND ANNUAL RETURNS.
The principle of corporate sovereignty is such that the courts will not interfere in the internal affairs of a company, because it should be within the competence of most of the shareholders to determine their company’s course and direction.
This is also known as the majority rule which is in line with the rule in Foss v. Harbottle.
THE SCOPE OF THE RULE IN FOSS v. HARBOTTLE (1843) 2 HARE 461.
The facts of the case is that F. and T. were shareholders in a company which was formed to buy land for use as a pleasure park. The defendants were the other directors and shareholders of the company. F. and T. alleged that the defendants had defrauded the company in various ways, and in particular that certain of the defendants had sold land belonging to them to the company at an exorbitant price. F. and T. now asked the court to order that the defendants make good the losses to the company.
The Court held that since the company’s Board of Directors was still in existence, and since it was still possible to call a general meeting of the company, there was nothing to prevent the company from obtaining redress in its corporate character and that the action of F. and T. could not be sustained.
The Rule is that in an action to remedy any wrong done to the company or where irregularity has been committed in the course of a company’s affairs the proper plaintiff is prima facie the company itself – section 299 of Companies and Allied Matters Act (CAMA) Cap. C20 LFN, 2004. This is the basis of the principle of corporate sovereignty. Also, where the alleged wrong is an irregularity which might be made binding on the company by a simple majority of members, no individual member can bring an action in respect of the irregularity – Edwards v. Halliwell (1950) 2 All ER 1064, Per Jenkins L. J. Also, in Abubakari v. Smith (1973) 6 SC 31, where the Supreme Court held that based on the rule in Foss v. Harbottle, the action must fail as the claimant sued in a personal capacity and did not join the association, as it was the association that should have been sued and not individuals; Yalaju – Amaye v. Associated Registered Engineering Contractors Ltd. [1990] 4 NWLR (Part 145) 422; Edokpolor and Co. Ltd. v. Sem-Edo Wire Industries Ltd. (1984) 15 NSCC 553.
The rule is also concerned with the procedure for the enforcement of the right of a company. The rule is sequel to the corporate personality principle that the company is separate and distinct from the members. Thus, where a wrong is done to the company by the directors, members or even outsiders, the company is the proper party to bring an action to remedy the alleged wrong. A shareholder or minority shareholders that have brought an action on behalf of the company cannot sustain the action by operation of the rule except it falls within any of the exceptions.
The rule is otherwise known as the majority rule because in deciding whether or not sue for an alleged wrong done to the company, it is the majority that decides and not the minority and the decision of the majority represents that of the company.
However, powers of the majority rule extend to every facet of the company’s affairs. The majority of members have power to:
1. Alter the Memorandum and Articles of Association of the company.
2. They appoint and dismiss the directors.
3. If they so desire, they can put an end to the business.
The rule has been held to apply not only to incorporated bodies but also to unincorporated associations. It was accordingly applied to trade unions in Cotter v. National Union of Seamen (1929) 2 CH. 58; and Mbene v. Ofili (1968) 1 ALR COMM. 235 on the ground that it was a body possessing a Constitution or a set of rules and regulations entitling it to sue and be sued as a legal entity.
JUSTIFICATION OF THE RULE.
Several justifications have been put forward for the rule, but the following may be noted –
1. The reluctance of the court to interfere in the internal affairs of the company. The courts would leave any irregularity to be corrected by the majority of members of the company when such irregularity relates to the internal affairs of the company.
2. The rule avoids multiplicity of suits. Any suit at the instance of the minority and no matter how meritorious is wasteful a long as the majority members do not support it. Thus, the court will not interfere with irregularities at meetings at the instance of a shareholder – MacDougall v. Gardiner (1875) 1 Ch. D. 13, where a minority action was rejected because if there was a wrong committed by the chairman, the proper plaintiff was the company.
3. The court should allow the will of the majority within a company to prevail as against that of the minority. If the management of the company is subjected to the whims and caprices of the minority, the internal management of the company will be very difficult. Thus, the minority must always be guided by the actions of the majority. The practice makes for good democracy in the corporate management.
4. Since the company is separate and distinct from the members, any wrong committed against the company should be remedied by the company acting through the majority.
5. Finally, the rule is justified on the ground of judicial policy which emphasizes that the courts will normally not judge intra-corporate disputes, if the majority of the shareholders decide that the matter will not be made a subject of litigation.
The rule has been applied to a number of cases in Nigeria. For example, Nigeria Stores Workers Union v. Uzor (1971) 2 ALR (Comm) 412; Omisade v. Akande (1987) 2 NWLR (Pt. 55) 158; and most especially in Tikatore Press Ltd. v. Abina (1973) 1 All NLR 401, where the directors of a company allotted shares to themselves following the death of the majority shareholder to enable them gain control of the company by becoming the majority shareholders. The administrator of the deceased shareholder sought a declaration that the allotment was ultra vires and therefore of no effect. The court upheld the argument of the defendant’s counsel that though the allotment was ultra vires, but the action of the directors was an internal irregularity which the majority could either ratify or overlook.
EXCEPTIONS TO THE RULE IN FOSS v. HARBOTTLE.
Note: When answering questions on minority protection, always start from the general premise, the Rule in Foss v. Harbottle, before applying the exceptions. This is provided for under section 300 of CAMA, which deals with cases of minority protection. Thus under the exceptions, a single shareholder can challenge the action of the majority to redress a wrong committed on the company or which has negatively affected the rights of the minority shareholders.
The exceptions are as follows –
1. Illegal (contravention of general law) or ultra vires (contravention of Memorandum and Articles, object clause, etc) transaction or act – A minority shareholder or an individual can sue or restrain an ultra vires transaction. He can also seek for a declaration that an act of the directors is more than a mere irregularity which the company can ratify through the majority – section 300(a) of CAMA. In Parke v. Daily News [1962] All Er 929; [1962] Ch 927; [1962] 3 WLR 566, Majority shareholders wanted to share as asset belonging to the company. After, the sale, they wanted to distribute the proceeds among employees being laid off. The minority shareholder went to court to seek a declaration that the gift to the employees who were to be redundant was an ultra vires gift, and the company was restrained.
2. Doing an act required to be done by a special majority or a simple majority – If the constitution of the company or the Act requires an act to be carried out by a special majority, for example, through a special resolution; if the act is done by a simple majority through an ordinary resolution, the minority can bring an action to remedy the breach of the Articles or provisions of the Act – section 300(b) of CAMA. In Baillie v. Oriental Telephone Co. (1915) 1 Ch. 503, an action brought by a minority shareholder was allowed to restrain a company from acting on a special resolution of which an insufficient notice had been given. Examples, Alteration of name section 31(3) CAMA, Alteration of objects clause section 46(1) CAMA, Reduction of share capital, share capital reconstruction etc.
3. Where an act or omission affects the personal rights of a member – This is under section 300(c) of CAMA. The section is a restatement of the common law position whereby if the personal and individual rights of membership have been invaded, the rule has no application. Where the individual rights of members have been infringed by the company or the directors by an act or omission, of course, such a member(s) can bring an action seeking for redress – Pender v. Lushington (1877) 6 Ch. D 70, where an action was brought by a shareholder whose vote was rejected on behalf of himself and all others who had voted for him for an injunction to restrain the directors from acting on the footing of the votes being bad. The court held that the plaintiffs were entitled to an injunction to restrain the company from acting on the resolution.
It should, however, be noted that section 301 of CAMA provides that if the application is granted, such aggrieved member shall not be entitled to damages but to declaration or injunction restraining the company from doing a particular act.
4. Fraud on the Minority or the Company – If fraud is committed on the company or the minority shareholders and the directors fail to take an appropriate action to redress the wrong, the minority can maintain an action against the directors or the company. The act complained of need not involve actual commission of fraud – section 300(d) of CAMA. In Cook v. Deeks (1916) 1 A. C 554, a minority shareholders action was allowed to compel the directors to account to the company for the profits made out of a construction contract, which they took in their own names. Also, in Daniels v. Daniels (1978) 2 All ER 89, the minority shareholders of a company were allowed to bring an action against the company and the directors where the directors had authorized the sale of a company land to one of them at a price alleged to be below the market value. Lastly, in Prudential Assurance Co. Ltd. v. Newman Industries Ltd (No. 2) (1982) Ch. 204, a minority shareholder’s action was allowed against a fraudulent conspiracy of two directors of the company in inducing the company to buy shares of another company at an over valued price.
5. Where a company meeting cannot be called in time – A minority action is allowed where a company’s meeting cannot be called in time to be of practical effect to redress a wrong done to the company – section 300(e) of CAMA. This exception was given judicial imprimatur (approval) in the case of Hodgson v. National & Local Government Officers Association (1972) 1 WLR 130, where it was held that where a company meeting cannot be called in time to be of practical effect to redress a wrong done to the company or to a minority, action on behalf of the company or individual shareholder will lie.
6. Where the directors are likely to derive a profit or a benefit (section 300(f) of CAMA) – A minority action is maintainable where the directors are likely to derive a profit or benefit or have profited or benefited from their negligence or from their breach of duty. It was held in Daniels v. Daniels (supra), that an action would lie against directors who have profited from their negligence, even if fraud is not proved. Also, in Alexander v. Automatic Telephone Co. (1900) 2 Ch. 56, a minority action was allowed where the directors benefited from a breach of their duty, even though fraud was negative or not proved.
The above mentioned exceptions constitute Members Direct Action.
Persons that can sue under as members under sections 300 and 301 of CAMA include the personal representative of a deceased member and any person to whom shares have been transferred or transmitted by operation of law – section 302(a) & (b).
5 Ways CAMA protects minority members are:
1. Ss 300 (a) – (f) above. Members Direct Action (Condition precedent: Must be a member)
2. Derivative action (Condition precedent: It must be established that the wrong doers are the people in charge of the company, they must be notified, the proposed action must be in good faith and must be in the overall interest of the company.)
3. Relief on the ground of unfairly prejudicial and oppressive conduct.
4. Investigation of the company.
5. Winding up on the ground of being just and equitable.
RELEVANT PETITIONS TO CAC, RESOLUTIONS AND COURT PROCESSES RELATING TO THE INSTITUTION OF MINORITY ACTIONS AT THE FEDERAL HIGH COURT.
Mode of commencing action is by ORIGINATING SUMMONS. Application may be made to court for leave to bring an action in the name or on behalf of the company or to intervene in an action to which the company is a party for the purpose of prosecuting, defending or discontinuing the action on behalf of the company – sections 303 – 309 of CAMA.
In connection with an action brought or intervened under section 303 of CAMA, the court may at any time make any such order or order, as it thinks fit – section 304 of CAMA.
Relief on Grounds of Unfairly Prejudicial and Oppressive Conduct.
A member who alleges that the affairs of the company are being conducted in a manner oppressive or unfairly prejudicial to a member or members may apply to court for relief by petition – section 310, and section 311 of CAMA; Ijale Properties Ltd. v. Omololu-Mulele [2000] FWLR (Pt. 5) 709. In this case, the allegation was by minority shareholder, and the minority shareholders stated that since the company was incorporated, they had not held a single meeting, not filed returns, no auditors or company secretary. The court held that this was a clear case were section 311 of CAMA could be invoked as a basis of action.
It should be noted that the same powers under section 311 are conferred on personal representative and also, the CAC may petition the court on the grounds.
Under section 312, one can ask for a specific order or a general order (omnibus order) to control how the company will run in the future. The court may regulate the company’s affairs for the future.
The court may restrain the doing of or the continuing of prejudicial acts. Or order the doing of a specific thing. The court may direct an investigation to be made by CAC that the company be wound up.
Possible reliefs from the court:
1. Declarative Relief – only sought when an act has been done.
2. Injunctive Relief – When an act in speculated, supported however, with facts and figures.
There are 3 capacities in which an action can be brought:
2. Representative; e.
An aggrieved minority can bring one action or combine the three types of actions i. e. personal, derivative and representative actions.
The financial statements of a company are its bills of health. The financial statements show the annual state of affairs of the company and they are vital and of crucial importance not only to members of the company but also to third parties dealing with it.
The financial statements enable a member to know if his investments are growing or depreciating and whether to sell off or retain his shares in the company; the statements also provide a potential investor with information which would either persuade him to invest or dissuade him from investing in a particular company.
DUTY TO PREPARE FINANCIAL STATEMENTS.
The directors must, in respect of each financial year of a company, prepare financial statements for the year – section 334(1) of CAMA. This includes –
(a) Statement of the accounting policies;
(b) The balance sheet as the last day of the financial year;
(c) A profit and loss account or, in the case of a company not trading for profit an income and expenditure account for the financial year;
(d) Notes on the accounts;
(e) The auditor’s report;
(f) The director’s report;
(g) A statement of the source and application of fund;
(h) A value added statement for the financial year;
(i) A five year financial summary; e.
(j) In the case of a holding company, the group financial statement – section 334(2) of CAMA.
FINANCIAL STATEMENTS OF A PRIVATE COMPANY.
A financial statement of a private company need not include the following –
1. Statement of the accounting policies;
2. Statement of the source and application of fund;
3. Value added statement for the financial year; e.
4. A five year financial summary – section 334(3) of CAMA.
PUBLICATION OF FINANCIAL STATEMENTS.
A company publishes its financial statements when the financial statements laid before the company in general meeting are delivered to the Commission and section 354 indicates that a company publishes its full account when the complete statements laid before the company in general meeting are also those delivered to the Commission.
However, where a company is entitled to publish abridged financial statements, it needs to publish only the balance sheet or profit and loss account, otherwise than as part of full financial statements to which section 354 applies – section 355(1) of CAMA.
Where a company publishes full financial statements, it must publish the relevant auditor’s report with them – section 354(2) of CAMA, and where appropriate, its group financial statements – section 354(3) and (4) of CAMA.
DUTY TO LAY AND DELIVER FINANCIAL STATEMENTS.
In respect of each year, the directors must at a date not later than eighteen (18) months after incorporation of the company and subsequently once at least in every year, lay before the company in general meeting copies of the financial statements of the company made up to a date not exceeding nine (9) months previous to the date of the meeting – section 345(1) of CAMA.
In respect of each year, the directors shall deliver with the annual return to the Commission a copy of the balance sheet, the profit and loss account and the notes on the statements which were laid before the general meeting – section 345(3) of CAMA.
A company’s balance sheet and every copy of it which is laid before the company in general meeting or delivered to the Commission shall be signed on behalf of the board by two of the directors of the company – section 343(1) of CAMA.
PERSONS ENTITLED TO RECEIVE FINANCIAL STATEMENT.
A copy of the company’s financial statements for the financial year must, not less than twenty-one (21) days before the date of the meeting at which they are to be laid, be sent to each of the following persons –
1. Every member of the company (whether or not so entitled);
2. Every holder of the company’s debentures (whether or not so entitled); e.
3. All persons other than members and debenture holders, being persons so entitled – section 344(1)(a)(b) & (c) of CAMA.
In the case of a company not having a share capital, a copy of financial statement may not be sent to a member who is not entitled to receive notices of general meetings of the company, or to a holder of the company’s debentures who is not so entitled – section 344(2) of CAMA.
The position of auditors is very important in a company. An auditor has enormous powers under the Act. His position and duties are meant to safeguard the interests of the company and investors by certifying compliance with the provisions of the law in relation to preparation of accounts and others.
Note: Vacation of office means leaving office before the end of your tenure.
Where the company operates in contravention of the laws and basic accounting principles or rules recognized by the Act, the auditor may qualify his statutory report or even refuse to certify the accounts.
However, the Act does not define an auditor.
APPOINTMENT OF AUDITORS.
The Act requires every company to appoint an auditor or auditors at each general meeting to audit the financial statement of the company and to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting – section 357(1) of CAMA; Avop Plc. v. A. G Enugu State (2000) 7 NWLR (Pt. 644) 260 at 276.
He is appointed for the purpose of carrying out a private audit on the activities of the company and to make his comments thereon – R. v. Shacter (1960).
A retiring auditor may be re-appointed at an annual general meeting without passing any resolution to that effect unless he is not qualified for re-appointment or a resolution has been passed at that meeting appointing another person or that he shall not be appointed at all or if he has given a notice in writing to the company that he is unwilling to be appointed – section 357(2) of CAMA. RE-APPOINTMENT IS AUTOMATIC.
The directors of a company have the power to appoint a person as an auditor to fill a vacancy where no auditor is appointed or re-appointed – section 357(3) of CAMA.
The company at a general meeting may remove any auditor so appointed by directors and appoint in their place any other persons who have been nominated for appointment by any member of the company and of whose nomination notice has been given to the members of the company not less than fourteen (14) days before the date of the meeting – section 357(5) of CAMA.
The first auditors may also be appointed by the company in general meeting if the directors fail to exercise their power to appoint the first auditors – section 357(5)(b) of CAMA.
A person is only qualified to be appointed an auditor if he is a member of a body of accountants established under an Act of the National Assembly in Nigeria ** foreign qualified accountants not applicable – section 358(1) of CAMA. However, an officer or servant of the company, a person or a firm who offers professional services to the company in respect of taxation, secretarial or financial management and a body corporate are disqualified from being appointed as auditors of the company – section 358(2) of CAMA.
Any person who knowingly acts as an auditor in contravention of the Act is guilty of an offence and liable to pay a fine of N500 and, for continued contravention, to a daily default fine of N50 – section 358(6) of CAMA.
DUTIES OF AUDITORS.
This is provided for under section 360 of CAMA. The duties of the auditor generally depend on the provisions of the Act and the Articles of the company. The duties are as follows –
1. He has a duty to write a report in form of an audit report on the accounts of the company as examined by him.
2. He has a duty to carry out proper investigations to enable him form an opinion on the proper accounting records that have been kept by the company and whether the company’s balance sheet and profit and loss account are in agreement with the accounting records and returns.
3. He has a duty to include in his report particulars of non-compliance with the provisions of the Act concerning preparation and presentation.
4. He has a duty to consider the directors report and say whether or not the report is consistent with the accounts for the period to which the report relates.
5. He has a duty to report to the members of the company and the audit committee, in case of a public company, on the accounts examined by him.
6. He has a duty to ascertain and state the true financial position of the company by an examination of the books of the company – Re London & General Bank (No. 2) (1895) 2 Ch. 673, per Lindley L. J; Leeds Estate Co. v. Shepherd (1887) 36 Ch. D 787.
7. He has a duty to act honestly and with reasonable care and skill. He must be honest and display a reasonable degree of skill and care in the performance of his duties – Re Kingston Cotton Mill Co. (No. 2) (1896) 2 Ch. 279 at 288.
LIABILITY OF AUDITORS.
An auditor will be liable for his negligent acts which have resulted in a loss or damage of the company – section 368(2) of CAMA.
However, an auditor will not be liable for negligence when a fraud has been committed through a well-laid out scheme which did not arouse any suspicion on the part of the auditor to make further or better investigations – Re City Equitable Fire Insurance Co. Ltd (1925) Ch. 407. In Re Kingston Cotton Mill (supra) at 683, per Lopez L. J, it was stated that the auditors are not liable for not tracking out ingenious and carefully laid schemes of fraud where there is nothing to arouse their suspicion.
REMOVAL OF AUDITORS.
An auditor may be removed by the company at any time before the expiration of his term by an ordinary resolution of the company. He can be removed in the forgoing manner not withstanding anything to the contrary in any agreement between him and the company – section 362(1) of CAMA.
