Choice Of Business Organizations And Formation Of Companies

Question 1

What is the statutory requirement for forming a company according to S.18 of CAMA?

Answer 1

Any two or more persons may form and incorporate a company upon fulfilling the statutory requirements.

Question 2

Who were previously permitted to be involved in the registration of companies before the amendment in 2017?

Answer 2

Only accredited professionals: legal practitioners, chartered accountants, and chartered secretaries.

Question 3

What significant change was made in the Companies Regulation 2012 amendment of 2017?

Answer 3

It widened the scope of persons who can file company incorporation documents to include first shareholders and first directors.

Question 4

According to the Federal High Court decision in Nkwocha Ernest v Minister of Industry, Trade and Investment, who can make the statement of compliance?

Answer 4

It remains the exclusive preserve of legal practitioners other than those in the employment of CAC.

Question 5

What are the steps involved in the formation of a company?

Answer 5

• Taking instructions from the promoters
• Preparing the incorporation documents
• Filing the incorporation documents with the Corporate Affairs Commission and obtaining a certificate of incorporation

Question 6

What personal details are required from clients when taking instructions for company formation?

Answer 6

Client’s Name and Personal Details
Nature, object and scope of business
Proposed name of company (with alternative)
Type of company sought to be formed
Desired location of company
Nature of liability of members
Number of members
Age of members
Proposed capital
Mode of Raising Capital
Proposed Directors and particulars
Secretary and particulars
History of mental or legal disability

Question 7

What types of companies can be formed based on liability?

Answer 7

• Limited by shares
• Limited by Guarantee
• Unlimited

Question 8

What is the maximum membership for a private company?

Answer 8

Maximum of 50 excluding employees and ex-employees shareholders.

Question 9

What is the minimum issued share capital for a private company?

Answer 9

Not less than N100,000.

Question 10

What is required of subscribers in the formation of a company?

Answer 10

They must sign the memorandum of association and the articles of association.

Question 11

What is the role of expatriate quota in company formation?

Answer 11

Expatriate employees, including directors, must be covered by expatriate quota.

Question 12

What is stated in the articles of association?

Answer 12

Regulations for the management of the company.

Question 13

What must the memorandum of association state for a company limited by shares?

Answer 13

• Name of the company must end with ‘Limited’
• Registered office in Nigeria
• Objects or business clause
• Status of the company
• Limitation of liability
• Minimum issued share capital

Question 14

What is the purpose of the subscription clause in the memorandum?

Answer 14

Subscribers will write opposite their names the number of shares they take.

Question 15

What is required for a company limited by guarantee?

Answer 15

• Approval of Attorney General of the Federation
• Memorandum and articles of association
• Documents for identification and registration

Question 16

What is the requirement for the signature on the memorandum of association?

Answer 16

Every memorandum must be signed by each subscriber in the presence of at least one witness.

Question 17

What is the significance of section 34 regarding articles of association?

Answer 17

A company shall have articles of association prescribing regulations unless it is a company to which model articles apply.

Question 18

What flexibility does the new act provide for companies regarding articles of association?

Answer 18

Companies are allowed to adopt any of the models prescribed by the Minister.

Question 19

What does section 32 of the Act require regarding articles of association?

Answer 19

It requires the registration of articles of association.

Question 20

Who has the power to prescribe model articles of association under section 33 of the Act?

Answer 20

The Minister of Trade.

Question 21

What is a significant change regarding the adoption of model articles for companies?

Answer 21

Companies are allowed to adopt any of the models prescribed, providing more flexibility.

Question 22

What are the two requirements for articles of association registered by a company?

Answer 22

• Contained in a single document
• Divided into paragraphs numbered consecutively

Question 23

What happens if articles are not registered or do not exclude relevant model articles?

Answer 23

The relevant model articles form part of the company’s articles.

Question 24

List three contents of articles of association as per the regulations.

Answer 24

• Interpretation
• Shares - classes and variation of class rights
• Prohibition of loans or financial assistance to buy shares in the company

Question 25

What section addresses the power of allotment of shares?

Answer 25

Section 171.

Question 26

True or False: The chairman's role is outlined in section 265.

Answer 26

True.

Question 27

What section discusses the duties of directors?

Answer 27

Sections 305-309.

Question 28

Fill in the blank: The payment for stamping is now done online through _______.

Answer 28

[Remita]

Question 29

What must be submitted online to the Commission for company registration?

Answer 29

* Availability Check and Reservation of Name * Application for the Registration of Company * Memorandum and articles of association

Question 30

What are the consequences if the Commission refuses to register the memorandum and articles?

Answer 30

* They do not comply with the Act * The business or object of the company is illegal * There is an incompetent or disqualified subscriber

Question 31

What is the prima facie evidence of compliance with the Act after registration?

Answer 31

The Certificate of Incorporation.

Question 32

What does incorporation confer to the subscribers of the memorandum?

Answer 32

They become a body corporate capable of exercising all powers and performing all functions of an incorporated company.

Question 33

What is the liability of members upon the winding up of the company?

Answer 33

Members have liability to contribute to the assets of the company.

Question 34

What section discusses the increase of share capital?

Answer 34

Sections 127 and 128.

Question 35

What is required for a company to seek listing of its shares on the Nigerian Stock Exchange?

Answer 35

The articles must comply with the regulations of the exchange.

Question 36

What is the effect of the abolition of the doctrine of constructive notice?

Answer 36

It is addressed in section 92.

Question 37

What is the significance of the section 41(1) grounds for refusal to register?

Answer 37

It outlines conditions under which the Commission may refuse registration.

Question 38

Who may apply to court for directions if aggrieved by refusal to register?

Answer 38

The company.

Question 39

What is the status of the company upon incorporation as stated in section 42 of CAMA?

Answer 39

It has perpetual succession.