Nigeria

4 Chapter Corporate Law

    • Private Limited Company (LTD)

      1. Private Limited Company (LTD):

      It is separated from the shareholders. It is the most common registered form of business. And because of separation of possessions the shareholders risk is reduced to only the amount of money they have invested in the company and any shares not paid yet. This type of company has very few restrictions, at least 25% percent of the authorized shares must be allotted at incorporation. The total number of members in a private limited company must not exceed 50, (not including those who are bona fide in the employment of the company). The authorized share capital shall not be less than 10,000.


      1. Public Limited Company (PLC):

      In this type of company, it is possible to sell shares to the public and can be quoted in the stock exchange. It must have at least 500.000 authorized share capital and the subscribers must take up at least 25 % of the authorized share capital.


      1. Guarantee Company (non-profit):

      Is not a profit company and is mostly formed by charitable organizations and do not have share capital, and the members do not own the company and they do not receive profits. Profits are used to cover operating costs.


      1. Unlimited Companies:

      This type of company has no limit on the liability of its members and must be registered with a share capital from the date for the Decree of 1990. (If the company is not registered with a share capital then the memorandum must be altered so that it becomes an unlimited company)

    • General Shareholders Meeting.

       

      2.1.1.     Obligation and rights for shareholders.


      Rights

      According to the Companies & Allied Matters Act of 1990 (CAMA) some of the shareholders rights are the following:

      -Every shareholder has the right to attend any general meeting of the company in accordance with the provisions set by this Act on section 81.

      -The right to speak and vote or any resolution before the meeting (In accordance with the provision of section 81, as well)

      -Shareholders have the right to vote in person or in absentia, and equal effect shall be given to votes whether cast in person or in absentia.

      -The right to receive accurate and timely information about general meetings.

      -Opportunity to ask for questions from the board and to place items on the agenda at the general meetings.

      -The right to dividends (Section 385)

      -The right to receive a copy of the memorandum and articles.


      Obligations.

      Shareholders must attend the annual general meeting and exercise their rights.

      -Taking interest in the implementation of the code of corporate governance.

      -Take account of the company's interests.


      2.1.2.     A process for having GSM.

      Only persons with authority can convene the meeting, the board of directors, two or more shareholders holding not less than 10% of the issued share capital of the company. The issuance of notice of the meeting is needed for the meeting to be considered valid. The notice must include, the name, type of meeting, place of meeting, date and time of the meeting and the general nature of the business.

      There are three types of Shareholders meetings, such as the Annual General Meetings, Extraordinary General Meeting, Class Meeting.

      2.1.3.     Requirement for deciding.

      A quorum for a meeting is the minimum number of persons entitled to attend the meeting that must be present for the meeting to be valid. It must be one-third of the total number of members of the company or 25 members present in person or by proxy, provided that where the number of members is not multiple of three, then the number nearest to one third, and where the number of members is 6 or less, the quorum shall be two numbers.


      2.1.4.     Minutes.

      Minutes of the meeting are required to be duly signed, with copies, and appointment of trustees and authorization of the application, showing the people present and the votes scored.


    • Board of Directors

       

      The law recommends that there be at least five members of the board with both executive and non-executive directors. The board of directors is responsible for representing shareholders’ interest and they are bound to exercise their powers in the best interest of the company.

      2.2.1.     Requirement for director.

      The Law is not very specific about directors’ requirements, the law only indicates that companies must specify the structure, role and powers of its directors in the articles of association.

      2.2.2.     Election and Dismissal.

      The first directors are appointed by the subscribers to the memorandum and articles of association, but afterwards the directors are chosen by the general meetings, by law there are no specific indications on how to choose directors


    • Corporate Auditor

       

      2.3.1.     Number of auditors.

      Law requires all public companies to establish an Audit Committee with an equal number of directors and representatives of the shareholders, a maximum of six. Any member can nominate a shareholder as a member of the audit committee given notice in writing of such nomination to the secretary of the company at least 21 days before the annual general meeting.


      2.3.2.     Obligation of auditor.

      The committee is in charge of making sure that the accounting and reporting is done properly and done accordingly with the law. The auditors must review the scope and planning of the audit requirements and review the findings on management matters with the external auditor and the government offices in charge of auditing.  


    • Kinds of Shares

       

      3.1. Kinds of Shares.


      1-Preference shares: these shares give the holder priority over other classes of shareholders, with dividends. These shares are given to members that do not want to participate into any risk of loss.

      2-Ordinary Shares: the owners of this types of shares have more financial risks, often considered as the equity shares of the company. These shares do not have any special rights or privileges over other shares, this share gives only voting powers.

      3-Deferred Shares: These shares are held by the founders of the company. With this shares the payment of dividend and return on capital ae deferred until payment has been completed with other types of shares.


      3.2. Dividend.

      A company can declare on the general meeting, dividends of any year, only by recommendation of the directors.  The general meeting can decrease the number of dividends recommended by the directors but has no power to increase them. Dividends must be payable to the shareholders only out of the distributable profits of the company.

      3.3. Capital increase.

      The General meeting oversees authorizing the increase, it can be done within 15 days after the resolution. The Commission must receive notice of this increase.


      3.4. Capital decrease.

      Decrease of share capital is not possible unless is authorized under articles 105 to 111 in the CAMA.


    • Dissolution

       

      Law indicates that when dissolution takes place in a company, all property and rights immediately before its dissolution (including leasehold property but not including property held by the company on trust for any other person) shall, subject and without prejudice to any order which may at any time be deemed to be vested in the State without further assurance, as bona vacantia. All individuals that could be affected by the dissolution shall receive a notice.


    • References

       
       Nigeria, Companies and Allied Matters Act (Chapter 59)

      http://www.wipo.int/wipolex/es/text.jsp?file_id=222458


      How many types of shares can a company have?, by  George Ibenegbu, 2018  https://www.legit.ng/1130834-how-types-shares-a-company.html


      Shareholders Rights and responsibilities, Research and Market Development Department, Securities and exchange commission,.

      http://proshareng.com/admin/upload/reports/2625.pdf