When an auditor has been removed, the company has a duty to give notice of his removal to the Corporate Affairs Commission within fourteen (14) days of the passing of the resolution leading to the removal of the auditor. Failure to do so makes the company and its officer who is in default guilty of an offence and liable to a daily fine of N100 – section 362(2) of CAMA.
Any auditor so removed shall not be deprived of any compensation or damages that he may be entitled to by reason of the termination of his appointment as an auditor.
Section 359(3) of CAMA provides that in addition to the report made to the members of the company on its accounts, the auditors shall in the case of a public company, also make reports to an Audit Committee which shall be established by the public company. Thus, it is only required in a public company.
It can be said that the institution of Audit Committees is part of the continuous effort to balance the interest of the shareholders and the public on the one hand against those of the board and management on the other hand.
However, it is advisable that the committee should not act as a barrier between the auditors and the executive directors of the board or encourage the board to abdicate its responsibility in reviewing and approving the financial statements.
It should also not be under the influence of any dominant personality on the board; neither should it get in the way of or obstruct executive management.
The main duty of Audit Committee is to examine the auditor’s report and make recommendations thereon to the annual general meeting as it may think fit – section 359(4) of CAMA.
COMPOSITION OF AUDIT COMMITTEE.
The Audit Committee shall consist of an equal number of directors and representatives of shareholders of the company (subject to a maximum number of six (6) members) – section 359(4) of CAMA. Note Sub-section 5.
The Audit Committee should be composed of strong and independent persons with not more than one (1) executive.
A member should, inter alia, be able to read and understand basic financial statements and be capable of making valuable contributions to the committee.
A majority of the non-executives should be independent of the company, that is, independent of management and free from any business or other relationships which could materially interfere with the exercise of their independent judgment as members of the committee.
The chairman should be a non-executive director, to be nominated by members of the committee. The term should be fixed and definite but a member may be re-elected.
The company secretary shall be the secretary of the committee.
FUNCTIONS OF AUDIT COMMITTEE*** EXAM POSSSIBLE.
This is provided for under section 359(6) of CAMA which provides thus:
“Subject to such other additional functions and powers that the company’s articles of association may stipulate, the objectives and functions of the audit committee shall be to –
a) Ascertain whether the accounting and reporting policies of the company are in accordance with legal requirements and agreed ethical practices;
b) Review the scope and planning of audit requirements;
c) Review the findings on management matters in conjunction with the external and departmental responses thereon;
d) Keep under review the effectiveness of the company’s system of accounting and internal control;
e) Make recommendations to the Board in regard to the appointment, removal and remuneration of the external auditors of the company; e.
f) Authorize the internal auditor to carry out investigations into any activities of the company which may be of interest or concern to the committee.
Every company either limited by shares or guarantee, is required to make and deliver to the Commission annual returns in the prescribed form – section 370 of CAMA. However, a company may not make and deliver annual returns if it is the year of incorporation of the company or is not to hold an annual general meeting in the following year under section 213 of CAMA. By section 374 CAMA, The annual return shall be completed with 42 days after the AGM for the year, whether or not that meeting is the first or only ordinary general meeting, of the company in that year, and the company shall forthwith forward to the Commission a copy signed both by a director and by the secretary of the company. This is how the CAC knows whether a company is a going concern.
The required Form is CAC Form 10.
Due Diligence report is analogous to a search report of a company.
The annual returns must be accompanied by a certified copy of the balance sheet and profit and loss account of the company as laid before the general meeting, the report of the auditors on, and of the report of the directors – section 375 of CAMA.
Private companies are required to submit their annual returns together with a certificate signed by both the director and the secretary to the effect that since the last annual return or incorporation in case of a new company, the company had not issued any invitation to the public to subscribe to any of her shares or debentures – section 376(1) of CAMA.
Non-compliance with the provisions relating to the filing of annual returns makes the company, every director or officer of the company guilty of an offence and liable to pay a fine of N1,000 in the case of a public company, and N100 in the case of a private company – section 378 of CAMA.
See Ss 372 and 525 CAMA.
CORPORATE LAW PRACTICE – WEEK 13.
COMPANY SECURITIES 1 (SHARES & DEBENTURES)
The capital of a company consists mainly of shares and debentures. Public companies raise capital through share subscription known as shares.
‘Shares’ is basically the measure of the interest of the member in the company. It represents the totality of rights and liabilities that a shareholder has in a company as provided in the terms of issue and the Articles of the company.
In Borland’s Trustee v. Steel Bros. & Co. (1901) 1 Ch. 279, per Farwell J., shares was defined as –
“The interest of a shareholder in the company measured by a sum of money, for the purpose of liability in the first place, and of interest in the second, but also consisting of a series of mutual covenants entered into by all the shareholders…”
Section 567(1) of Companies and Allied Matters Act (CAMA), Cap C20, LFN 2004 defines “share” as –
“the interests in a company’s capital of a member who is entitled to share in the capital or income of such company; and except where a distinction between stock and shares is expressed of implied includes stock”.
The shareholder is a proportionate owner of the company, but he does not own the company’s assets, which belongs to the company as a separate and independent legal entity.
Thus, a share represents the basis of the interests of a member or shareholder in the company. These interests include participation in the management of the company, the right to attend and vote at meetings, etc.
By virtue of Section 116(1)(a) CAMA, Cap C20, LFN 2004, every share must carry the right on a poll at a general meeting of the company to one vote in respect of each share and no company may by its articles or otherwise authorise the issue of shares which carry more than one vote in respect of each share or which do not carry any rights to vote.
• The Nominal value of shares is the unit cost of each share at incorporation.
• The Prevailing market value (PMV) refers to the current quoted value.
• The difference between the PMV and the Nominal value is the premium.
• By virtue of Section 120(1) CAMA, a company can sell at a premium.
• The premium must be paid into a shares premium account. Section 120(2) CAMA. Premium is not distributable.
TYPES OF SHARES.
Shares are of different classes and have different rights attaching to them. The main types of shares are –
1. Preference shares;
2. Ordinary shares; e.
3. Deferred shares.
Section 122 of CAMA provides that a company, if authorised by its Articles of Association, shall issue preference shares which shall, or at the option of the company be liable to be redeemed unless they are fully paid, and redemption shall be made only out of profit; or the proceeds of a fresh issue of share.
These are shares which give their holders priority over other classes of shareholders in relation to dividend before anything is paid on other classes of shares. Furthermore, by virtue of Section 143(1) CAMA, a preference shareholder may be entitled to more than one vote per share, as an exception to the rule in Section 116 CAMA.
The main feature of this type of shares is that it entitles the holder to a fixed preferential dividend – this means that the dividend payable by the company to the holder of such shares is fixed at a specific figure; it may be 5% or 100% etc.
The dividend must be must not be paid out of capital but out of profits because this will amount to an illegal return of capital to the preference shareholder. The dividend must be paid before the ordinary shareholders receive their own dividends, that is, preference shares have priority over ordinary shares.
Preference shares are safer during a period where there is instability in economic growth, but will not be safe (unattractive) during inflationary period. However, where a company is well managed, and the resultant effect will naturally be large profits, it will be disadvantageous to own preference shares because of their fixed percentage dividend and it will give rise to the ordinary shareholders to share the bulk of the profits, since the value of their shares would have risen on the market.
Preference shares is sub-divided into two namely –
1. Cumulative; e.
Cumulative preference shares are where the dividends of a company accumulate to the next year or subsequent years until they are fully paid from the profits of later years; whilst non-cumulative preference shares does not accumulate from one year to another, where a company fails to pay dividend in a particular year, no dividend will be paid for that year nor will it be carried to the subsequent year.
In the event of winding-up of a company and unless it is expressly stated in the Articles of Association, preference shareholders have no inherent priority as to the repayment of capital. If the assets are not enough to pay the preference and ordinary shares in full, both preference and ordinary shares are paid off rateably according to the nominal value of the shares.
These are sharers that do not attract special rights or privileges over other shares, but they form bulk of the company’s capital. They are the risk bearers as they are only entitled to dividend when one is declared provided the company has made a profit to warrant the declaration of the dividend. The holders have an equal right to share in the profit of the company declared by way of dividend. In the event of liquidation, they rank after the preference shareholders except the Articles of Association otherwise provide.
However, an obvious advantage of ordinary shares to ordinary shareholders is that their dividends are not fixed and they may rise considerably with the level of profitability of the company.
Another advantage of ordinary shares is that voting power and strength of the ordinary shareholders in general meeting allow them to control the resolution of the meetings.
Ordinary shares carry the remaining of distributed shares after the preference shares have been paid their fixed dividend.
These shares are usually held by the founders of the company. They are so called because payment of dividend and return on capital are deferred until payment has been made in respect of other classes of shares.
Section 119 of CAMA provides thus –
“Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, any share in a company may be issued with such preferred, deferred or other special rights or such restrictions, whether with regard to dividend, return of capital or otherwise, as the company may, from time to time, determine by ordinary resolution”.
RIGHTS AND OBLIGATIONS ATTACHED TO SHAREHOLDERS.
By section 114 of CAMA, the rights and obligations carried by or attaching to the shares of a company would depend on the terms of issue and of the company’s Articles of Association.
In Kotoye v. Saraki (1994) SCNJ 524 at 575, the Supreme Court stated that “by being registered as a holder of shares in a company, the registered holder becomes entitled to certain rights, benefits and privileges”.
The rights are thus –
1. The right to dividend while the company is a going concern and a dividend is declared;
2. The right of attending any general meeting Section 114(b) CAMA;
3. The right to vote at the general meeting Section 114(b) CAMA;
4. The right to participate in distribution of assets in the winding-up of the company, that is, return of capital on winding up.
The principal obligation of a shareholder, whether or not, it is so stated in the terms of issue or articles of the company, is to pay the amount unpaid on the shares he holds. However, payment is to be made when call is made or at a time fixed for payment by the terms of issue.
Another obligation is that, a shareholder may also be personally liable in certain situations, for example, to repay any dividend unlawfully received by him.
ACQUISITION OF SHARES.
Section 160(1) of CAMA provides that subject to the provisions of section 190(2) and its articles of association, a company may not purchase or otherwise acquire shares issued by it.
A company may acquire shares for the following reasons –
(a) Setting or compromising a debt or claim asserted by or against the company; ou.
(b) Eliminating fractional shares; ou.
(c) Fulfilling the terms of a non-assignable agreement under which the company has an option or is obliged to purchase shares owned by an officer or an employee of the company; ou.
(d) Satisfying the claim of a dissenting shareholder; ou.
(e) Complying with a court order – section 160(2) of CAMA.
A company may also accept from any shareholder, a share in the company surrendered as a gift, but may not extinguish or reduce a liability in respect of an amount unpaid on any such share, except in accordance with the provisions for the reduction of share capital – section 160(3) of CAMA.
ALLOTMENT OF SHARES.
Subject to the provisions of the Investment and Securities Act (ISA), the power to allot shares shall be vested in the company which may delegate it to the directors subject to any conditions or directions that may be imposed in the articles or from time to time by the company in general meeting – section 124 of CAMA.
METHOD OF APPLICATION AND ALLOTMENT OF SHARES.
1. In the case of a private company or a public company where the issue of shares is not public, there shall be submitted to the company a written application signed by the person wishing to purchase shares and indicating the number of shares required;
2. In the case of a public company, subject to any conditions imposed by the Securities and Exchange Commission where the issue of shares is public, there shall be returned to the company a form of application as prescribed in the company’s articles, duly completed and signed by the person wishing to purchase shares;
3. Upon the receipt of application, a company shall, where it wholly or partially accepts the application, make an allotment to the applicant and within 42 days after the allotment, notify the applicant of the fact of allotment and the number of shares allotted to him; e.
4. An applicant shall have the right at any time before allotment, to withdraw his application by written notice to the company – section 125 of CAMA.
PROCEDURE FOR ALLOTMENT OF SHARES.
1. After the issuing of the prospectus, open a subscription list (if public).
2. Receive applications and record in Application and Allotment Sheets.
3. Convene Board (or Allotment Committee) meeting to pass a resolution of allotment.
4. Issue Letters of Allotment (and letters of regret).
5. Deal with letters of renunciation, if any.
6. Prepare Share Certificates.
7. Enter allottee’s names in the register of Members.
8. File Return of Allotments (Form CAC 2.5) within one month after allotment.
9. If the shares are issued for a consideration other than cash –
a) Have the consideration valued and obtain particulars of valuation.
b) If consideration involves capital investment of 20,000 Naira or more apply under the Industrial Inspectorate Act.
c) Prepare and file along with Form Corporate Affairs Commission 2.5 –
Eu. Agreement constituting the title of the allottee to the allotment;
ii. Agreement for sale of property or for services of other consideration; e.
iii. Particulars of Valuation.
TRANSFER OF SHARES.
A share is a transferrable property. The shares of a member in a company may be transferred in a manner provided in the articles or other statutory instruments regulating transfer of shares.
It has also been defined as “the voluntary conveyance of the rights and possibly the duties of a member, as represented in a share in the company from a shareholder who wishes to cease to be a member to a person desirous of becoming a member”. Though, a member may wish to transfer just a portion of his shares and still remains a member of the company in relation to other shares owned in the company.
The right to transfer shares is exercisable by every holder of shares in a company. This is because the shares of every registered company are transferrable through legislative provisions. Thus, the right is exercisable even where there is no specific authority or permission in the memorandum or articles of association. In Chief R. A Okoya & Ors. v. Santilli & Ors (1910) 1 Ch. 312 at 316 – 358, it was stated that transfer is a matter between the shareholder who wants to part with his shares and the purchaser or transferee. The company will only ratify by adjusting its books to reflect the new shareholder.
METHOD OF TRANSFER.
Transfer of shares shall be effected by delivery of a proper instrument of transfer to the company and the subsequent registration of the transferee in the register of members – section 151(1) and (2). The transferor is deemed to remain a holder of the share until the name of the transferee is entered in the register of members in respect of the shares – section 151(3) of CAMA.
PROCEDURE FOR TRANSFER OF SHARES.
This could either be –
1. Transferring of all shares; ou.
2. Transferring of part of the shares.
Transferring of all shares.
1. Prepare the deed of transfer which shall be duly signed by the parties and a witness.
2. Transferor gives the deed of transfer and the share certificate to the transferee.
3. The deed of transfer is stamped at the stamp duties office.
4. The stamped deed of transfer together with the resolution of the company approving the transfer, and Form CAC 2.5 (return of allotment) is filed with CAC.
5. Transferee registers the stamped deed of transfer with the company.
6. Company issues share certificate and register transferee as the new owner.
Note: No stamp duties are payable on transfer of shares or stocks, for under the Stamp Duties Act (SDA), “all documents relating to the transfer of stocks and shares are exempted from stamp duty. SDA, Cap S18, LFN 2004.
When the transfer has been lodged with the company, it must, within 3 months either register the shares and issue a new share certificate to the transferee. Section 146, CAMA.
Transferring part of the shares.
The transferor executes the transfer but does not hand it over to the transferee; instead, he sends it to the company together with his certificate with a request that the instrument of transfer be certificated. Section 157(1) CAMA. The secretary of the company endorses on the instrument of transfer, the words “certificate lodged” or similar words. Section 157(2) CAMA. This is the certification of the transfer. He then returns the instrument of transfer to the transferor who delivers the certificated instrument to the transferee in exchange for the price. The transferee executes the transfer and delivers it to the company for registration. The company must within 3 months, Section 146 CAMA, either register the shares and issue a certificate to the transferee for the amount transferred and a certificate for the balance to the transferor or some other transferee, as the case may be, or if it refuses the registration, inform the transferee accordingly within 2 months. Section 153(1).
However, section 152(2) of CAMA provides that until the deed of transfer is registered with the company, the shares are deemed to still be the property of the transferor. The implication of this is that all the rights and liabilities of a shareholder will continue to be addressed to the transferor as if the shares were still his.
This is a document which creates or acknowledges a debt due from a company. The document does not need to be under seal, although it is usually under seal and need not charge the assets of the company by way of security, although, it does in most cases – Lemon v. Austin Friars Investment Trust Ltd (1926) Ch. 1
Debentures are instruments issued to people from who the company has borrowed money. It is often by way of a deed, but not necessarily so – Union Bank Ltd. v. Tropic Foods Ltd (1992) 3 NWLR (Pt. 228) 321.
The power to issue debentures by companies is provided by section 166 of CAMA, which provides that 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 – General Auction Estate Co. v. Smith (1891) 3 Ch. 432.
In Intercontractors (Nig.) Ltd. v. NPFMB 2 NWLR (Pt. 76) 280 at 292, the court stated that –
“A debenture consists of a debt owed by the company to another secured by a deed which prescribes the condition of the realization of the debt, and it may be created over the fixed or floating assets of the company”.
Generally, at Common law, the power of a company to borrow money must be expressly stated in its Memorandum of Association before it can be exercised. It cannot be implied, except in the case of trading companies. This is no longer necessary under section 166 of CAMA.
The power to borrow money includes the power to charge the assets of the company which constitutes a form of security to the lender and such power is normally exercised by the directors of the company; who must not borrow above its authorised capital.
It should be noted that a debenture is a document which is evidence of a chose in action, that is, it is a document that contains an acknowledgment of indebtedness. The debenture or debenture stock certificate under the company’s common seal must within 60 days after allotment or after registration of transfer of any debenture be delivered by the company to the registered holder – section 167 of CAMA.
Where the debenture or debenture stock certificate is lost, defaced or destroyed by the registered holder, he will be issued at his request, a certified true copy by the company on payment of N5 (five naira) or less subject to the company’s rights to be indemnified and payment of out of pocket expenses for investigating evidences where reasonably required.
Default by the company or officer attracts a fine of N25 (twenty five naira) and they can be compelled by court order to comply, on the application of the registered holder and can be responsible for all the costs of and incidental to the application.
Statements to be included in the debenture includes –
1. The principal amount borrowed.
2. The maximum discount which may be allowed on the issue or re-issue of debenture.
3. The maximum premium at which the debentures may be made redeemable.
4. The rate of and the dates on which interest on the debentures issued shall be paid and the manner of payment and other statements or matters.
Statements made in debentures are prima facie evidence of the title to the debentures of the registered holder and of the amounts secured.
TYPES OF DEBENTURES.
There are several types of debentures. They are –
1. Perpetual debentures;
2. Convertible debentures;
3. Secured and naked debentures; e.
4. Redeemable debentures.
These are debentures that are irredeemable or redeemable only on the happening of a contingency, however remote, or on the expiration of a period, however long – section 171 of CAMA.
These are debentures issued on the terms that they are convertible to shares of the company in lieu of redemption and at the option of the holder upon such terms as may be stated in the debentures – section 172 of CAMA. That is, it is issued upon the terms that in lieu of redemption or repayment, a right of option is given to the holder of the company to convert the debentures into shares at some future date.
If a debenture holder exercises this right of conversion, he ceases to be a creditor and becomes a shareholder instead.
SECURED OR NAKED DEBENTURES.
A debenture is secured when it is secured by a charge over the properties of the company. The security may be a fixed charge or a floating charge, or by both a fixed charge on a certain property and a floating charge. Whilst, the debenture is naked when it is not secured by any property of the company – section 173 of CAMA.
