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Home Opinion & Analysis Investogist Business Saturday

Barr. Amaka discusses Nigeria’s Business Laws and Tax System: What every Business Owner should Know: Part 3

On Investogist Business Saturday Forum

Tuesday, 5 May 2020, 4:30 am
in Investogist Business Saturday, Opinion & Analysis
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Barr. Amaka discusses Nigeria’s Business Laws and Tax System: What every Business Owner should Know: Part 3
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Hi everyone. I am Barr. Amaka Obizolu, the principal partner of Amaka Obizolu & Co., today we continue our discussion on Nigerian Business Law and Tax System.

HOW TO BECOME A MEMBER OF A COMAPNY
An investor who desires to become a member of a company can through subscription, allotment, purchase and transfer, transmission (inheritance). In all he must agree in writing to be a member and his name entered in the register of members.

Note that upon incorporation, your copies of Memorandum, Articles of association, Statement of authorized share capital must be stamped as that marks the creation of a “contractual relationship under seal” between the company, its members and it’s officers.

One major effect on the certificate of incorporation is that it’s a prima facie evidence that all conditions precedent to the registration of a company has been fulfilled, therefore where the certificate of incorporation of a company is lost, the company may apply to the commission for a certified true copy of the certificate by making the following available:

  1. Cover letter on the company letter head
  2. Affidavit of loss
  3. Police report
  4. Resolution of the director to apply for the Certified True Copy
  5. A copy of the Memorandum and Articles (if available).

At this juncture, it is salient to know other major benefits of incorporation of a Limited company. As soon as a company is registered, the company becomes a body corporate, has legal personality, can sue and be sued in its own name, has perpetual succession and as such a common seal.

  • Also read: Barr. Amaka discusses Nigeria’s Business Laws and Tax System: What every Business Owner should Know: Part 1

Who is a promoter in a company? Any person who undertakes to form a company with reference to a given project as to set it going and who takes the necessary steps to accomplish that purpose. As a promoter of a company, it is advisable to ensure a pre-incorporation contract is entered *prior* to the formation of a company, as that agreement remains binding even after the incorporation in order to recover debts, but where there is no such pre-incorporation contract, your action for recovery is in futility.

Some examples of pre-incorporation contracts are payment of promoters expenses, Shareholders agreement, Take over agreement, Formation agreement, Joint venture agreement etc.

  • Read more: Barr. Amaka discusses Nigeria’s Business Laws and Tax System: What every Business Owner should Know: Part 2

Please note that Memorandum and Articles of Association (Memo) and Joint Venture agreement are different, while Memo is an incorporation document, Joint Venture Agreement (JVA) is not, therefore it is very important that the terms of the JVA are incorporated into the Memo in order that the members of the company have strong desire to perform the terms of the JVA.

On statutory filings – There are days within which every company is expected to carry out filings to avoid being penalized, and they includes:

  1. Every resolution is filed within 15 days
  2. Court orders are filed within 14 days from the day the order is pronounced
  3. Change of directors or secretary is filed  within 14 days
  4. Registration of charges is done within 90 days
  5. Return of allotment of shares is done within 1 month of any allotment.
  6. Annual returns  is filed within 42 days of the Annual General Meeting (AGM)
  7. Appointment of auditors is done within one week
  8. Removal of auditors is filed within 14 days.

The effect of default is any if the above is penalty fee, or in some cases the company can apply to court for an extension of time within which to carry out the filling.

Please note that under the Act, all companies are free to be re-registered either from limited to unlimited company, private to public company, public to private etc., but a limited liability once re-registered as unlimited cannot be re-registered back as a limited company.  Same with an unlimited company which cannot be re-registered as a public or guarantee company unless it first re-registered as private company then to public company.

  • Read further: J. Crew becomes the first Big Retailer to Bow to Coronavirus in US – Declares Bankruptcy

Note that there are steps for the above re-registrations which cannot be discussed here for the purpose of time.

Also note that after every re-registration, the commission will issue a new certificate of incorporation, and the company is expected to reflect the changes in the letter heads, notices and seals.

As provided in Section 45 of the Act, the following alterations can be done by the company; Change of object clause, Change of name, increase in share capital, reduction in share capital and alteration of articles.  Before doing any of the above as contained in your memo, the company secretary must first study the articles to ensure that the company has the power to do so, otherwise the article should be altered first.

  • Read more: N132.69 Billion Staked in March as Domestic Investors turn to the Stock Investment

Be advised here that after a special resolution for the alteration has been passed, SC 46(1)(2) empowers dissident members holding a minimum of 15% of the  nominal value of the issued share capital of the company who voted against the resolution to apply to court by way of petition within 28 days for it’s cancellation.

Do you know that you have a right as the first registered company to raise an objection restricting the use of a name bearing the same registered name with yours? Oh Yes, and how? By simply instructing your solicitor to make a letter of objection to the commission within 6 months of incorporation of the new company at the federal high court for passing off.

Join us for the fourth instalment in the following day to discuss “How to increase the company share capital”.

Presented by:

Amaka C. Obizolu Mrs. (LL.B, BL)

+234 803 5404 780

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