These are debentures that are liable to be redeemed at the option of the company – section 174 of CAMA.
REMEDIES OF DEBENTURE HOLDERS.
The remedies available to a debenture holder are provided under section 209 of CAMA. They are –
1. Action for recovery for principal and interest;
2. Petition for winding-up;
3. Debenture holder’s action;
4. Power of sale;
5. Foreclosure action;
6. Valuation of security and proving the balance on winding-up; e.
7. Appointment of Receiver/Manager.
ACTION FOR RECOVERY OF PRINCIPAL AND INTEREST.
A debenture holder can sue for the recovery of the principal and interest upon default in payment and thereafter levy execution on the property of the company, whether the debenture is a secured or unsecured debenture – section 209(2) of CAMA.
PETITION FOR WINDING-UP.
A debenture holder can bring up an action to wind-up the company on the ground of inability of the company to pay its debt. Although, this is subject to any condition imposed by the debenture – section 209(2)(ii) of CAMA.
DEBENTURE HOLDER’S ACTION.
A debenture holder may bring a representative action on behalf of the other holders of debentures of the same class (class action) where the debenture is one of a series for payment and enforcement of the security – section 209(2)(a) of CAMA.
The power of sale may be exercised be a debenture holder; subject however, to the condition that such power must be contained in the debenture or trust deed. It may be noted generally that a debenture will contain power of sale to be exercised by the receiver and where there is no such express power; the implied power of sale b a mortgagee may be exercised. Also, power of sale may be exercised pursuant to the order of court following a debenture holder’s action – section 209(3) of CAMA.
A debenture holder can also bring a foreclosure action which may extend to uncalled capital of the company. However, a foreclosure order will not be made unless all the debenture holders of every class are parties to the action.
VALUATION OF SECURITY AND PROVING THE BALANCE ON WINDING-UP.
Where the debenture is secured, the debenture holder is in the same position as any secured creditor of the company. Consequently, on winding up, he may value his security and if it is insufficient, prove for the balance like any unsecured creditor.
CHARGES SECURING A DEBENTURE.
Debentures may be secured by ‘fixed” or “floating charges” – section 178 of CAMA.
A fixed charge is a mortgage of a specified property of the company such as land. Whilst, a floating charge is an equitable charge over the whole or specified part of the undertaking or assets of the company including cash and uncalled capital both present and future.
PROCEDURE ON CREATION OF CHARGES.
1. Convene Board meeting to pass resolution authorizing the loan and preparation of loan documents including prospects if necessary.
2. Preparation, execution and stamping the documents:
a) Deed of mortgage (charge by way of legal mortgage debenture).
b) Power of Attorney (if any).
c) Debenture Trust Deed (if any).
3. Obtain Governor’s consent if necessary, and where necessary – NIDB V. Olalomi Ind. Ltd (2002) 5 NWLR 761.
4. File documents at Land Registry.
5. File documents for registration at the CAC viz:
Eu. Mortgage/Charge by way of Legal Mortgage or Debenture.
iii. Particulars of Charge in Form CAC 3.
6. Leave copies of documents for inspection at the Registered Office of the Company, that is, in the Record of Instruments.
7. Enter particulars of charge in Register of Charges and also in the Register of Debenture holders where applicable.
8. Obtain Certificate of registration of charge from the CAC and have a copy of the charge endorsed on every debenture or certificate of debenture stock issued by the Company the payment of which is secured by the charge.
9. Obtain Form CAC 6.2 along with Deed of Release or other instrument.
10. Notify CAC of the appointment of a Receiver or Manager upon enforcement of the security.
REGISTRATION OF CHARGES.
Section 197(1) of CAMA requires that where a company creates on its property any of the charges specified in section 197(2), the company must within 90 days of the creation deliver to CAC certain particulars for registration. The registration is effected by filling the prescribed forms – Form CAC 3 is used for the registration of Mortgage(s)/Charge(s).
When the charge is registered, the CAC must issue a registration certificate; the registration certificate is a prima facie evidence of compliance with the requirements or registration – section 198(2) of CAMA. The certificate must be endorsed on every debenture or debenture stock certificate issued by the company and secured on the charge – section 198(1) of CAMA.
EFFECT OF NON REGISTRATION.
Failure to register a charge as required will render it void against the liquidator and any creditor of the company – section 197(1) of CAMA. The obligation to pay the debt is, however, not thereby discharged – Capital Finance Co. Ltd. v. Stokes (1969) 1 Ch. 261.
RECTIFICATION OF REGISTER AND EXTENSION OF TIME.
This is provided for under section 205 of CAMA. The company and any person interested may apply to the Federal High Court for rectification of the Register of charges and extension of time for registration in respect of omission to register a charge within time or omission or misstatement of any particular with respect to that charge or in the memorandum of satisfaction on any of the following grounds –
1. That the omission or misstatement was accidental, or due to inadvertence or to some other sufficient cause; ou.
2. That the omission or misstatement is not of a nature to prejudice the position of creditors or shareholders of the company; ou.
3. That on other grounds it is just and equitable to grant relief. If the court is satisfied on any of the grounds, it may grant relief on such terms and conditions as seems just and expedient and order that the time for registration be extended or that the omission or misstatement be rectified – Moses Ola and Sons (Nig.) Ltd. v. Bank of the North Limited [1992] 3 NWLR 377.
Every certificate of registration of charge issued by the Commission must be endorsed on every debenture or debenture stock certificate – Section 203(1) of CAMA.
SATISFACTION OF CHARGE.
If the company repays the amount of the debenture, it has to file a memorandum of satisfaction of the charge. This is done using Form CAC 6.2 to Form CAC 9 – section 204.
NOTICE OF ENFORCEMENT OF SECURITY.
Any person who obtains an order of court for the appointment of a receiver or manager of property of the company or appoints such a receiver or manager under powers contained in any instrument must within seven (7) days from the date of the order or appointment under the powers, give notice of the fact to the Commission which will register the fact in the register of charges – section 206 of CAMA.
CHECKLIST OF RECORDS TO BE KEPT.
When a company is issued a debenture, certain records are kept, which are –
1. Register of Instruments – Every company shall cause a copy of every instrument creating any charge requiring registration to be kept at the registered office of the company – section 190 of CAMA.
2. Record of Charges – Every company shall keep at the registered office of the company, a register of charges and enter therein all charges specifically affecting property of the company and all floating charges on the undertaking or any property of the company, giving in each case a short description of the property charged, the amount of the charge, and, except in the case of securities to bearer, the names of the person entitled thereto – section 191 of CAMA.
3. Register of debenture holders – A company which issues or had issued debentures shall maintain a register of the holders thereof – section 193 of CAMA.
1. Rule 10(1) of RPC – A lawyer acting as a legal practitioner shall not sign or file document unless such document is affixed with a seal and stamp approved by the Nigerian Bar Association.
CORPORATE LAW PRACTICE – WEEK 14.
COMPANY SECURITIES 2 – (FLOATATION OF SECURITIES AND COLLECTIVE INVESTMENT SCHEMES)
PUBLIC OFFER/SALE OF SECURITIES/COLLECTIVE INVESTMENT SCHEME; and CAPITAL MARKET AND PROCEDURE.
FLOATATION OF CAPITAL.
Floatation of capital refers to the method of raising capital for a company intending to do business. Capital floatation may be commenced by any of the following ways:
1. Capital Market – The capital market may be described as a financial market for long-term maturity financial assets such as government bonds, corporate bonds and equity. The capital market operates at two levels.
The Primary and Secondary Market.
2. Money Market – Capital acquisition from banks and other financial institutions. This capital is however, limited to the bank’s capacity, legally and statutorily to pay or make such funds available to the public.
The major characteristic of a public company is that it can offer its securities to the public for sale or subscription.
Section 315 of ISA defines security to mean –
(a) Debentures, stocks or bonds issued or proposed to be issued by a.
(b) Debentures, stocks, shares, bonds or notes issued or proposed to be issued by a body corporate;
(c) Any right or option in respect of any such debentures, sticks, shares,
(d) Commodities futures, contracts, options and other derivatives as provided in the definition.
It should, however, be noted that ‘a futures contract’ is an agreement to buy or sell a standardised asset (such as a commodity, stock, or foreign currency) at a fixed price at a future time.
METHODS OF PUBLIC OFFER/SALE OF SECURITIES.
There are several methods of public offer and sale of securities, but the major ones are –
2. Offer for sale; e.
This is also referred to as public offer. Under this, the company offers its shares (or debentures) to the public through an issuing house (usually a Bank or other. financial institution) by means of a prospectus (any written or electronic information, notice, advertisement or other forms of invitation offering to the public for subscription or purchase, any shares, debentures or other approved and recognised securities of a company and other issues or scheme). The risk of failure of the issue is born by the company which, in order to protect itself, arranges for the issue to be underwritten at an agreed commission by an issuing house. Thus, the risk of failure lies with the offeror of securities (the company) as the company could spend much more than they eventually got.
There are four classes of direct offer, they include:
1. Initial Public Offer – This refers to the first public offer made by a company, inviting members of the public for the very first time to subscribe for its Shares or Debentures.
2. Public Offer – This refers to subsequent offers made.
3. Rights Issue – This is an invitation to existing shareholders of a company to subscribe to new securities being issued by that company in fixed proportion to their existing holdings. The invitation is usually made by rights circular which may be accepted in-part, rejected, or sold on the floor of the stock exchange.
N. B. The articles of a [private] company often contain a pre-emption clause requiring that no shares shall be transferred to non-member unless no member can be found to purchase them at a fair price to be determined in accordance with the articles, or that the member should inform the directors of his intention to sell shares, the number of shares, their price, and the name of the proposed transferee and that they should be offered first to a member. If no member is willing to buy, then the shares may be sold as proposed.
4. Hybrid issue: This is a combination of the public offer and the right issue.
This is where a company allots its shares or debentures to an issuing house which then invites the public to buy from it usually at a higher price. The risk of failure of the issue is born by the issuing house which usually will underwrite the issue.
An offer for sale needs a prospectus due to the fact that it is an invitation to the public.
This means that invitation is not made to the public whether directly or indirectly. A placing may be done in one of two ways. The company may either sell its shares to an issuing house which offers (or places) the shares not to the public at large but to clients or institutional investors; or the company ‘places’ their shares with the issuing house and gives commission for every share sold e. g. Insurance companies and Pensions funds. Alternatively, the issuing house may “place” the securities without first purchasing them. In this case, the issuing house acts as the agent of the company in disposing of the shares and will be paid a commission called brokerage. A ‘private placement’ is one undertaken by a private company.
FLOATATION OF SHARES IN THE CAPITAL MARKET.
(STEPS AND PROCEDURES)
1. Only public companies can offer its shares to the public, for a private company to be able to offer its shares to the public it must first seek re-registration from private to public company under section 50 CAMA.
2. The company must secure an issuing house(s): issuing houses are the main operators in the primary market. They act as agents of the issuer by helping to package the issue, pricing, preparing prospectus and other documents. Other advisory service personnel include: Brokers, Registrars, Trustees, Portfolio and Fund Managers, Investment Advisers and under writers(persons registered by the commission whose duty is to “take up by way of subscription in a new company or new issue certain number of shares if and so far as not applied for by the public” An underwriter may be a broker, bank or issuing house. The company must ensure before engaging any of these market operators that not only are they duly registered with the SEC but that their registration has not been cancelled or suspended (section 18 ISA)
3. Registration of securities with SEC: all securities of a public company must be registered with the Securities and Exchange Commission.(SEC). Section 54(1) Investments and Securities Act, 2007. The issuer must file with the commission a registration statement which must be signed by each issuer, its CEO(s), its principal financial officer and every person named as a member of the board of directors or persons performing similar functions and in the case the issuer is a foreign person, by its duly authorized representative in Nigeria (section 54(2) ISA, 2007) and no securities or investments of a public company or collective investment scheme should be issued, transferred, sold or offered for subscription by or sale to the public without the prior registration of the Securities or investment with the commission. Section 54(5) ISA 2007.
A registration Statement will be deemed effective only as to the securities or investments specified therein as proposed to be issued. Section 54(3) ISA 2007.
4. Preparation of Draft Contracts, Agreements and Prospectus.
The following documents/contracts must be prepared:
uma. Vending Agreement.
b. Contrato de Subscrição.
c. Written consent of the parties.
d. Notices, Circulars and advertisement.
All material contracts must state among other things,
ii. Date of contract.
iii. General nature of the contract.
COLLECTIVE INVESTMENT SCHEME.
This is provided for under sections 153 and 315 of the Investments and Securities Act (ISA), 2007.
Under section 153 and 513, collective investment scheme is defined thus –
“a scheme in whatever form, including an open-ended investment company, in pursuance of which members of the public are invited or permitted to invest money or other assets in a portfolio, and in terms of which –
(a) Two or more investors contribute money or other assets to and hold a participatory interest in a portfolio of the scheme through shares, units or any other form of participatory interest;
(b) The investors share the risk and the benefit of investment in proportion to their participatory interest in a portfolio of a scheme or in any other basis determined in the deed, but not a collective investment scheme authorised by any other Act.
Thus, collective investment scheme is a scheme whereby members of the public are invited or permitted to invest money or other assets in a portfolio. The interest investors have is a participatory interest, and they are neither shareholders nor debenture holders.
NATURE OF COLLECTIVE INVESTMENT SCHEME.
The scheme relates to some special types of arrangements whereby people pool their little resources together for profits such as those found in unit trusts and in local community contributions.
TYPES OF COLLECTIVE INVESTMENT SCHEME.
Section 154 of the Investments and Securities Act provides for three types of the scheme namely –
(a) Unit trust scheme; ou.
(b) Open-ended investment company; ou.
(c) Real Estate Investment Company or trusts.
UNIT TRUST SCHEME.
This is an arrangement made for the purpose of providing facilities for participation of the public as beneficiaries under a trust, in profits or income arising from acquisition, management or disposal of Securities or any other property – sections 152 and 315 of ISA.
OPEN-ENDED INVESTMENT COMPANY.
This is a company with an authorised share capital whose articles of association authorise the acquisition of its own shares structured in such a manner that it provides for the reissuing of different classes of shares to investors, each class of shares representing a separate portfolio with a distinct investment policy – sections 152 and 315 of ISA.
REAL ESTATE INVESTMENT COMPANY OR TRUSTS.
This is defined under section 193(1) of ISA as “a body corporate incorporated for the sole purpose of acquiring intermediate or long term interests in real estate or property development, may raise funds from the capital market through the issuance of securities which shall have the following characteristics –
(a) An income certificate giving the investor a right to a share of the income of any property or property development; e.
(b) An ordinary share in the body corporate giving the investor voting rights in the management of that body corporate.
ORGANS OF COLLECTIVE INVESTMENT SCHEME.
This is the person whom the powers of the management is vested relating to property for the time being subject to any trust created in pursuance of the scheme.
Section 155 of ISA states that the manager shall administer a collective investment scheme honestly and fairly, with skill, care and diligence; and in the interest of investors and the securities industry.
However, no person shall perform any act or enter into any agreement or transaction for the purpose of administering the scheme, unless such person is incorporated under the Companies and Allied Matters Act, and the person is registered as a fund or portfolio manager – section 155 of ISA.
The commission has the power the cancel the administration of a manager – section 174 of ISA.
DUTIES OF A MANAGER.
Under section 157 of ISA, the duties of the manager of a scheme shall be to –
1. Avoid conflict between the interests of the manager and the interests of an investor;
2. Disclose the interests of its directors and management to the investor;
3. Maintain adequate financial resources to meet its commitments and to manage the risks to which its collective investment scheme is exposed;
4. Organise and control the scheme in a responsible manner;
5. Keep proper records;
6. Employ adequately trained staff and ensure that they are properly supervised;
7. Have well-defined compliance procedures; e.
8. Promote investor education.
This is any investor or beneficiary who has acquired units of a collective investment and is entitled to a pro rata share of dividends, in trust or other income of the securities comprised in the unit – section 152 of ISA.
This is a person with the duties to perform that of a manager pursuant to the provisions of the trust deed or other agreement under which the units or securities are issued – section 152 of ISA.
This is a person registered by the Commission to so act, and in whom the property for the time being, subject to any trust created in pursuance of an approved scheme or operation, is or may be vested, in accordance with the terms of the trust – section 152 and 315 of ISA.
This is a person who has custody as a bailee of securities or certificate issued in the investor’s name with the investor’s name appearing in the issuer’s register as the beneficial owner of the securities – section 152 and 315 of ISA.
APPOINTMENT OF CUSTODIAN OR TRUSTEE.
A manager shall appoint either a trustee or a custodian for any scheme managed by it having regard to the structure of the scheme – section 178(1) of ISA.
A trustee or custodian intending to retire from an appointment shall give to the manager and the Commission not less than three (3) months notice, and during the said period of three (3) months, the manager concerned shall take steps to appoint another trustee or custodian to act as such – section 178(3) of ISA.
Only persons registered under the Commission as trustee or custodian can act as a trustee or a custodian – section 178(2) of ISA.
QUALIFICATIONS AND REGISTRATION OF TRUSTEE OR CUSTODIAN.
The commission shall only register a person as trustee or custodian if the commission is satisfied that –
1. The person is not in relation to the manager, either a holding company or a subsidiary or fellow subsidiary company within the meaning of those terms as defined in the Companies and Allied Matters Act; e.
2. The general financial commercial standing and independence of the person is such that it is fit for performing the functions of a trustee or custodian and that the person is by reason of the nature of its business sufficiently experienced and equipped to perform such functions – section 179(3) of ISA.
DUTIES OF TRUSTEE OR CUSTODIAN.
A trustee or custodian shall –
(a) Ensure that the basis on which the sale, repurchase or cancellation of participatory interest effected by or on behalf of a scheme is carried out in accordance with the Act and the trust deed or custodial agreement;
(b) Ensure that the selling or repurchase price of participatory interests is calculated in accordance with this Act and the trust deed or custodial agreement;
(c) Carry out the instructions of the manager unless they are inconsistent with this Act or the trust deed or custodial agreement;
(d) Verify that, in transactions involving the assets of a scheme, any consideration is remitted to it within acceptable units of market price;
(e) Verify that the income accruals of a portfolio are applied in accordance with the Act and the trust deed or custodial agreement;
(f) Enquire into and prepare a report on the administration of the scheme by the manager during each annual accounting period, in which it shall be stated whether the scheme has been admitted in accordance with the provisions of this Act and the trust deed or custodial agreement – section 181(1) of ISA.
Section 181(2) and (3) of ISA stated additional duties which are –
A trustee or custodian shall report to the manager any irregularity or undesirable practice, concerning the collective investment scheme of which it is aware; and he shall satisfy itself that every income statement, balance sheet or other return prepared by the manager in terms of section 169 fairly represents the assets and liabilities, as well as the income and distribution of income, of every portfolio of the scheme administered by the manager.
At the request of the trustee or custodian, every director or employee of the manager shall submit to the trustee or custodian any book or document or information relating to the administration by the manager of its collective investment scheme which is in its possession or at its disposal, and which the trustee or custodian may consider necessary to perform its functions – section 181(4) of ISA.
LIABILITY OF TRUSTEE OR CUSTODIAN.
Under section 168 of ISA, any provision in the trust deed or custodial agreement is void if it has the effect of exempting the trustee or custodian from or indemnifying it against liability for breach of trust or where he fails to exercise the care and diligence required of it as trustee or custodian.
Section 183 of ISA went further to state that the trustee or custodian of a scheme shall indemnify the manager and investors against any loss or damage suffered in respect of money or other assets in the custody of the trustee or custodian and which loss or damage is caused by the negligent act or omission of the trustee or custodian.
CREATION AND MANAGEMENT OF COLLECTIVE INVESTMENT SCHEME.
1. The manager, trustee or custodian must –
(a) Obtain incorporation under the Companies and Allied Matters Act (CAMA).
(b) Register with Securities and Exchange Commission (SEC).
(c) Have the capital and reserve fund as may be prescribed by the SEC – section 160(3)(b) of ISA.
2. Preparation of Trust Deed or Custodian Agreement in compliance with the Act and regulations of the SEC – section 160(3)(d) of ISA.
3. Registration of the Scheme. For the scheme to be carried on, it must be authorised by and registered with the SEC – section 160(1) of ISA.
4. Registration of Units or Securities. It is unlawful for any person to deal in units or securities of a scheme unless they are duly registered with the SEC – section 161 of ISA.
5. Approval of prospectus and other offer documents of the scheme. Any letter, notice, circular or document prepared by the manager for the purpose of offering units or securities of a scheme to the public must be approved by the trustee or custodian, and submitted to the SEC for approval before such letter, notice, circular or document is published – section 164 of ISA.
6. Determination of market price. A unit or security must be valued at its fair market price and the SEC may by regulation prescribe the mode and method of determining the fair market price – section 170 of ISA.
7. Investment of a collective scheme. A scheme fund must be invested by a manager in accordance with the provisions of the trust deed or custodian agreement with the objectives of safety and maintenance of fair returns on amounts invested – section 171(1) of ISA.
8. A manager may invest the funds and assets of a scheme in units of any investment funds, provided that such investment fund may only be invested in the categories of investments set out in real estate.
9. The SEC may, by regulation, impose additional restrictions on investments by a manager where such additional restrictions are imposed with the objects of protecting the interest of scheme or its beneficiaries.
10. For the purpose of complying with any guideline set by the SEC as to the quality of instruments and banks that scheme fund assets may be invested in, and to ensure the safety of scheme assets in general, a manager shall have due regard to the risk rating of instruments that has been undertaken by a rating company registered under ISA – section 171 of ISA.
ROLES OF SOLICITOR IN PUBLIC OFFER OF SECURITIES.
The roles of a solicitor in public offer and sale of securities are –
1. Ensuring the company is a public company. If it is a private company, the solicitor must ensure the proper procedure is followed to convert the company from private to public company.
2. Ensuring that the shares to be issued are within the nominal share capital of the company. If necessary the nominal share capital of the company may be increased to accommodate the new issue.
3. Ensuring that necessary application and returns are made to the Corporate Affairs Commission in case of conversion of a private company to public company or increase in the capital of the company.
4. Making sure that shares to be issued are registered with the Securities and Exchange Commission.
5. Advising on whether the issue is such that will require full prospectus, abridged prospectus or falls within the provided exemptions will not need prospectus.
6. Ensuring that any prospectus issued make all the required disclosures.
7. Advising on any on-going or threatened litigation or claim(s) the outcome of which may adversely affect the fortune of the company.
8. Getting all written consent, including his own and that of other experts that may be mentioned in the prospectus.
9. Drafting and registration of prospectus and also ensuring the prospectus carry the signature of all directors named in the prospectus as directors.
10. Investigating and ensuring all parties to the issue hold a current and subsisting registration with the Securities and Exchange Commission.
11. Making sure there is no untrue or misleading statement in the prospectus.
12. Advising on the opening of subscription lists before any allotment.
13. Ensuring that allotment is not made unless minimum subscription has been achieved.
14. Advising that application money be held in trust in a separate account as deposit by the issuing house.
15. Advising on the allotment.
16. Advising on when to return money in case of over subscription.
17. Preparing, perusing, and making sure all material contracts are duly approved and executed.
18. Seeking the initial and final approval of the Securities and Exchange Commission and the Stock Exchange to the issue.
19. Advising the company on the listing rules of the Stock Exchange.
20. Ensuring that the issue conforms to all necessary laws and regulations, that is, Companies and Allied Matters Act (CAMA), Investment and Securities Act (ISA), listing requirements of the Securities and Exchange Commission (SEC), and the Nigerian Stock Exchange (NSE).
CORPORATE LAW PRACTICE – WEEK 15.
CORPORATE RESTRUCTURING 1 (OPTIONS AND INTERNAL)
Corporate restructuring is the process of redesigning one or more aspects of a company. The process of reorganizing a company may be implemented due to a number of different factors, such as positioning the company to be more competitive, survive a currently adverse economic climate, or poise the corporation to move in an entirely new direction.
Corporate restructuring may take place as a result of the acquisition of the company by new owners. The acquisition may be in the form of a leveraged buyout, a hostile takeover, or a merger of some type that keeps the company intact as a subsidiary of the controlling corporation. When the restructuring is due to a hostile takeover, corporate raiders often implement a dismantling of the company, selling off properties and other assets in order to make a profit from the buyout. What remains after this restructuring may be a smaller entity that can continue to function, albeit not at the level possible before the takeover took place.
OPTIONS AVAILABLE FOR CORPORATE RESTRUCTURING.
The corporate restructuring options can either be internal or external to the company or combination of both. The option to adopt is usually a product of business decision and legal exigencies. Internal options involve the company alone with its members or creditors while External involves the company and other third parties.
A combination of both internal and external options is also possible and at times may be considered as a more potent measure.
The new Rule 230(b) SEC Rules as amended 2010 sets out the documents that must be forwarded to SEC in the course of internal restructuring of a company as follows:
• Shareholders resolution of the companies approving the restructuring.
• A copy of Certificate of incorporation of the affected companies certified by the company secretary.
• CAC forms dealing with particulars of Directors and allotment of shares of the affected companies.
• “No objection” letter from relevant regulatory authorities (where applicable)
• Information memorandum containing the following information:
1. Directors of the companies.
2. Profile/share capital history of the companies.
3. Shareholding structure of the companies.
4. Directors beneficial interest.
5. Status of the subsidiaries after the restructuring.
6. Status of the shares of restructured companies.
7. Status of the employees of the restructured companies.
8. Percentage or level of involvement of the combined companies (if they have similar products) in the industry.
9. Any other information or document required by the Securities & Exchange Commission (SEC) from time to time.
INTERNAL RESTRUCTURING OPTIONS.
The major internal restructuring options are:
• Arrangement and Compromise.
• Arrangement on Sale.
• Management Buy out.
ARRANGEMENT AND COMPROMISE UNDER Sections 537 & 539 CAMA.
Compromise and arrangement are used interchangeably. A compromise is essentially an arrangement by a Company with the creditors and/or the shareholders or a class of them to accept less than what they are ordinarily entitled to as full satisfaction of their obligation. It may require the company to negotiate with the creditors and request that they relinquish their security or to permit the creation of a prior or parri pasu charge in favour of other creditors. It is also possible under a compromise, for a company to persuade its creditors to accept shares or part shares and part cash, in satisfaction of their debt.
Alternatively or simultaneously sometimes, shareholders or a class of them may be convinced to vary their rights. An agreement may be reached with ordinary shareholders to surrender part of their shares to preference Shareholders in lieu of dividend arrears. Conversely, holders of preference shares may be persuaded to cancel accrued dividends or reduce the fixed rate of dividend or to accept the conversion of their preference shares to ordinary shares.
PROCEDURE FOR ARRANGEMENT AND COMPROMISE.
This is available under section 539 to section 540.
1. A scheme of arrangement and compromise is prepared by the company, a member or members, creditor or creditors, or the liquidator where the company is being wound up.
2. Application is made to the court in a summary way by the company or creditor or member of the company, or the liquidator if the company is being wound up, praying the court for an order that a meeting of the company or class of members or class of creditors be summoned in such manner as the court may direct – section 539(1).
3. If the order is granted, then the meeting is convened accordingly. The notice of the meeting must be accompanied with a statement explaining the general effect of the arrangement, any material interest of the directors of the company and whether it would affect the directors differently from other persons. If it will affect debenture holders, the effect must give explanations. If the meeting is summoned by advertisement, it must contain the above statement or notice of where copies of such statement can be obtained by those entitled to attend the meeting – section 540(1) and (2).
4. At the meeting, if a majority representing not less than three-quarters in value of the shares of members or class of members, or of the interest of creditors or class of creditors, as the case may be being present and voting either in person or by proxy, agree to the scheme, report shall be made to the court of the meeting – section 539(2).
5. The court shall refer the scheme to the Securities and Exchange Commission, which shall appoint one or more inspectors to investigate the fairness of the scheme or compromise and make a report thereon to the court within the time specified by the court – section 539(2).
6. If the court is satisfied as to the fairness of the scheme, it shall sanction it and it shall be binding on all creditors or the class of members of the company, and also the company or in the case of a company in the course of being wound up, on the liquidator and contributories of the company – section 539(3).
7. An order made to sanction the scheme shall have no effect until a certified true copy of the order has been delivered by the company to the Corporate Affairs Commission for registration – section 539(4).
8. A copy of every such order shall be annexed to every copy of the memorandum of the company issued after the order has been made – section 539(4).
ARRANGEMENT ON SALE UNDER Sections 538 – 540 CAMA.
Section 538 CAMA empowers the members of a company to resolve by special resolution, in order to achieve an arrangement, that the company be wound up and that the liquidator be appointed to sell the whole or part of the company’s undertaking or assets to another company. The consideration for such sale may be cash, shares or debentures which the liquidator will distribute proportionately to the members in accordance with their rights in liquidation.
Section 538(1) CAMA provides:
With a view to effecting any arrangement, a company may be special resolution resolve that the company be put into members’ voluntary winding up and that the liquidator be authorised to sell the whole or part of its undertaking or assets to another body corporate, whether a company within the meaning of this Act or not (in this section called “the transferee company”) in consideration or part consideration of fully paid shares, debentures, policies, cash or other like interests in the transferee company and to distribute the same in specie among the members of the company in accordance with their rights in the liquidation.
The main difference between the liquidation process in the corporate restructuring and that of dissolution of the company lies on the fact that the winding up embarked on for restructuring usually result in the resurrection of the company in another form, either as a new company, or providing fund for another restructuring scheme, while the winding up for liquidation of the company brings to a permanent end of the company since the assets are distributed to those entitled according to the rules of distribution of assets of dissolved company.
PROCEDURE FOR ARRANGEMENT ON SALE.
1. A twenty-one (21) days notice must be sent to members and the notice must state a special resolution pursuant to section 538 CAMA.
2. The members in general meeting must pass a special resolution to –
(a) Wind up the company voluntarily.
(b) Appoint and authorise the liquidator to carry out the sale and distribution. Pursuant to Sections 457(b) & 538 CAMA.
3. The resolution will empower the liquidator to “sell the whole or part of the company’s undertaking or assets to another corporate body in consideration or part consideration of fully paid shares, debentures, policies or other interests in the transferee company and to distribute the same in species among the members of the company in accordance with their rights in liquidation.
4. The directors make a declaration of solvency as the basis of the members voluntary winding up. This declaration will express their belief in the solvency of the company contingent upon the approval of the scheme of arrangement or compromise. Section 462 CAMA.
5. The liquidator convenes a meeting of the shareholders or of the creditors for the purpose of considering and approving the proposed scheme of arrangement and compromise.
6. A dissenting member may by notice addressed to the liquidator and deposited at the registered office or head office of the company within thirty (30) days of the resolution into effect or to purchase his own shares at a price to be determined either by agreement in the case of a private company in which foreigners do not participate or by Securities and Exchange Commission in the case of a public company or private company in which foreigners participate. (Note that in case of a member of a priv.
7. Any sale or distribution in pursuance of the special resolution shall be binding on the company and on all members except a member who signified his dissent accordingly – section 538(2)&(4).
8. The sanction of court shall be required for the arrangement to be valid if.
(a) Within one year from the date of passing any special resolution as required, an order is made under section 310 to section 312 for relief on the grounds of unfairly prejudicial and oppressive conduct; ou.
(b) Within one year from the date of passing any resolution as required, an order is made for creditor’s voluntary winding up – section 358(2)(a).
EFFECT ON CREDITORS.
The positions of creditors is that they remain creditors of the transferor company and they have all the rights against that company that their debts confer.
It will normally be part of the arrangement that the transferee company agrees to meet the liabilities of the transferor company and gives an indemnity to this effect or, alternatively that the transferor company retains sufficient assets to meet its liabilities.
Where a creditor feels that the arrangement is causing a variation or abrogation of his rights, he can pursue an order for creditors’ voluntary winding up.
EFFECT ON SHAREHOLDERS.
The position of shareholders is that the resolution and the distribution that may follow it are valid but that any shareholder may in specific circumstances dissent and require to be bought out.
However, no dissentient shareholder can be compelled to take interest in the transferor company as long as he signifies his dissent according to the Act.
Management buy-out is the acquisition by a management team of a company, of controlling shares of that company or its subsidiaries with or without third-party financing. Rule 238(a) SEC Rules 2007 as amended 2010. The management team involved usually constitutes of the Directors and the officers of the company, who may or not be holding shares in the company, but who offers to acquire the controlling shares of the company and make it their own. Rather than allow the company to dissolve or be subject to merger & acquisition or take over by third parties, who may not share the vision and mission of the enterprise, the management team of the company can decide to salvage the company by buying into its stock and acquire the controlling shares in house.
By Virtue of Rule 238(a) Rules 2007 as amended 2010, an application for the approval of a management buy-out shall be filed by the management team making the acquisition, accompanied by the following:
• Resolution of the shareholders of the company approving the management buy-out.
• Resolution of the management team to undertake the management buy-out.
• A copy of the Certificate of Incorporation of the company.
• A copy of the Memorandum and Articles of Association of the company.
• Two copies of the Prospectus which shall contain the following, among others.
(a) Profile of the company.
(b) Profile of the management team buying over the company.
(c) Objectives of the management buy-out.
(d) 5 years audited financial statement of the company or if less than 5 years, the statement of affairs for the number of years in existence)
(e) Claims and litigation;
• Sale agreement between the company and the management team which shall contain the following terms amongst others;
(a) Terms and conditions of sale.
(b) Indemnity against contingent liabilities by the seller to-
2. Pay tax not provided for in the account;
(c) If the employees of the target company operate a Pension Scheme, the Agreement should have a clause on the continuation of the scheme;
(d) Sale and purchase of assets.
(e) Contracts and creditors.
(f) Employees: the liabilities and obligations under the existing contract of employment will pass to the buyer with accrued contractual and statutory rights unaffected;
(g) Debtors: the agreement should reflect that monies owned the seller by its debtors should be paid to the seller unless assigned to the buyer. The purchase price must reflect the fact that the debts are assigned;
(h) Name: the agreement should state whether the buyer or seller would like to carry on the business under the existing name. Where a new name would be used, it should be so stated and copies of relevant documents shall be filed with the SEC;
(i) Trust Deed (where applicable)
(j) Any other document that may be required by the SEC from time to time.
Some regulatory bodies have a role to play with the regulation of corporate restructuring. They are –
1. Securities and Exchange Commission.
2. Central Bank of Nigeria.
3. The Federal High Court.
4. Nigerian Stock Exchange.
5. Corporate Affairs Commission.
SECURITIES AND EXCHANGE COMMISSION (SEC)
The SEC is the apex regulatory institution of the Nigerian capital market. In furtherance of its regulatory functions, S. 118(1) of the Investments & Securities Act 2007 provides:
“Notwithstanding anything to the contrary contained in any other enactment, every merger, acquisition or business combination between or among companies shall be subject to prior review and approval of the commission”
In performing this function, the duty of SEC is two-fold: to find out.
uma. whether such merger or acquisition, directly or indirectly of the whole or any part of the whole or any part of the assets of another company, is not likely to cause substantial restraint if competition or tend to create monopoly in any line of business enterprise, and.
b. the use of such shares by voting or granting or otherwise shall not cause substantial restraint of competition or tend to create monopoly in any line of business enterprise.
CENTRAL BANK OF NIGERIA.
The Central Bank of Nigeria gets involved in merger and acquisition, where banking institutions are involved in the merger scheme. That is any merger scheme involving a bank in Nigeria must get a prior approval of the Central Bank before the SEC’s consent is granted. Section 7, Banks and other Financial Institutions Act (BOFIA) No. 25 1991.
THE FEDERAL HIGH COURT (FHC)
The FHC is the designated Court for the purpose of granting court ordered-meetings and of sanctioning of the merger scheme. The FHC order the meetings of the members/shareholders of the affected merging companies, to deliberate and support the proposed scheme and sanctions the scheme, particularly as it relates to judicial sanction of transfer of assets, dissolution without windup of the company and compulsory acquisition of dissenting shareholder’s shares. RE LIPTON NIGERIA LTD.
NIGERIAN STOCK EXCHANGE (NSE)
The NSE plays a minimal but prominent role in merger schemes. Merging companies are expected to comply with the listing requirements of the Stock Exchange in order to admit their new shares on the floor of the exchange. The NSE also plays the role in avoiding speculative trading and insider abuse during the merger schemes exercise. The scheme proposal or offer documents must be submitted to the Quotation department of the Stock exchange, along with the proposed prospectus issued for sale of shares of the Bank that went through merger schemes and ready to sell shares.
CORPORATE AFFAIRS COMMISSION (CAC)
Corporate Affairs Commission was established under the Companies and Allied Matters Act, 1990 (CAMA), to administer the CAMA, register business and non-business organizations, and regulate their operations. Although the provisions of the Investment and Securities Act 2007 has excised the jurisdiction of CAC from issues of merger and acquisition in favour of the SEC, certain key roles are still reserved for CAC in matters relating to mergers and acquisition. The key roles of CAC:
• Filing and certification of corporate resolutions and documents to be filed with SEC.
• Filing of sanction.
• De-registration of dissolved companies.
NOTICE OF MEETING TO PASS SPECIAL RESOLUTION FOR VOLUNTARY WINDING UP.
NOTICE IS HEREBY GIVEN that an extra-ordinary general meeting of XXX LIMITED will be held at XXXXXX XXXXXXXX, Lagos on 30th January, 2011 at 10 O’ Clock in the morning, or the purpose of considering and if thought fit passing the following special resolution to wit:
That XXX LIMITED BE WOUND UP with the order of Court.
Dated this 31st December, 2010.
By order of the Board.
SPECIAL RESOLUTION TO WIND UP A COMPANY AND APPOINT LIQUIDATOR AND FIX HIS REMUNERATION.
That the company be wound up voluntarily, and that Chief XXXXX XXXXXXXXX, a lawyer of 20, XXXX XXXXXXXX, Lagos be appointed liquidator for the purpose of such winding up and that the remuneration of the liquidator be fixed as follows:
Dated the_______________ day of ____________________________, 2011.
By order of the Board.
Director Company Secretary.
DECLARATION OF SOLVENCY EMBODYING A STATEMENT OF ASSETS AND LIABILITIES (PURSUANT TOP SECTION 462 CAMA)
Name of Company: XXXX LIMITED.
Presented by: Eminue Uya, Esq.
DECLARATION OF SOLVENCY.
We (Names of Directors) of ________________________________ and ________________________ of_______________________ the Directors (the majority of directors), solemnly and sincerely declare having so done we have formed the opinion that this company and, that to pay its debt in full within a period of two months, from the commencement of the winding up, and we append a statement of Company’s assets and liabilities as at 30th January, 2011 being the latest practicable date before the making of this declaration. And we make this solemn declaration, conscientiously believing the same to be true, and by virtue of the provisions of the Oaths Act.
Declared at Lagos the 25th February, 2011.
This ________ day of 2011-02-27.
Commisssioner for Oaths.
IN THE FEDERAL HIGH COURT OF FEDERAL REPUBLIC OF NIGERIA.
HOLDEN AT ABUJA.
IN THE MATTER OF WADATA NIG. LTD.
IN THE MATTER OF COMPANIES AND ALLIED MATTERS ACT.
WADATA NIG. LTD. APPLICANT.
WADATA NIG. LTD RESPONDENT.
MOTION ON NOTICE.
BROUGHT PURSUANT TO SECTION 539(1) AND 540 OF THE COMPANIES AND ALLIED MATTERS ACT 2004; RULE 3 COMPANIES PROCEEDINGS RULES 1992 AND UNDER THE INHERENT JURISDICTION OF THE COURT.
TAKE NOTICE that this honourable court will be moved on ______ day of ______________, 2011 at the hour of 9:00 am in the forenoon or so soon thereafter as the Counsel for the applicant may be heard for the following RELIEFS:
AN ORDER CALLING A MEETING OF THE APPLICANTS to effect the Scheme of Arrangement to be summoned in such a manner as the Court directs.
AND SUCH FURTHER ORDER OR ORDERS as the honourable Court may deem fit to make in the circumstances.
Dated this 12th day of January, 2011.
Name of Chamber.
1. WADATA NIG. LTD.
2. The Corporate Affairs Commission.
Alhaji Shehu Shagari Way,
CORPORATE LAW PRACTICE – WEEK 16.
CORPORATE RESTRUCTURING 2 – EXTERNAL OPTIONS.
OPTIONS IN EXTERNAL RESTRUCTURING.
1. Arrangement on sale under section 538.
2. Compromise or arrangement under sections 530 and 540 – with creditors and shareholders,
3. Amalgamation or merger – buy all of controlling shares or transfer business or part of it to another company in consideration for shares,
4. Take-over or be taken over by another. Please note that a private company cannot be taken over.
5. Management buy-out.
6. Purchase and assumption.
REGULATORY ROLES OF THE SECURITIES AND EXCHANGE COMMISSION.
This is the apex regulatory body for mergers and acquisitions.
Section 8(1) of the Securities and Exchange Commission Act, 1999 provides that one of the functions of the Securities and Exchange Commission (SEC) is reviewing, approving and regulating mergers, acquisitions and all forms of business combinations.
The necessary powers to achieve this are contained in section 118 of the Act.
Section 118(1) provides thus –
“Notwithstanding anything to the contrary contained in any other enactment, every merger, acquisition or combination between or among companies shall be subject to the prior review and approval of the Commission”.
Section 8(2) provides thus –
“The Commission shall approve any application made under this section if and only if the Commission finds that –
(a) Such acquisition, whether directly or indirectly, of the whole or any part of the equity or other share capital or of the whole or any part of the assets of another company is not likely to cause substantial restraint of competition to tend to create monopoly in any line of business enterprise;
(b) The use of such shares by voting or granting proxies or otherwise shall not cause substantial restraint of competition or tend to create monopoly in any line of business.”
These provisions have filled an open vacuum in the process of the combination of enterprises by preventing a monopoly tendency or an undue restriction of business enterprises to the detriment of general economic activities in the country.
Certain combination exemptions are exempted from the control of SEC. These are acquisition of shares by holding companies solely for the purpose of investment and not using same for voting or otherwise to cause or attempt to cause substantial restraint of competition or tend to create monopoly in any line of business enterprise, and also transactions duly consummated pursuant to authority given by any Federal Government owned agency under any statutory provision vesting such powers in the agency.
To determine whether a merger will substantially prevent or lessen competition, the Commission must assess the strength of competition in the relevant market, and the probability that the company, in the market after the merger, will behave compressively or co-operatively taking into account any factor that is relevant to competition in that market including the following –
1. The actual and potential level of import competition in the market;
2. The ease of entry into the market including tariff and regulatory barriers;
3. The level and trends of concentration and history of collusion in the market;
4. The degree of countervailing power in the market;
5. The dynamic characteristics of the market, including growth, innovation, and product differentiation;
6. That nature and extent of vertical integration;
7. Whether the business or part of the business of a party to the merger or proposed merger has failed or is likely to fail; e.
8. Whether the merger will result in the removal of an effective competitor – section 121(1)(a) and (2) of the Act.
If it appears to the Commission from the above facts that the merger is likely to substantially prevent or lessen competition, the Commission must –
1. Determine whether or not the merger is likely to result in any technological efficiency or other pro-competitive gain which will be greater than, and off-set, the effects of any prevention or lessening of competition, that may result or is likely to result from the merger and would not likely be obtained if the merger is prevented;
2. Determine whether the merger can or cannot be justified on substantial public interest grounds – section 121(1)(b) of the Act;
3. Determine whether all shareholders are fairly, equitably and similarly treated and given sufficient information regarding the merger – section 121(1)(d) of the Act.
In determining if a merger can or cannot be justified on public interest grounds, the commission must consider the effect that the merger will have on –
1. A particular industrial sector or region;
3. The ability of small business to become competitive; e.
4. The ability of national industries to compete in international markets.
ROLE OF CENTRAL BANK OF NIGERIA (CBN)
Section 7(1)(c) of the Banks and Other Financial Institutions Act, 1991 provides thus –
“except with the prior consent of the Governor of the Central Bank of Nigeria, no bank shall enter into an agreement or arrangement for the amalgamation or merger of the bank with any other person.”
This means that the Central Bank of Nigeria has a role to play to ensure that no bank in Nigeria enters into an agreement with another bank as regards to merger or amalgamation.
Section 7(3) of the Banks and Ot0068er Financial Institutions Act, 1991 provides that a contravention of the above is an offence punishable with a fine.
ROLE OF CORPORATE AFFAIRS COMMISSION.
This is the body responsible for the general administration of companies and strict compliance with the provisions of Companies and Allied Matters Act (CAMA).
FEDERAL HIGH COURT.
This is the court that has jurisdiction of companies’ matters pursuant to section 251 of the 1999 Constitution.
This is defined by Rule 227(1) of the Securities and Exchange Commission (SEC) Rules and Regulations as –
“an amalgamation of the undertakings or any part of the undertakings or interest of two or more companies and one or more bodies corporate.”
It is, however, defined under section 119(1) the Investments and Securities Act, 2007 as –
“& # 8230; any amalgamation of the undertakings or any part of the undertaking or interest of two or more companies or the undertakings or part of the undertakings of one or more companies and one or more bodies corporate.”
In a merger, the whole undertaking of the acquired company is merged in the acquiring company.
Under section 119(2) of the Act, a merger may be achieved in any manner including by purchase or lease of the shares, interest or assets of the other company in question; or amalgamation or other combination with the other company in question.
There are three categories of merger namely –
2. Intermediate merger; e.
This means a merger or proposed merger with a value at or below N500,000,000 or any amount or value the Commission may prescribe from time to time.
A party to this is not required to notify the Commission of that merger unless the Commission requires such and may implement the merger without approval unless required to notify the Commission – section 122(1) of the Act. It may therefore, notify the Commission voluntarily – section 122(2) of the Act.
If the Commission is of the opinion that the small merger being implemented may substantially prevent or less competition or cannot be justified on public interest grounds, the Commission may within six (6) months of the commencement of implementation of the merger require the parties to notify the Commission – section 122(3) of the Act; and when the parties in small merger are so required, they must take no further steps to implement the merger until the merger has been approved or conditionally approved – section 122(4) of the Act.
After the notice of the merger has been given to the Commission, the Commission must within twenty (20) working days notify the parties of its decision but the Commission may extend the time if it needs to review the merger and such extension must not exceed forty (40) working days with an extension certificate issued to the parties – section 122(5)(a) of the Act.
Within twenty (20) working days after the notice or within forty (40) days of an extension, the Commission must notify the parties in the prescribed form of its decision which may be –
1. Approval of the merger;
2. Approval of the merger subject to any condition;
3. The prohibition of the implementation of the merger, if it has not been implemented; e.
4. If already implemented, a declaration that the merger is prohibited – section 122(5)(b) of the Act.
If the Commission approves the merger, the parties will apply to the Federal High court for the merger to be sanctioned and if it succeeds, it shall become binding on the companies. The federal High Court may by the order sanctioning the merger make provision for any or all of the following matters –
1. The transfer to the transferee company of the whole or any part of the undertaking and of the property or liabilities of any transferor company;
2. The allotment or appropriation by the transferee company of any share, debentures, policies or other like interest in that company which under the compromise or arrangement are to be allotted or appropriated by that company to or for any person.
3. The continuation by or against the transferee company of any legal proceedings pending by or against any transferor company;
4. The dissolution, without winding up, of any transferor company;
5. The provision to be made for any persons who in such manner as the court may direct, dissent from the compromise or arrangement; e.
6. Such incidental, consequential and supplemental matters as are necessary to ensure that the reconstructuring or merger shall be fully and effectively carried out – section 122(6) of the Act.
However, under section 122(7) of the Act, an order for dissolution without winding up of the transferor company must not be made unless the whole of the undertaking and the property, assets and liabilities of the transferor company are being transferred into the transferee company, and the court is satisfied that adequate provision for compensation or otherwise has been made for the employees of the company to be dissolved.
This means a merger or proposed merger with a value between N500,000,000 and N5,000,000,000 or any amount or value the Commission may prescribe from time to time.
1. Notice of merger must be given to the Commission in the prescribed form by a party to the merger – section 123(1) of the Act.
2. Each of the party to the merger must provide a copy of the notice for –
(a) any registered trade union that represents a substantial number of the employees; ou.
(b) the employees concerned or the representatives of the employee, if there are no such registered trade union – section 123(2) of the Act.
3. No implementation of the merger by the parties until it has been approved by the Commission with or without conditions.
4. The Commission may investigate or appoint an inspector to investigate the merger. The Commission may require any party to the merger to provide additional information in respect of the merger and any person may voluntarily file any document, affidavit statement or other relevant information in respect of a merger – section 124 of the Act.
5. Within twenty (20) days after the parties to the merger have given all the required notices, the Commission must come to a decision, but the Commission may extend the time to consider the merger by a single period of forty (40) days in which case a certificate of extension must be issued to the parties – section 125 of the Act.
6. After considering the merger in accordance with section 121, the Commission may issue a certificate in the prescribed form of its decision which may be –
a) Approval of the merger;
b) Approval of the merger subject to any condition; ou.
c) The prohibition of the implementation of the merger – section 125(1) of the Act.
This means a merger or proposed merger with a value at or above N5,000,000,000 or any amount or value the Commission may prescribe from time to time.
1. Notice of merger must be given to the Commission in the prescribed form by a party to the merger – section 123(1) of the Act.
2. Each of the party to the merger must provide a copy of the notice for –
(c) any registered trade union that represents a substantial number of the employees; ou.
(d) the employees concerned or the representatives of the employee, if there are no such registered trade union – section 123(2) of the Act.
3. No implementation of the merger by the parties until it has been approved by the Commission with or without conditions.
4. The commission after receiving the notice of large merger must –
(a) refer the notice to the court; e.
(b) within forty (40) working days after receiving the notice consider the merger by investigating it or appointing an inspector to investigate it and forward to the court a statement, whether or not implementation of the merger is –
(ii) approved subject to any conditions; ou.
(iii) prohibited – section 126 of the Act.
Also, it should be noted that the Securities and Exchange Commission have a three step procedure, viz –
1. A pre-merger notification to Securities and Exchange Commission.
2. A formal approval.
3. A post-approval notification of compliance to Securities and Exchange Commission.
a) The merger proposal should be prepared, considered, and approved in principle by the separate boards of directors of the merging companies.
b) A pre-merger notice should be given to the members and Securities and Exchange Commission – Rule 232.
c) Any of the merging companies shall make an application to court in a summary way to sanction it.
d) The court shall order separate general meetings of each of the companies to be held.
a) If the majority representing not less than three-quarters in value of members being present and voting either in person or by proxy at each of the separate meetings agree to the scheme, the scheme shall then be referred to Securities and Exchange Commission for approval.
b) Where a merger involves the transfer of shares or any class of shares in a transferor company to the transferee company and the scheme is approved by the holders of not less than nine-tenth in value of the expiration of the four months after making the offer compulsorily acquire the shares of any dissenting shareholder.
c) Each company affected by the merger is required to pass resolution agreeing to the terms of the merger.
d) If the scheme is approved by the shareholders of the affected companies and the Securities and Exchange Commission, any of the merging companies may then make an application to court to sanction the scheme. The court has discretion to make consequential orders.
a) Every company affected shall cause an office copy of the court order to be delivered to Securities and Exchange Commission for registration within seven (7) days after the making of the order; e.
b) Publish a notice of the order in the Official Gazette of the Federation and in at least one national newspaper; e.
c) A notification to Securities and Exchange Commission of the completion of the merger.
Also, mergers may be categorised into –
1. Horizontal – This involves competitors in the same field e. g. same companies company together as one like Glo and Mtn;
2. Vertical – This involves non-competitors e. g companies in non-competive production coming together as one, for instance, Sugar Industry and Soap Insdustry; e.
3. Conglomerate – This involves companies in different fields coming together e. g. Transport Company and Raw materials company.
This is defined under section 117 of the Investments and Securities Act as the acquisition of the company of sufficient shares in another company (often referred to as the target company) to give the acquiring company control of that other company.
A take-over is different from a merger in that the company taken over remains in existence but as a subsidiary of the acquiring company. Thus, the target company remains separate and distinct but as a subsidiary of the acquiring company.
1. The offeror convenes a board meeting to consider and approve, in principle, that a take-over bid for the acquisition of the target company (offeree company) be made. The resolution of the directors approving the bid shall accompany the bid. The resolution shall be signed by at least one director and the company secretary – Rule 235(2).
2. A take-over bid shall be deemed to be dated as of the date on which a bid under the take-over bid is dispatched or if such a bid is dispatched on more than one date, on the latest date on which such a bid is dispatched and for this purpose, a bid dispatched by post shall be deemed dated as of the date on which it is posted – section 133(2) of the Act.
3. The bid is dispatched to shareholders of the target company at approximately the same time to acquire –
a) more than one-third (1/3) in number of the issued shares of any class; ou.
b) sufficient shares in the offeree company to make that company the subsidiary of that person; ou.
c) sufficient shares in the offeree company to enable that person to control the exercise of not less than a one-third (1/3) of the total voting power at any general meeting of the offeree company – section 133(1) of the Act. But a take-over bid cannot be made –
Eu. where the bid is dispatched to fewer than twenty (20) shareholders in order to purchase shares by way of separate agreements;
ii. to purchase shares in a company which has fewer than twenty (20) or such other number as may be prescribed in the regulations; two or more persons who are joint shareholders being counted as one shareholder; ou.
iii. in circumstances or for a purpose prescribed by regulations; ou.
iv. to acquire shares of private company – section 133(3) and (4).
4. No take-over bid can be made unless authority to proceed has been granted by the Securities and Exchange Commission. The authority remains in force for three (3) months or for such longer period as the Securities and Exchange Commission may, on application made to it before the expiration of the three (3) month period – section 105 of the Act and Rule 235.
5. A copy of the proposed bid is to be forwarded in advance to the Securities and Exchange Commission for registration – section 106 of the Act and Rule 238.
6. Requirements as to bid under the take-over differ depending on whether the bid is “an invitation” or “an offer” – section 107 of the Act and Rule 236.
7. A bid under a take-over bid must be dispatched concurrently to –
a) each director of the offeree company;
b) each shareholder of the offeree company; e.
c) the Securities and Exchange Commission – section 109 of the Act.
8. Where the bid has been dispatched to each of the directors of an offeree company, the directors shall send a directors’ circular to each shareholder of the offeree company and to the Securities and Exchange Commission at least seven days before the date on which the take-over bid, whichever is the earlier is to take effect – section 111 of the Act.
9. Where a take-over bid has been made in respect of all the shares of a class (other than those held by the offeror) and acceptance is given in respect of not less than ninety percent (90%) in number of those shares, the offeror may within one month after the date on which acceptance of the shares up to that percentage was completed give notice to dissenting offerees, to the following effect –
a) that the take-over has been accepted up to ninety percent (90%) in number of the shares subject to acquisition;
b) that the offeror is bound to take up and pay for the shares of the offerees who have accepted the take-over bid or has already done so; e.
c) that dissenting offeree is free to elect either –
Eu. to transfer his shares to the offeror on the same term as those who accepted the take-over bid; ou.
ii. to demand payment of a fair value – section 117 of the Act.
MAKING A TAKE-OVER BID.
A take-over bid may be made by a person either by himself or through his agent, or by two or more persons jointly by themselves or through an agent. However, a corporation cannot make a take-over bid either with another person or alone, unless the making of the take-over bid has been approved by a resolution of its directors – section 139(1) of the Act.
It should be noted that for a take-over to amount to a merger, there must be not less than 51% of the shares of the company to be acquired.
A bid, which is an invitation under a take-over bid, must be incorporated in a document that must state or specify the matter required under section 136(1) of the Act.
Where the bid is an offer under a take-over bid, it must be incorporated in a document which states or specifies the matters required under section 136 of the Act.
LIMITATIONS TO TAKE-OVER BID.
A take-over bid cannot be made in the following circumstances:
I. To a fewer than 20 shareholders or such number as may be prescribed by the commission, in order to purchase share by way of separate agreement provided that a take-over bid shall be made in any case where a bid is dispatched to such number of shareholders holding in the aggregate a total of 51% of the issued and paid up shares of the company.
II. To purchase shares in a company which has fewer than twenty or such other number as may be prescribed in the regulations.
III To two or more persons who are persons who are joint shareholders being counted as one shareholder.
IV. In circumstances or for a purpose prescribed by regulations.
v. To acquire shares of private company. S. 133 ISA 2007.
ACCEPTANCE OF OFFER.
The shareholders of the offeree company may accept or reject the offer made to them in respect of individual holdings.
Under this, the target management plays the leading role. The acquisition is effected by a management group which uses debt financing supplied by a bank or other lender to acquire a company.
The assets of the company so acquired are pledged as collateral for the loan and it is anticipated that the loan will be repaid out of the company’s cash flow.
Management buy-out may create conflict of interest in that the management is an equity participant in the buy-out group and also has a duty to represent the interests of the target company’s shareholders.
PURCHASE AND ASSUMPTION.
Purchase and assumption is a situation where a company decides to buy over another company. For example, where Bank PHB buys over Spring Bank.
However, purchase and assumption should not be mistaken for merger as it is a total buying and acquisition of the other company.
1. Rule 15(2)(a) of the Rules of Professional Conduct (RPC) – A lawyer in his representation of his client must keep strictly within the law notwithstanding any contrary instruction by his client and, if the client insists on a breach of the law, the lawyer shall withdraw his service.
2. Rule 7(2)(a)(b)(c) of the Rules of Professional Conduct (RPC) – A lawyer shall not practice as a legal practitioner while personally engaged in –
(a) The business of buying and selling commodities;
(b) The business of a commission agent; e.
(c) Such other trade or business which the Bar Council may from time to time declare to be incompatible with practice as a lawyer or as tending to undermine the high standing of the profession.
IN THE FEDERAL HIGH COURT.
HOLDING AT ABUJA.
IN THE MATTER OF WADATA NIGERIA LTD.
IN THE MATTER OF COMPANIES AND ALLIED MATTERS ACT.
MOTION ON NOTICE.
BROUGHT PURSUANT TO SECTION 540 OF THE COMPANIES AND ALLIED MATTERS ACT 1990; RULE 3 OF THE COMPANIES PROCEEDINGS RULES 1992; AND THE INHERENT JURISDICTION OF THE COURT.
TAKE NOTICE that this honourable court will be moved on the 4th day of March 2010 at the hour of 9.00am in the forenoon or so soon thereafter as the counsel for the applicant may be heard for the following reliefs:
AN ORDER calling a meeting of the applicants to effect the Scheme of Arrangement to be summoned in such a manner as the court directs.
AND SUCH ORDERS OR FURTHER ORDERS as the Honourable Court may deem fit to make in the circumstances.
No. 3 Nedu Close.
1. Wadata Nig. Ltd.
House 8, Gram Estate.
2. Corporate Affairs Commission.
Alhaji Shehu Shagari Way.
CORPORATE LAW PRACTICE SCENARIO.
Wadata Nig. Plc. is the strongest rival of Gold Palms Nig. Plc. in the palm produce business in Nigeria. Recently, the management of Wadata Nig. Plc. concluded plans to edge out Gold Palms Nig. Plc. from the market through a ridiculous reduction in the prices of its products. This latest strategy is made possible by the fact that Gold Palms Nig. Plc. has just signed a contract with New Age Nig. Ltd. for the supply for extra-ordinarily cheap raw materials for palm produce business in all its ramifications. This is a major threat to the Board of Directors of Gold Palms Nig. Plc. They have decided to put their personal differences behind them and salvage the company.
Chief Nosakhire Oyarie has just disclosed to the Board of Directors that he owns sixty (60) percent of the shares in New Age Nig. Ltd.
Question 1 – Identify practicable restructuring options from the above scenario.
Question 2 – Advise the Board of Directors on Gold Palm Nigeria Plc. on how they can survive the threat from Wadata Nig. Plc. and gain an upper hand in the management of the rival company.
• Arrangement on sale.
• Merger between all three companies.
• Merger between Gold Palm and New Age.
Arrangement on sale for New Age Ltd S. 538, follow through and either proceed to wind up New Age or propose a takeover bid of WADATA.
CORPORATE LAW PRACTICE – WEEK 17.
These are the proceedings of a company. The provisions of Companies and Allied Matters Act (CAMA) provides for various applications to be made to the court in respect of a company or for other proceedings to be taken under the general law.
JURISDICTION OF THE FEDERAL HIGH COURT.
Section 567 of CAMA defines court in relation to company, to be the “Federal High Court”.
Also, section 251 of the 1999 Constitution gives exclusive jurisdiction to the Federal High Court to hear matters relating to the operation of the Companies and Allied Matters Act inter alia and shall exercise this jurisdiction to the exclusion of any other court.
All offences under the act may be tried by a Court (Federal High Court) of competent jurisdiction in the place where the offence is alleged to have been committed – section 554(1) of CAMA.
The governing procedural rules in company proceedings are –
1. Companies Proceedings Rules 1992;
2. The Companies Winding Up Rules 2001;
3. Federal High Court (Civil Procedure) Rules, 2009;
4. Investments and Securities Act (ISA), 2007;
5. Securities and Exchange Commission Rules, 2007 as amended 2010; e.
6. Investments and Securities Tribunal Procedure Rules, 2003.
The Companies Proceedings Rules 1992 apply to all proceedings taken out or arising from any provision of any section of Part A of the Companies and Allied Matters Act – Rule 21(1) of the Companies Proceedings Rules.
Rule 21(1) of the Rules provide thus –
“These Rules shall apply to all proceedings taken out or arising from any provision of any section of Part A of the Companies and Allied Matters Act.”
Rule 19 of the Rules provide thus –
“Where no provision is made by the Rules, the Federal High Court (Civil Procedure) Rules shall apply”.
Rule 18 of the Rules provide thus –
“A proceeding under the Act is not invalidated by reason only that the Companies Proceedings Rules are not fully complied with or by any irregularity, unless the court before which an objection is made to the proceeding is of the opinion that injustice has been done by non-compliance with the rule complained about or any other irregularity, and that injustice cannot be remedied by any order of that court”.
APPLICATIONS FOR COMPANY PROCEEDINGS.
The applications that can be made in respect of company proceedings are made available under Rule 2, 3 and 4 of the Companies proceedings Rules.
Rule 2 of the Rules provides that –
“Except in the case of the applications in rules 3 and 4 and applications made in proceedings relating to the winding-up of companies, every application under the Act may be made by originating summons.” – Unipetrol (Nig.) Plc. v. Agip (Nig.) Plc (2002) 14 NWLR (Pt. 787) 312.
From the above provisions, it means that an application is to be made by originating summons except where –
1. It is to be made by originating motions – Rule 3 of the Rules;
2. It is to be made by petition – Rule 4 of the Rules; e.
3. It is to be made in respect to winding-up of companies.
It should, however, be noted that under Rule 1(1) of the Rules, every originating summons, notice of originating motion and petition by which any such proceedings are begun and all affidavits, notices and other documents in those proceedings shall be entitled: in the matter of the company in question and in the matter of the Companies and Allied Matters Act.
This involves interpretation, clarification, declaration of legal / documentary prescriptions. Usually, facts are not disputed but application of law/rules for the determination of the rights and obligations of parties. An originating summons under the Rule shall be in Form 1 as specified in the schedule to the Rules – Rule 2(2) of the Rules.
Also, an application under section 317 or 638 of the Act may be made by ex-parte originating summons – Rule 2(3) of the Rules.
Originating Motion is basically ‘praying’ in nature, and mostly contains mixture of both law and disputed facts. In corporate litigation, originating motion is mostly used where there is need to remedy an error or omission or benefit from set rules.
APPLICATIONS TO BE MADE BY ORIGINATING MOTIONS.
Under Rule 3 of the Rules, the following applications under the Act (Companies and Allied Matters Act) shall be made by originating motion –
1. Under section 23(2) for an order that a company be relieved from the consequences of default in complying with conditions constituting a company, a private company;
2. Under section 46(8), 129(2), or 312(5) for an order extending the time for delivery to the commission of any document required by that section to be delivered.
3. Under section 90(1) for the rectification of the register of members of a company;
4. Under section 315 for an order declaring that the affairs of a company ought to be investigated by an inspector appointed by the Commission;
5. Under section 319(3) and (4) for an inquiry into any such case as is therein mentioned;
6. Under section 329 for an order directing that shares in or debentures of a company shall cease to be subject to restrictions imposed by that section; e.
7. Under section 524(1) for an order declaring dissolution of a company which has not been wound-up to have been void.
In Form 2 of the Rules, the notice of an originating motion must be given, and it must include a concise statement of the nature of the claim made or the relief or remedy required.
This is brought in the cases which are specifically provided in the Rules.
APPLICATIONS TO BE MADE BY PETITION.
Under Rule 4 of the Rules, the following applications under the Act (Companies and Allied Matters Act) shall be made by originating petition –
1. Under section 46(1) and (2) to cancel the alteration of a company’s objects;
2. Under section 47(1) to cancel the alteration of a condition contained in a company’s memorandum of association;
3. Under section 53(3) to cancel a special resolution to which that section applies;
4. Under section 120 to confirm a reduction of the share premium account of a company;
5. Under section 121(2) to sanction the issue by a company of shares at a discount;
6. Under section 158 to confirm a reduction of the capital redemption reserve fund of a company;
7. Under section 107(1) to confirm a reduction of the share capital of a company;
8. Under section 142(1) to cancel any variation or abrogation of the rights attached to any class of shares in a company;
9. Under section 311(1) for relief on the ground that the affairs of a company are being conducted in an illegal or oppressive manner;
10. Under section 525(6) for an order restoring the name of a company to the register, when the application is made in conjunction with an application for the winding-up of the company;
11. Under section 100(3) of the Investments and Securities Act (ISA), 1999 to sanction a scheme for merger between two or more companies; e.
12. Under section 558 for relief from liability of an officer of a company or a person employed by a company as auditor.
PROCEDURE FOR PETITION.
This has to do with summons for direction in regards to petition –
1. Under Rule 4 of the Rules, there shall be a presentation of the petition.
2. After the presentation, the petitioner must, under Rule 5 of the Rules, except where the application is made under section 121(2) of the Act to sanction the issue of shares at a discount, or section 100(3) of the Investments and Securities Act (ISA) to sanction a compromise or arrangement except as provided in rule 52(6), or under section 525(6) of the Act for an order restoring the name of the company to the register, apply for direction as in Form 5.
3. On the hearing of the summons, the court may give such direction, as to the proceedings to be taken before the hearing of the petition, as it thinks fit – Rule 5(3) of the Rules.
4. When the application made by the petition is to confirm a reduction of share capital (section 107 of CAMA), or of the share premium account (section 120 of CAMA) of the capital redemption reserve fund (section 158 of CAMA) of accompany, the court may give additional directions for inquiry as to debts of and claims against the company, and also as to the proceedings to be taken for settling the list of creditors entitled to object to the reduction and fixing the date of the list – Rule 5(4) of the Rules.
This has to do with inquiry as to debts –
1. Where an inquiry is order as to the debts, the company must, within fourteen (14) days, file in the court, an affidavit made by a competent officer of the company verifying a list of creditors as in Rules 6 and 7.
2. The company must give notice of the list of creditors – Rule 8 of the Rules, and advertise a notice of the list in the newspaper as required by Rule 9.
3. With regard to claims by creditors, the company must also file an affidavit made by the company’s solicitor and a competent officer of the company in the form required in Rule 10.
4. Where there is dispute as to the entitlement of creditors to be entered in the list, the dispute is to be adjudicated upon and settled by the court as provided by Rules 11, 12 and 13.
5. The list of creditors entitled to object to the reduction must be certified and the certificate filed by the Court Registrar – Rule 12 of the Rules.
HEARING THE PETITION.
Where a petition is for the confirmation of a reduction under Rule 5(4) and the court had directed an inquiry as above, the petition shall not be heard before the expiration of at least eight (8) clear days after the filing of the certificate – Rule 14 of the Rules. Before the hearing, a notice of the day appointed for the hearing must be published in the newspaper as the court directs – Rule 14(2) of the Rules.
PROCEDURE FOR ORIGINATING SUMMONS.
Under Rule 2(2) of the Rules, the procedure for originating summons must be as specified in the Appendix to the Rules.
An application under section 317 (production of documents and evidence to inspectors) or section 638 (production of books, where offence suspected) may be made ex parte originating summons.
By S. 554(1) CAMA, criminal offences resulting from corporate transactions are to be tried by a Court of competent jurisdiction in the place of the offence. The mode for instituting the criminal process is therefore dependent on the mode for instituting criminal proceedings in the relevant court. Criminal trials at the Federal High Court are summary proceedings.
ADR AS AN ALTERNATIVE IN DISPUTE RESOLUTION OF DISPUTES INVOLVING COMPANIES.
Alternative Dispute Resolution (ADR) is a term generally used to refer to informal dispute resolution processes in which the parties meet with a professional third party who helps them resolve their dispute in a way that is less formal and often more consensual than is done in the courts. While the most common forms of Alternative Dispute Resolution (ADR) are mediation and arbitration, there are many other forms.
Parties in company proceedings who are in disagreement come agree to settle through any of the alternative dispute resolutions like negotiation, etc rather than going through litigation in the court (Federal High Court as regards to company matters) which will be costlier and will also amount to delay.
Alternative Dispute Resolution (ADR) is generally faster and less expensive. It is based on more direct participation by the disputants, rather than being run by lawyers, judges, and the state. In most ADR processes, the disputants outline the process they will use and define the substance of the agreements. This type of involvement is believed to increase people’s satisfaction with the outcomes, as well as their compliance with the agreements reached.
Most Alternative Dispute Resolution (ADR) processes are based on an integrative approach. They are more cooperative and less competitive than adversarial court-based methods like litigation. For this reason, Alternative Dispute Resolution (ADR) tends to generate less escalation and ill-will between parties. In fact, participating in an Alternative Dispute Resolution (ADR) process will often ultimately improve, rather than worsen, the relationship between the disputing parties.
SERVICE OF COURT PROCESS AND OTHER DOCUMENTS ON A COMPANY.
• Effective service of court process on a company is very imperative as it goes to jurisdiction.
• The legal consequence of non-service or invalid service renders the entire proceedings null and void upon an application to set aside the service by the Respondent.
• By S. 78 CAMA, a court process is served on a company in accordance with the provisions of the applicable Ruled of Court, covering the jurisdiction within which the company is situated. Where the matter is a matter which the State High Court has jurisdiction, it would be done by the Bailiff of Court in accordance with the applicable Rules of the Court where the action in instituted. If the matter falls within the exclusive jurisdiction of the FHC, the rules of the FHC shall apply.
• Order 6 Rule 8 FHC (Civil Procedure) Rules 2009 states that where a suit is against a corporation or a company authorized to sue and be sued in its name or in the name of an officer or trustee, the Writ or other document may be served, subject to the enactment establishing that corporation or company or under which the company is registered, as the case maybe, by giving the writ or document to any director, secretary or other principal officer, or by leaving it at the office of the corporation or company.
• Order 7 Rule 9 and 10 High Court of Lagos State (Civil Procedure) Rules 2004 deals with corporation or company and foreign corporation or company, and makes wider provisions as to venue and persons that can be validly served with originating court process on behalf of a company, corporation and foreign company or corporation, to include – director, secretary, trustee or other senior, principal or responsible officer of the organization or leaving it at the registered, principal or advertised office or place of business of the organization within the jurisdiction. In case of foreign company/corporation where the cause of action arose within jurisdiction, it should be served on the principal officer or representative within the jurisdiction.
• In Ranco Trading Co. Ltd v. Union Bank of Nigeria, a purported service of court process on a company by leaving it with an unnamed “receiving clerk” in the registered office of the company does not meet any of the requirements of Order 6 rule 1of the High Court of Lagos State (Civil Procedure) Rules 1972.
• In MTN Nigeria Communication Ltd v. Bolingo Hotels & Towers Ltd, it was held that the service on the security guard cannot be proper service on the Appellant as envisaged by S. 78 CAMA and Order 12 Rule 8 of the FCT High Court Rules.
• By S. 78 CAMA, documents other than originating court process are served on the company by leaving it at, or sending it by post to the registered office or head office of the company.
1. Rule 14 of the Rules of Professional Conduct (RPC), 2007 – A lawyer shall dedicate and devote his attention to the cause of his client.
2. Rule 32(1) of RPC – A lawyer in appearing in his professional capacity before a Court shall not deal with the Court otherwise than candidly and fairly.
(SAMPLE OF THE HEADING OF ORIGINATING SUMMONS)
IN THE FEDERAL HIGH COURT.
IN THE MATTER OF THE COMPANIES AND ALLIED MATTERS ACT, 2004.
(SAMPLE PREAMBLE OF PETITION)
“The humble petition of the above-named X Limited (for a company that is the same as one referred to in the heading, or Y Limited for the company that is not the same as one referred to in the heading) whose registered office is not (company) of …………………. (address) states as follows………………………………………………………………..”
NOTE: The body of the petition follows, consisting of a concise statement of the nature of the claim made and the relief or remedy required as indicated as indicated in Form 4 of the Rules.
WEEK 18 INVESTMENT DISPUTES.
• Investment disputes refer to disagreements and controversy arising from the operation and application of Investments and Securities Act (ISA) and the rules and regulations made there under.
• The following example may fall within investment disputes.
1. A stockbroker misappropriating client’s money; or selling client’s shares without instruction to do so.
2. An issuing house neglecting or refusing to remit proceeds to the issuer.
3. Disputes on mergers and acquisition.
4. Appeals to and from Administrative Proceedings Committee of SEC.
5. Appeals to and from the Investment and Securities Tribunal.
Resolution Channels of Investment Disputes.
• Reconciliation or amicable settlement by parties.
• Through the self-regulatory organizations.
• Alternative Dispute Resolution (ADR)
• Administrative Proceedings Committee of SEC.
• Investment and Securities Tribunal.
• Court of Appeal.
Dispute Resolution Clause in an Investment agreement.
• All disputes between the parties in relation to any matter whatsoever touching on this agreement or the construction of this agreement shall be referred to a single arbitrator to be nominated by settlement house upon the request of any party to this agreement.
Investment and Securities Tribunal.
• The tribunal was established by Section 274 of the Investments and Securities Act (ISA) 2007.
• By virtue of Section 93 Pension Reform Act No. 2 2004, the Tribunal is empowered to adjudicate on pension disputes referred to it by the National Pension Commission.
• (Composition) The tribunal is composed of ten members appointed by the Minister of Finance.
• (Member qualification) Presiding over the Tribunal is a full time chairman who is a legal practitioner of not less than 15 years with cognate experience in capital market matters. Other full-time members of the tribunal include three legal practitioners of not less than 10 years experience and one person who is knowledgeable in capital market matters. In addition to full time members, there are five part-time members who are persons with proven ability and expertise in corporate and capital market matters (Section 275 Investments and Securities Act ISA 2007)
• For the purpose of discharging its functions, the Tribunal has the power to:
1. Summon and enforce the attendance of any person and examine him on oath;
2. Require the discovery and production of documents.
3. Receive evidence on affidavits.
4. Call for the examination of witnesses or documents;
5. Review its decisions.
6. Dismiss an application for default or deciding matters ex-parte.
7. To pursue every option which is in the opinion of the Tribunal is incidental or ancillary to its functions ( S. 290(2) ISA, 2007)
• Any proceeding before the Tribunal shall be deemed to be a judicial proceeding and the Tribunal shall be deemed to be a civil for all purposes (S. 290(3) ISA, 2007).
• (Jurisdiction of the Tribunal) The tribunal shall have to the exclusion of any other court of law or body in Nigeria, exercise jurisdiction to hear and determine any question of law or dispute involving:
1. A decision or determination of the commission in the operation and application of the Act, and in particular, relating to any dispute:
• Between capital market operators.
• Between capital market operators and their clients.
• Between an investor and a securities exchange or capital trade point or clearing and settlement agency.
• Between capital market operators and self regulatory organizations.
2. The commission and self regulatory organization.
3. A capital market operator and the commission.
4. An investor and the commission.
5. An issuer of securities and the commission.
6. Disputes arising from the administration, management and operation of collective investment schemes. Section 284(4) ISA 2007.
• (Proceeding of the Tribunal) The Tribunal must dispose of any matter before it finally, within three months from the date of the commencement of the hearing of the substantive action (Section 289(5) ISA, 2007).
• The Tribunal may make rules regulating its procedures. Section 290(1) ISA, 2007.
• Proceedings of the Tribunal may be held in camera as and when deemed appropriate in the interest of the public (Section 290(4) ISA, 2007)
• (Commencement of Proceedings) Proceedings may be commenced by originating application, notice of appeal, Referencing.
• A party may appear either in person or authorize one or more legal practitioners to represent him before the Tribunal. (Section 291 ISA, 2007).
• The onus of proving any matter before the Tribunal is on the applicant or appellant as the case may be. Section 292 ISA, 2007.
• (Judgement of the Tribunal) The Tribunal must give its judgement in writing and may make orders as to fines, suspension, withdrawal of registration or licences, specific performance, or restitution as it may deem appropriate in each case. Section 293(1) ISA, 2007.
• A certified true copy of the decision of the Tribunal must be supplied to the parties upon request Section 293(2) ISA, 2007.
• By virtue of Section 290(2)(e) ISA 2007, the Tribunal has power to review its decisions.
WINDING-UP OF BUSINESS ORGANISATIONS II (COMPANIES)
SIGNIFICANCE AND LEGAL EFFECT OF WINDING-UP.
Winding-up is the most common process of bringing a registered company to an end and distribution of its assets for the benefit of members and creditors.
Companies are creatures of the law, and therefore, their dissolution is governed by statutory provisions. The winding-up process terminates the company’s attribute of perpetual succession which is one of the ways to dissolve a registered company under the Act. Also, the fact of winding-up of a company or the appointment of liquidator does not by itself result in the death of the corporate body thereby removing its legal personality.
It should be noted that a company winding has not died for it is still alive; it only dies on dissolution – C. S. (Nig.) Plc v. Mbakwe (2002) 3 NWLR (Pt. 755) 523 at 527 – 528.
During the winding-up process, the assets of the company are realised, sold and applied to pay off its debts and whatever is left as the surplus is distributed to the shareholders in accordance with the provisions of the memorandum and articles of association.
The terms “winding-up” and “liquidation” are usually regarded as being synonymous and are consequently used interchangeably. In Musa v. Ehidiamhen (1994) 3 NWLR (Pt. 334) 544, it was stated that both refer to the process whereby an end is put to the “life” of a company and its property administered for the benefit of its creditors and members.
TYPES OF WINDING-UP OF COMPANIES.
There are three types of winding-up of companies viz –
1. By the Court (Federal High Court);
2. Voluntarily; ou.
3. Subject to the supervision of the court – section 401 of Companies and Allied Matters Act (CAMA), Cap. C20, LFN 2004.
WINDING-UP BY THE COURT.
A company may be wound-up by an order of the court. The court that has jurisdiction is the Federal High Court whose jurisdiction covers the area where the registered office or head office of the company is located – section 407(1) of CAMA.
Section 407(2) of CAMA defines “registered office or head office” as the place with the longest time of registration of the office or head office of the company during the six (6) months immediately preceding the presentation of the petition for winding-up. In Medicore (Nigeria) Ltd. v. Labwares (Nigeria) Ltd. (1985) FHCR 240, a company’s registered office is in Illorin, Kwara State. A petition was brought in a Lagos court to wind-up the company. It was held that the court that had jurisdiction to wind-up the company is the court within whose area of jurisdiction the registered office of the company is situated, which is the court in Illorin. Therefore, the Lagos court was incompetent to hear the petition. Also, in IMB Nigeria Ltd. v. Lomay Nigeria Ltd. (1986) FHCR 28, where a petition was brought for convenience in Lagos against a company whose registered office is in Jos, the petition was struck out.
Where a company is being wound-up by the court, any attachment, sequestration, distress or execution put in force against the company after the commencement of the winding-up shall be void by virtue of section 414 – N. D.I. C v. Ifediegwu (2003) NWLR (Pt. 800) 56.
GROUNDS FOR WINDING-UP BY THE COURT.
The grounds or circumstances in which a registered company may be wound-up by the court are –
1. Where the company has by a special resolution resolved that the company be wound-up;
2. Where default is made in delivering statutory report to the commission or in holding the statutory meeting;
3. Where the number of members is reduced below two;
4. Where the number of members is unable to pay its debts; e.
5. Where the court is, of the opinion that it is just and equitable that the company be wound-up – section 408(a) – (e) of CAMA.
BY SPECIAL RESOLUTION.
All that is required for a company to be wound-up under this ground is that the resolution must be duly passed at a meeting duly and properly convened and it should require that the company be wound-up by the court. Such instances are rare because a company would rather pass a special resolution to wind-up the company voluntarily under section 457(b) of CAMA.
DEFAULT MADE IN DELIVERING STATUTORY REPORT.
This can only be brought by a shareholder and it must be before the expiration of fourteen (14) days after the last day on which the meeting should have been held under section 410(2)(b) of CAMA. The court may, instead of making a winding-up order, direct that a meeting be held or the report be delivered, and make orders as to costs as it thinks fit – section 411(3) of CAMA. This ground is only applicable to public companies – section 211(1) of CAMA.
REDUCTION OF MEMBERS BELOW TWO.
A company cannot be incorporated with less than two persons which is the legal requirement – section 18 of CAMA. A company which is in default of this would be wound-up by the court in addition to other sanctions as to liability – section 93 of CAMA. This is one of the cases where a contributory is expressly authorised to bring a petition for winding-up – section 410(2) of CAMA.
INABILITY TO PAY DEBT.
Section 409 of CAMA makes provision in relation to when a company is deemed to be unable to pay debts. Esses são -
1. If the company owes a creditor a sum exceeding N2,000 (Two thousand naira) which is due for payment and a demand has been made on the company for payment with the company not being able to pay, secure or compound the debt to the satisfaction of the creditor for three (3) weeks after the demand has been made.
2. Where execution has been levied or other process issued against the company in respect of a judgment debt and it is returned unsatisfied in whole or in part.
3. If the court is satisfied that the company is unable to pay its debts after taking into account any contingent or prospective liability of the company.
The courts often apply strict rules in granting an application for winding-up based on the ground since it is often abused. Thus, the debt must be disputed. In Re London & Paris Banking Corporation (1874) LR 19 Eq 444 at 644, per Jessel M. R stated thus –
“& # 8230; I should be bound to hold that if the debt is bona fide contested and there is no evidence other than non-compliance with the statutory notice to show that the company is insolvent, and the company denies this insolvency, I ought to dismiss the petition”.
In such a case, a petition based on inability to pay debt was dismissed because the debt was disputed. Also, in Re Brighton Club & Norfolk Hotel Co. Limited (1865) 35 Beav. 205, a petition for winding-up was based on failure to pay debt after a demand has been made for same. The petition was not granted because there was no bona fide dispute as to the exact amount that was due. In Tandy and Freeman v. Harmony House Furniture Co. Ltd. (1972) NCLR 163, the Supreme Court granted a petition for the winding-up of a company on the basis of her inability to pay her debt.
For a petition for winding-up to be successful on the ground of inability to pay debt, a demand must have been made on the company after which the company defaults in settling same within three weeks after the demand. In Nigerian Commercial & Industrial Enterprises Ltd. v. Registrar of Companies (1973) 1 FRCR 249, it was held that a demand made by the solicitor to a company for payment of debt was not a demand by an officer of the company.
JUST AND EQUITABLE GROUND.
This ground is based entirely on the discretion of the court and is also popular with applicants. However, the courts would consider a lot of factors before coming to the conclusion that a company should be wound-up on just and equitable ground. Whether it is just and equitable to wind-up a company depends on the facts which are available to the court at the time of hearing of the application as set out in the petition – Re Wondoflex Textiles Property Ltd. (1951) VLR 458.
Petitions have succeeded generally on the basis of this ground in cases of oppression of the minority by the majority – Ebrahimi v. Westbourne Galleries Ltd. (1972) 2 All ER 492, loss of substratum – Re Yenidije Tobacco Ltd. (1916) 2 Ch. 426, and deadlock amongst members.
In The Matter of the Stevedoring (Nig.) Co. Ltd. (1962) LLR 164, it was held that it was just and equitable to wind-up a small company where there was a disagreement between the members and directors and disagreement has adversely affected the business of the company. However, a petition on just and equitable ground should not be dismissed basically because the petitioner has some other remedies since the motive of the petitioner is irrelevant – Obasi v. Pureway Corporation (Nig.) Ltd. (1878) 4 FRCR 214. The petitioner is not entitled to a winding-up order on the just and equitable ground if his object is not a company purpose but the pursuit of a selfish advantage in a question between himself and other shareholders – Anglo American Brush Corporation Ltd. v. Scottish Brush Co. Ltd. (1882) 9 R. 972.
PETITION FOR WINDING UP.
An application that the company be wound-up by the court shall be by petition and can be presented by –
1. The company itself.
2. A creditor, including a contingent or prospective creditor of the company.
3. The official receiver.
4. A contributory (which includes past and present members). See section 92 of CAMA.
5. A trustee in bankruptcy to, or a personal representative of a creditor or contributory.
6. The Corporate Affairs Commission.
7. A receiver if authorised by the instrument under which he was appointed.
8. All or any of those parties, together or separately – section 410(a) – (h) of CAMA.
PROCEDURE FOR WINDING-UP BY THE COURT.
An application shall be made to the court for the winding up of a company which must be in the form of a petition. Every petition shall be in any of the Forms 2, 3, or 4 in the Appendix to the Rules with such variations as the circumstances may require – Rule 15 of the Winding-Up Rules, 1983. The following is necessary –
1. Filing of the Petition for winding-up – Rule 16 of the Winding-Up Rules.
2. Filing of the Affidavit verifying the Petition – Rule 18 of the Winding-Up Rules.
3. Service of the Petition and Affidavit of Service – Rule 17 of the Winding-Up Rules.
4. Advertisement of the Petition – Rule 19 of the Winding-Up Rules.
5. Filing of Memorandum of Compliance.
6. Filing of Notice of Intention to Appear – Rule 23 of the Winding-Up Rules.
7. Appointment of Provisional Liquidator – Rule 21 of the Winding-Up Rules.
8. Filing of Affidavit in Opposition and Affidavit in Reply – Rule 25 of the Winding-Up Rules.
9. Summons for Security for Costs.
10. Filing of List of Persons Appearing – Rule 24 of the Winding-Up Rules.
11. Hearing of Petition – Rule 22 of the Winding-Up Rules.
12. Making of winding-up order – section 415 of CAMA.
13. Service of winding-up order – section 416 of CAMA.
14. Delivery of Statement of affairs.
15. Official Receiver’s Preliminary Report – section 421 of CAMA.
16. First Meeting of Creditors and Contributories – section 422(3)(c) of CAMA.
17. Appointment of Liquidator – section 422 of CAMA.
APPOINTMENT OF LIQUIDATOR.
The court may appoint a liquidator for the purpose of conducting the proceedings in winding-up a company – section 422(1) of CAMA. On the making up of a winding-up order, if no liquidator is appointed, the official receiver shall by virtue of his office become the liquidator – section 422(3)(b) of CAMA.
The liquidator must, within fourteen (14) days after his appointment publish in the Gazette and in two (2) daily newspapers and deliver to the commission for registration a notice of his appointment – section 491 of CAMA.
DISQUALIFICATION FOR APPOINTMENT AS LIQUIDATOR.
The following are persons who are incompetent to be appointed or to act as liquidator in a winding-up by the court –
2. An unsound mind.
3. A body corporate.
4. An undischarged bankrupt.
5. Any director of the company under liquidation.
6. Any person convicted of any offence involving fraud, dishonesty, official corruption or moral turpitude and in respect of whom there is a subsisting order to restraint fraudulent persons – section 509(1) of CAMA.
Any appointment made in contravention of the above shall be void – section 509(2) of CAMA.
POWERS OF A LIQUIDATOR.
The liquidator, in a winding-up by court, exercises some powers, but the powers must be sanctioned by the court or the committee of inspection – section 425(1) of CAMA. These powers include –
1. The power to bring or defend any action in the name and on behalf of the company;
2. The power to carry on the business of the company as may be necessary for the purpose of the beneficial winding-up;
3. The power to appoint relevant professionals or legal practitioner to assist him in the performance of his duties;
4. The power to pay all classes of creditors in full;
5. The power to make any compromise or arrangement with creditors or persons claiming to be creditors; e.
6. The power to compromise all calls, debts and liabilities capable of resulting in debts.
In Agbaoye v. Chief Federal Land Officer (1976) 2 FCRC 33, it was held that a liquidator must obtain a sanction (consent) from either the court or committee of inspection before instituting or defending an action in the name and on behalf of the company.
There are also further powers of a liquidator which are provided under section 425(2) of CAMA –
1. The power to sell the property of the company by public auction or private arrangement.
2. The power to do all acts and to execute in the name and on behalf of the company, all deeds, receipts and other documents.
3. The power to prove, rank and claim in the bankruptcy, insolvency or sequestration of any contributory.
4. The power to draw, accept, make and indorse any bill of exchange or promissory note in the name and on behalf of the company.
5. The power to raise any money required on the security of the assets of the company.
6. The power to appoint an agent to do any business which the liquidator is unable to do himself.
When the winding-up is completed, the liquidator may apply to the court which then makes a dissolution order; the company shall be dissolved accordingly from the time of the order – section 454(1) of CAMA.
The liquidator is required to send a copy within fourteen (14) days (from the day the order was made) to the Commission who shall make in its books a minute of the dissolution of the company – section 454(2) of CAMA. Failure to comply with the provision by the liquidator will attract a fine of N25 (Twenty five naira) daily of the breach – section 454(3) of CAMA.
Once a company is fully wound-up and dissolved, it loses its legal entity and ceases to exist in law – CBCL (Nig.) Ltd. v. Okoli (2009) 5 NWLR (Pt. 1135) 446.
Under section 454(1) and (2), a company dies once the court orders the dissolution of the company. However, the revocation of the license of the company and order of court winding-up same does not indicate the death of a company. The appointment of a liquidator is for the purpose of ensuring the smooth burial of the company – Progress Bank (Nig.) Plc. v. O. K Contact Point Ltd. (2008) 1 NWLR (Pt. 1069) 514 at 531 – 532; Nzon v. Jinadu (1987) 1 NWLR (Pt. 51) 533; C. C.B (Nig.) Ltd. v. Onwuchekwa (2000) 3 NWLR (Pt. 647) 65.
A company may be voluntarily wound-up under two situations namely –
1. When the period fixed for the duration of the company by the articles expires or an event provided for occurs, on occurrence of which the articles for the dissolution of the company occurs and the company has passed a resolution that the company be wound-up voluntarily; e.
2. Where the court has passed a special resolution that the company be wound-up voluntarily – section 457 of CAMA.
Where a resolution has been passed for voluntary winding-up, a notice of the resolution shall be given to the public and the Commission within fourteen (14) days of the passing of the resolution advertisement in the Gazette or two daily newspapers – section 458(1) of CAMA. Default in the publication of the notice as required attracts a penalty against the company and every officer of the company in default – section 458(2) of CAMA.
In a voluntary winding-up, the process is deemed to have commenced when the resolution for winding-up is passed – section 459 of CAMA. The effect is that the company shall immediately cease to do business except a business that facilitates a beneficial winding-up of the company – section 460 of CAMA.
TYPES OF VOLUNTARY WINDING-UP.
Voluntary winding-up is of two types, namely –
1. Members voluntary winding-up; e.
2. Creditors voluntary winding-up.
MEMBERS VOLUNTARY WINDING-UP.
This is where a statutory declaration of solvency shall be made by the directors to the effect that they have made a full inquiry into the affairs of the company and have formed an opinion that the company is able to pay its debt in full within a period not exceeding twelve (12) months from the commencement of the winding-up process – section 462(1) of CAMA.
PROCEDURE FOR MEMBERS’ VOLUNTARY WINDING-UP.
1. Declaration of solvency – For the declaration of solvency to be effective under the Act, it must be made within five (5) weeks immediately preceding the date of the passing of the resolution for voluntary winding-up and must be delivered to the Corporate Affairs Commission for registration. It must also embody a statement of the company’s assets and liabilities as at the latest date before the making of the declaration – section 462(2) of CAMA.
2. Special resolution – A general meeting of the members of the company shall be called to pass a special resolution that the company be wound up – section 457(b) of CAMA.
3. Appointment of liquidator – At the general meeting, members shall also pass a special resolution appointing a liquidator. Once a liquidator is appointed, the directors will cease to act – section 464 of CAMA.
4. Notice of special resolution to the Corporate Affairs Commission – A notice of special resolution shall be given to the public and the Commission within fourteen (14) days of the passing of the resolution advertisement in the Gazette or two daily newspapers – section 458(1) of CAMA.
5. Notice of appointment of liquidator to the Corporate Affairs Commission – A notice of appointment of the liquidator shall be given to the public and the Commission within fourteen (14) days of the passing of the resolution advertisement in the Gazette or two daily newspapers – section 458(1) of CAMA.
6. Liquidator shall call a meeting each year – In the event of the winding-up continuing for more than one (1) year, the liquidator shall summon a general meeting of the company at the end of the first year from the commencement of the winding-up, and of each subsequent year and shall lay before the meeting an account of the conduct of the winding up – section 467(1) of CAMA.
7. Final meeting – As soon as the affairs of the company are fully wound-up, the liquidator shall prepare an account of the winding-up, showing how the winding-up has been conducted and thereupon the liquidator shall call a general meeting of the company for the purpose of laying the account before the meeting – section 468(1) of CAMA.
8. Dissolution – The Commission on receiving the account and, in respect of the meeting of the creditors and the company shall register them, and on the expiration of three (3) months from the registration, thereof, the company shall be deemed to be dissolved – – section 468(4) of CAMA.
CREDITORS’ VOLUNTARY WINDING-UP.
This is where the directors are not able to make a declaration of solvency. The directors must call the meeting of all its creditors – section 471(1) of CAMA. At the meeting, the directors must place before the creditors’ meeting a full statement of the company’s affairs together with a list of their claims – section 471(3)(a) of CAMA. A liquidator must be appointed and on the appointment of the liquidator, all the powers of the directors shall cease forthwith.
PROCEDURE FOR CREDITORS’ VOLUNTARY WINDING-UP.
1. Meeting of company and creditors – The company shall cause a meeting of the creditors of the company to be summoned for the day, or the day next following the day, on which there is to be held the meeting at which the resolution for voluntary winding-up is to be proposed, and shall cause the notice of the said meeting of creditors to be sent to the creditors simultaneously with the sending of the notices of the meeting of the company – section 472(1) of CAMA.
2. Notice of meeting – The notice is to be published in the Gazette and two newspapers; the publication of the notice is tantamount to a declaration of insolvency – section 472(2) of CAMA.
3. Chairman of the creditors’ meeting – The meeting of the creditors is to be presided over by one of the directors who shall be appointed from one of them – section 472(3) of CAMA.
4. Special resolution to wind-up – If the meeting of the company at which the resolution for voluntary winding-up is to be proposed is adjourned and the resolution is passed at an adjourned meeting, any resolution passed at the meeting of the creditors shall have effect as if it had been passed immediately after the passing of the resolution for winding-up of the company – section 472(5) of CAMA.
5. Appointment of liquidator – The creditors and the company at their respective meetings may nominate (that is, appoint) a person to be a liquidator for the purpose of winding-up of the company, and if the creditor and the company nominate different persons, the person nominated by the creditors shall prevail and such person shall be the liquidator. However, a director, member or the company may apply tom court for an order that the person nominated by the company shall be the liquidator – section 473 of CAMA.
6. Notice to the Corporate Affairs Commission – The resolution to wind-up the company and appointment of liquidator are given to the Corporate Affairs Commission and published in the Gazette and two newspapers within fourteen (14) days.
7. Liquidator call meeting each year – In the event of the winding-up continuing for more than one year, the liquidator shall summon a general meeting of the company and a meeting of the creditors at the end of each of the first year from the commencement of the winding-up, and of each subsequent year and shall lay before the meeting an account of the conduct of the winding-up of the company – section 477(1) of CAMA.
8. Final meeting – As soon as the affairs of the company are fully wound-up, the liquidator shall prepare an account of the winding-up showing how the winding-up has been conducted and thereupon, the liquidator shall call a general meeting of the company and a meeting of the creditors for the purpose of laying the account before the meetings and any explanation – section 478(1) of CAMA.
9. Dissolution – The commission on receiving the account, and in respect of the meeting of the creditors, and the company shall register them, and on the expiration of three (3) months from the date of registration thereof, the company shall be deemed to be dissolved – section 478(4) of CAMA.
COMMITTEE OF INSPECTION.
Under section 474(1) of CAMA, it is provided that the creditors at their meeting, if they think fit, shall appoint a committee of inspection consisting of not more than five (5) persons, and if such a committee is appointed, the company may at a general meeting appoint such number of persons as they think fit not exceeding five (5) persons to join as members of the committee of inspection. However, the creditors, may, if they think fit, resolve that all or any person appointed by the company shall not be members of the committee of inspection, and if the creditors so resolve, the persons mentioned in the resolution shall not unless the court otherwise direct, be qualified to act as members of the committee.
CONSEQUENCES OF A VOLUNTARY WINDING-UP.
The consequences of a voluntary winding-up are –
1. The company shall cease to carry on its business except so far as may be required for the beneficial winding-up thereof.
2. The corporate status and corporate powers of the company shall however continue notwithstanding anything to the contrary in its articles, until it is dissolved – section 460 of CAMA.
3. Any transfer of shares not made with the sanction or approval of the liquidator shall be void.
4. Any alteration in the status of members of the company made after the commencement of the voluntary winding-up shall also be void – section 461 of CAMA.
WINDING-UP SUBJECT TO THE SUPERVISION OF THE COURT.
This is provided for under sections 486 to 490 of CAMA. Where the company has passed a resolution for voluntary winding-up, the court may make an order that the voluntary winding-up be subject to the supervision of the court on the strength of a petition or application made to the court – section 486 of CAMA. The court’s order shall be with such liberty for creditors, contributories, or others to apply to the court on such terms and conditions as the court thinks fit.
A winding-up subject to the supervision of the court is deemed to be a winding-up by the court for the purposes of sections 413 and 414 – section 488 of CAMA. Under this type of winding-up, the court may appoint a liquidator by the order or by a subsequent order – section 489(1) of CAMA. The liquidator is usually in addition to the one appointed by the directors and their powers are the same – section 489(2) of CAMA.
The court is also empowered to remove any liquidator so appointed by the court and may fill any vacancy, occasioned by the removal, resignation or death – section 489(3) of CAMA.
EFFECT OF SUPERVISION ORDER.
An order for winding-up subject to the supervision of the court has the following effects –
1. The liquidator so appointed is free to exercise all his powers without the sanction or intervention of the court in the same manner as if the company is being wound-up voluntarily – section 490(1) of CAMA.
2. The liquidator shall not exercise the powers specified in paragraphs (d), (e) and (f) of section 425(1) of CAMA, that is, the power to pay all classes of creditors in full; the power to make any compromise or arrangement with creditors or persons claiming to be creditors; and the power to compromise all calls, debts and liabilities capable of resulting in debts respectively, except with the sanction of the court – proviso to section 490(1) of CAMA.
3. A winding-up subject to the supervision of the court does not amount to winding-up by the court for the purpose of the provisions of CAMA as specified in Schedule 12 – section 490(2) of CAMA.
Subject to the provisions contained in Schedule 12, an order for a winding-up subject to supervision of the court shall for all purposes be an order for winding-up by the court.
PROVISIONS APPLICABLE TO EVERY WINDING-UP.
1. Section 491 of CAMA – notice of appointment of liquidator.
2. Section 492 of CAMA – proof of debts and ranking of claims.
3. Section 493 of CAMA – application of the bankruptcy rules to insolvent companies.
4. Section 494 of CAMA – preferential payments.
5. Section 495 of CAMA – fraudulent preference.
6. Section 496 of CAMA – liabilities and rights of certain fraudulent preferred persons.
7. Section 498 of CAMA – effect of floating charge.
8. Section 499 of CAMA – disclaimer of onerous property.
9. Section 500 of CAMA – restrictions of rights of creditors as to execution.
10. Section 501 of CAMA – duty of sheriff as to goods taken in execution.
11. Section 502 of CAMA – offences by officers.
12. Section 503 of CAMA – falsification of books.
13. Section 504 of CAMA – frauds by officer.
14. Section 505 of CAMA – no proper accounts.
15. Section 506 of CAMA – fraudulent trading.
16. Section 507 of CAMA – misfeasance summons.
17. Sections 508 of CAMA – prosecution of delinquent officers and members.
18. Sections 509 – 518 of CAMA – supplementary provisions.
19. Sections 519 – 523 of CAMA – supplementary power of court.
20. Sections 524 – 526 of CAMA – dissolution provisions.
21. Sections 527 – 529 of CAMA – central accounts.
22. Section 530 of CAMA – returns by officers of court.
23. Section 531 of CAMA – annual accounts of company winding-up and disposal.
MAJOR OFFICERS IN LIQUIDATION AND INSOLVENCY OFFICIAL RECEIVER.
The Deputy Chief Registrar of the Federal High Court or any other Officer designated for the purpose by the Chief Judge of that Court is the Official Receiver – section 419 of CAMA. His duty is to receive the Statement of Affairs of the company and to collate information about the company e. g. the capital, assets and whether there is need for further enquiry concerning the promotion, formation or failure of the company – section 421 of CAMA. He becomes the liquidator when the winding order is made in a compulsory winding up until the appointment of a liquidator – section 422(3)(b) of CAMA, and acts as such whenever there is a vacancy – section 422(1) of CAMA.
A liquidator is a person who is appointed by the company or the Court to wind-up the affairs of a company and to distribute its assets, if any, among creditors and contributories in accordance with the articles. He represents the interests of all creditors, especially the unsecured creditors. Upon his appointment, all the powers of the directors cease – section 422(9) of CAMA.
A receiver is appointed by secured creditors under power contained in agreement between the company and the creditors. Accordingly he represents the interest of the creditors and his main concern is to release the assets of the company and payoff the debt due to the creditors. When satisfactory discharge of his duty requires that he manages the affairs of the company, he is called a “Receiver and Manager.”
A receiver is just to take over the business of the company whilst a manager is to take up the company and try to turn it around to manage it with the aim of generating profits for running the company. A manager has the duty of running the company as a going concern while a receiver does not.
Where the Official Receiver becomes the liquidator of a company, he may apply to the court for an order appointing a Special Manager with such power, including those of Receiver or Manager as the court may invest on him – section 436 of CAMA. The Official Receiver himself may be appointed Special Manager.
1. Rule 14(1) of Rules of Professional Conduct (RPC), 2004 – A lawyer shall dedicate and devote his time to his client, to act in a manner consistent with the best interests of the client.
2. Rule 16 of RPC – A lawyer shall represent his client competently.
3. Rule 31(5) of RPC – except as provided by a rule or order of court, a lawyer shall not deliver to the judge any letter, memorandum, brief or other written communication without concurrently delivering a copy to the opposing lawyer.
(sample of winding-up resolution)
THAT it has been proved to the satisfaction of this meeting that the company cannot by reason of its liabilities continue its business, and that it is advisable to wind-up the same, and accordingly that the company be wound-up voluntarily and that ……………………….. (name of proposed liquidator) of ……………………………. (address) be nominated as liquidator for the purpose of such winding-up.
(sample of declaration of solvency)
IN THE FEDERAL HIGH COURT.
HOLDING AT ABUJA.
DECLARATION OF SOLVENCY.
BROUGHT PURSUANT TO SECTION 462 OF THE COMPANIES AND ALLIED MATTERS ACT 2004; FORM 82 OF THE COMPANIES WINDING-UP RULES 2001; AND THE INHERENT JURISDICTION OF THE COURT.
We ……………………………. of …………………………….. being all the directors/majority of the directors of ………………………………… Limited, do solemnly and sincerely declare that we have made a full enquiry into the affairs of this company, and that, having so done, we have formed the opinion that this company will be able to pay its debts in full within a period of …………………………. months from the commencement of the winding-up, and we append a statement of the company’s asset and liabilities as at …………………. 20……… being the latest practicable date before the making of this declaration. And we make this solemn declaration, conscientiously believing the same to be true, and by virtue of the Oaths Act, 2004.
COMMISSIONER OF OATHS or NOTARY PUBLIC.
(sample of petition for winding-up)
IN THE FEDERAL HIGH COURT.
HOLDING AT ABUJA.
PETITION FOR WINDING-UP.
BROUGHT PURSUANT TO SECTION 410 OF THE COMPANIES AND ALLIED MATTERS ACT, CAP C20, LFN 2004; RULE 15 OF THE COMPANIES WINDING-UP RULES 2001; AND THE INHERENT JURISDICTION OF THE COURT.
4. The objects for which the company was established are as follows –
And other objects set forth in the memorandum of association thereof.
5. (state the facts on which the petitioner relies under this paragraph).
6. The petitioner therefore humbly pray as follows –
a) That the company may be wound-up by the Court under the provisions of the Companies and Allied Matters Act.
b) Or that such order be made in the premises as shall be just.
WINDING-UP OF BUSINESS AND NON-BUSINESS ORGANIZATION II (PARTNERSHIP, INCORPORATED TRUSTEE)
Partnership is the relationship which subsists between persons carrying on business in common with a view of profit – section 3(1) of Partnership Law of Lagos Cap. PI 2009.
According to section 1(1) of Partnership Act, 1890, partnership is the relationship which subsists between persons carrying on a business in common with making a view. That is, it involves not less than two persons to start a partnership but not more than twenty (20) persons. A partnership of more than 20 persons will, as a general rule, be an illegal association – Akinlose v. A. I. T. Co. Ltd (1961) WNLR 503.
It lacks legal capacity and the partners are personally liable for the debts and liabilities of the partnership unless it is a limited partnership. The formation and terms may be evidenced by partnership articles under seal or by mere agreement which may be written or oral – Ojemen v. Okoafuda (1977) NCLR 192 at 197 – 198.
A partnership does not have perpetual succession like incorporated companies. Equality is the rule in partnership unless otherwise expressly stated. Though, every partner is also jointly and severally liable for the liability of the firm because there is no separate legal personality.
Partnership is based largely on the agreement of the parties. As such, there are several essential elements of partnership which are agreement, contribution to capital, and sharing of profit.
Thus, an association in existence must have 3 (three) characteristics before it can qualify as a partnership. Esses são -
1. There must be a business – Henshaw v. Roberts (1966) NNLR 158; Uredi v. Dada (1988) 1 NWLR (Pt. 69) 237.
2. The business must be carried on in common by two or more persons; e.
3. The intention must be to make profit – Ugorji v. Uzuokwu (1972) 1 All NLR (Pt. 1) 289.
Finally, every partner has a right to participate in the management of the firm except a sleeping partner (that is, one who is not active in the management of partnership) – section 5 and 24(5) of the Partnership Act. And, a partnership is not limited or circumcised by the ultra vires doctrine as they are empowered to undertake any kind of legitimate business of their choice.
DISSOLUTION OF PARTNERSHIP.
This can be caused by any of the partners in the following ways –
1. By act of the parties. This can be done either –
(i) By giving notice of intention to dissolve the partnership if provided for in the agreement – section 33(1)(c) of Partnership Law of Lagos; ou.
(ii) By reason of ill-health making a partner permanently incapacitated and the partnership not being able to continue; ou.
(iii) Where a partner creates a charge on his or her share of the partnership property – section 34(b) of Partnership Law of Lagos; ou.
(iv) By providing for a clause like power of expulsion in the agreement.
2. By operation of law if –
(i) It is for a fixed term at the expiration of the term – section 33(1) of Partnership Law of Lagos.
(ii) It is for an undertaking at the performance of the undertaking – Ureli v. Dada (1988) NWLR (Pt. 69) 237.
(iii) It is supervening illegality – section 35 of Partnership Law of Lagos.
(iv) It is for death or bankruptcy of a partner – section 34(a) of Partnership Law of Lagos.
3. By order of Court, in which a partner can apply that the partnership be dissolved based on –
(i) Mental ground; ou.
(ii) Breach of agreement; ou.
(iii) Permanent incapacity; ou.
(iv) Carrying on the business at a loss or on any equitable ground – section 36 of Partnership Law of Lagos.
1. Notice of requirement, dissolution, or expulsion is served on another partner referring to the appropriate clause in the partnership agreement.
2. The partners prepare the dissolution agreement.
3. Notice of dissolution is given to Corporate Affairs Commission, if registered.
4. Notice of dissolution is published in the gazette and national newspapers.
5. Notice of dissolution is given to clients or customers.
These are names registered by individuals and partners when carrying out business. Such business names are to be registered with the Companies and Allied Matters Act, Cap C 20 LFN 2004.
The registration of business names is administered by the Corporate Affairs Commission. Section 570 of CAMA provides that “there shall be established in each State of the Federation, a register office of business names where there shall be kept a register in the prescribed form in which shall be entered such matters as are required by this Act or any regulation made thereunder to be entered in it.”
DISSOLUTION OF BUSINESS NAMES.
The Registrar has power to remove a business name from the register if the firm, individual or company is no longer carrying on business under the following circumstances –
1. If the firm, company or individual ceases to carry on business in the business name.
2. A notice shall be delivered or posted to the Registrar within three (3) months after the business has ceased to be carried on, stating that the firm or individual has ceased to carry on business – section 578(1) of CAMA.
3. Upon delivery of the notice to the Registrar, the Registrar may remove the firm, company or individual from the register.
4. If the Registrar has reasonable cause to believe that the firm, company or individual is not carrying on business, the Registrar may send a notice to the firm, company or individual enquiring whether or not the business is being carried on. Where there is no response within two (2) months, or the answer to this is that there is no business being carried on, the Registrar may remove the business name from the Register – section 578(3) and (4) of CAMA.
This is provided for under PART ‘C’ of CAMA. It is any class of persons bound together by custom, kinship, nationality or any association for educational, literary, cultural or charitable purpose – section 590 of CAMA. It must not be profit oriented.
From the date of registration, the trustee(s) shall become a body corporate by the name prescribed in the certificate and shall have perpetual succession, common seal, legal capacity, and power to hold and dispose land – section 596(1) of CAMA. The common seal must have a device approved by the Commission, and any instrument to which the seal is affixed in apparent compliance with the regulation for the use of the seal is binding on the corporate body notwithstanding any defect or circumstance affecting the execution of such instrument – section 604 of CAMA. The corporate body may contract in the same form as an individual – section 605 of CAMA. Though, no portion of the property may be paid or transferred in any form to any of the members of the association – section 603(1); except as bona fide and reasonable payment for services – section 608(5) of CAMA.
The name or objects of the corporation may be altered or changed – section 597 of CAMA. the trustees shall apply to the commission in the prescribed form setting out the alterations desired and attaching a copy of the resolution approving the change and duly certified by the trustees. If satisfied that the proposed change is prima facie lawful, the committee shall cause it to be published in two daily newspapers in the same way as an application for incorporation, calling for objections. It shall also direct the corporation to display a notice for the proposed change or alteration in a conspicuous place at the corporation’s office and any such place where a majority of members are likely to see it for a period of at least 28 days – section 597(2) of CAMA. If the Commission assents to the application, the alteration shall be made and in the case of a change of name, the Commission shall issue a new certificate in the new name in place of the former certificate – section 597(4) of CAMA.
A trustee must not be –
2. A person of unsound mind,
3. An undischarged bankrupt, or.
4. A person who has been convicted of an offence involving fraud or dishonesty within five years of his proposed appointment – section 592(1) of CAMA.
The trustees of a corporation are required to deliver to the Commission an annual return showing, inter alia, the particulars of the corporation, that is, the name, address and occupations of the trustees, and members of council or governing body, etc. The return must be submitted not earlier than 30th June or later than 31st December of each year, but no return is required for the year in which trustees are incorporated – section 607(1) of CAMA.
The corporation may be dissolved by the court on a petition which may be brought for that purpose by the governing council or body, or by one or more of the trustees, or by members of the association constituting not less than fifty percent (50%) of the total membership or by the commission – section 608(1) of CAMA. It shall be dissolved if the aims and objectives have been fully realized and there is no longer need for its existence, or that its aims and objectives have become illegal or otherwise contrary to public policy, or that it is form for a specified period which has elapsed, or that it is just and equitable in all the circumstances that it should be dissolved – section 608(2) of CAMA.
After dissolution of the corporation, and satisfaction of its debts and liabilities, any remaining property of the corporation cannot be distributed to members of the association, but must be given or transferred to some other institutions having objects similar to those of the body – section 608(4) of CAMA. In cases where the property is not transferred to such institutions, it may be transferred to some charitable object – section 608(5) of CAMA.
DISSOLUTION OF INCORPORATED TRUSTEE.
This may be dissolved through the following –
1. Dissolved by the Federal High Court upon a petition brought for the purpose of dissolution by any of the following persons –
a) The governing body or council; ou.
b) One or more trustees; ou.
c) Members of the association constituting not less than fifty per cent (50%) of the total membership; ou.
d) The commission – section 608(1) of CAMA.
2. At the hearing of the petition, all persons whose interest or rights may be affected, in the opinion of the court, shall be put on notice.
3. If there remains after the satisfaction of all its debts and liabilities, any property whatsoever, such shall not be paid or distributed among the members of the association but shall be given or transferred to other institutions having similar objects to the objects of the body, such institutions to be determined by the members of the association at or before the time of dissolution or be transferred to some charitable object – section 608(3),(4) and (5) of CAMA.
The grounds upon which an application for dissolution can be done are –
1. That the aims and objects for which it was established have been fully realised and no useful purpose would be served by keeping the corporation alive;
2. That the body corporate is formed to exist for a specified period and that period has expired and it is not necessary for it to continue to exist;
3. That all the aims and objects of the association have become illegal or otherwise contrary to public policy; e.
4. That it is just and equitable in all the circumstance that the body corporate be dissolved – section 608(2) of CAMA.
1. Rule 14(1) of Rules of Professional Conduct (RPC), 2004 – A lawyer shall dedicate and devote his time to his client, to act in a manner consistent with the best interests of the client.
2. Rule 16 of RPC – A lawyer shall represent his client competently.
(sample draft on notice of dissolution)
NOTICE OF DISSOLUTION.
I hereby give you notice dissolving the partnership subsisting between us under the said agreement (or deed).
I hereby exercise my option to purchase on the date of dissolution your share in the partnership on the terms therein stipulated.

Trading in option on individual stocks in nse commenced on

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