INCORPORATION

OF A COMPANY
FIRST SEMESTER 2023/2022
ACADEMIC SESSION
Introduction
Although a COY is a form of business organisation, we
will examine a company generally under this heading
This addresses how a company is set up (which is the S
under the first subtopic – forms of business
organisations)
We also have laid the foundation as stipulated in
section 18(1) and (2) of CAMA 2020
Right and Capacity to form a
Company
Pursuant to s. 19 of CAMA, an association consisting of
more than 20 persons must be registered as a company.
ss. 18 and 20 of CAMA also mention that person(s) may
incorporate a company. Who then is a person so capable?
Persons in this section refers to natural and juridical
persons (hence any juristic person may join in the
formation of a company
Right and Capacity (Cont.)
Pursuant to s. 20(1)(a)-(d), the following natural persons are incapable of joining
in the formation of a company
1. a minor (unless other members of the company are not incapacitated. Hence a
minor will not be counted in the determination of the minimum number of
members of the company (s. 2(2)).
2. a person of unsound mind, so found by a court of competent jurisdiction in
Nigeria or elsewhere
3. an undischarged bankrupt
4. person disqualified from being a director of a company pursuant to ss. 279,
281, 283 and 284
Right and Capacity (Cont.)
With regards to a juridical person, a corporate body in
liquidation shall not join in the formation of a company
– s.20(3)

A foreign company or an alien has restricted capacity

with respect to laws prescribing their capacity to
participate in businesses in Nigeria – s.2(4)
Types of Companies (TOC)
By the wordings of s. 21 of CAMA, there are six types of
companies
1. Private company limited by shares
2. Public company limited by shares
3. Private company limited by guarantee
4. Public company limited by guarantee
5. Private unlimited company
6. Public unlimited company – see generally ss. 21(1)
and 2(2) 41(5)(b)-(c) and 55 CAMA 2020.
TOC: Company Limited by Shares
Leaving out the private or public status of the company, we shall
discuss the types briefly:
Company limited by shares: this is a company whose members are
only liable to the amount (if any) unpaid on the shares held by them
(either by subscription, allotment or transfer) – s. 21(1)(a). Such
company must be registered with a share capital pursuant to s. 27(2).
The shares is the interest of a member in the company’s share capital
– s.868. It is the unit of a member’s holding/interest in the company.
TOC: Company Limited by Shares
(Cont.)
A person who has paid in full for his or her shares cannot be held
liable for any part of the liability of the company.
Where the shareholder has not paid in full(or at all) for his or her
shares, such can be called to pay for the shares within a minimum of
14 days, whether or not the company is being wound up – s.158
CAMA
The members of the company can therefore determine the extent of
their liability (indebtedness to the company).
This is the most common type of company for business purposes.
TOC: Company Limited by
Guarantee
This is a company whose members are liable to such
amount the members had promised to contribute, in
the event of the winding up of the company – ss. 21(1)
(b)
It is mainly employed where the company is not for the
purpose of business – s. 26(1), (3), (11) and (15)
TOC: Unlimited Company
This is a company whose members have unlimited liability to
contribute to the asset of a company, in the event of the
winding up of the company – ss. 21(1)(c) and 25 CAMA
It therefore affords no financial security to its members and is
therefore unattractive for the purpose of business. (it is like a
partnership with a corporate form)
This type of company is usually employed by professionals
who take personal responsibilities for their obligations
TOC: Features/Comparisons between these
types of companies
S/ Subject Ltd. by Shares Ltd. by Guarantee Unlimited
N
1 Name (what Private Co. – Limited Limited by Guarantee Unlimited
must be at (Ltd) (Ltd/Gte) – s.29(3) (Ultd) –
the end of Public Co. – Public and (5) s.29(4) and
the names) Limited Company (5)
(PLC)- 29(1), (2) and
(5)
2 Share Must be registered Must not have a Same as in
capital with a share capital. share capital. Ltd. by
The minimum share However, the total shares
capital for a private amount the members
co. is N100,000; for must guarantee to
contribute must not
public co. is
be less than
N2,000,000 (s. 27(2)
N100,000 (ss.26(2),
(a)) (12) and 27(4)(b))
TOC: Features/Comparisons
between these types of companies
S/ Subject Ltd. by Shares Ltd. by Guarantee Unlimited
N
4 Special Requires no special Requires the Requires
Consent consent authority of the AGF – no special
s. 26(4). However, consent
this is not absolute
and can be waived by
CAC – s. 26(7)-(10)
5 Shareholder Has shareholders Has no shareholders, Has
s but has in its place shareholde
‘guarantors’ rs
6 Separate All these types of companies have separate legal
Legal personality – s. 42 CAMA
Personality
TOC: Private and Public
Companies
Private companies are companies which are stated in their
memorandum of association to be a private company – s. 22(1)
A public company on the other hand is any company other than
a private company, which is indicated to be a public co, by its
memorandum – s. 24
The implication is that to know a public company, one must
know a private company. To this end, the features of both
companies are considered below:
TOC: Private and Public
Companies Compared
S/ Subject Private Co. Public Co.
N
1 Memo of Association Yes - s.22(1) Yes - s.24
determines its type
2 Restriction of Transfer of Yes, subject to s. No – s. 24
shares by its article of 22(2)(a)-(c)
association
3 Minimum number of One – s. 18(2) Two – s.
members 18(1)
4 Maximum number of 50, excluding None – s. 24
members (membership employees of the
cap) company – s.
 TOC: Private and Public Companies
Compared
S/ Subject Private Co. Public Co.
N
5 Invitation of the public to As a general rule, no, Yes – s, 24
subscribe for shares and unless it is permitted
debentures, or to deposit monies by any law in Nigeria –
for fixed period payable when s. 22(5)(a) and (b)
requested for
6 Minimum issued capital N100,000 - s. 27(2)(a) N2,000,000 - s.
27(2)(a)
7 Appointment of two or more Yes – s. 287(1) They must be
directors by a single resolution elected
separately,
unless there is
a resolution
allowing same
– s. 287(1) and
(2)
 TOC: Private and Public
Companies Compared
S/ Subject Private Co. Public Co.
N
8 All resolutions must be passed A written resolution can be Yes – s. 259
at general meeting signed by those entitled to
attend the meeting and it
will be deemed passed at
the meeting – s. 259
9 Compulsory requirement to No – s.235(1) Yes –
hold statutory meeting s.235(1)
10 Disclosure of age for directors No – s. 278(1) and (2) Yes – 278(1)
who are above age 70 and (2)
11 The suffix at the end of the Limited or Ltd – s.29(1) and Public
company name. The (5). Limited
requirement for a private or Company or
public company limited PLC – s.
guarantee of unlimited 29(2) and (5)
TOC: Private and Public
Companies Compared
NB - Where private companies do not comply with the features
above, they shall lose their statuses as private companies and
cease from enjoying the privileges conveyed there under – s.
23(1), unless such non-compliance was accidental or other
grounds the court may consider to be just and equitable s. 23(2)
NB – it is also important to note that these companies can be re-
registered as another type of company – s. 55 (a) – (e).
Re-Registration of a Company
A company may be re-registered to alter its type as follows:

1. Private (whether limited or unlimited) to Public Company Limited by shares

2. Public to Private

3. Ltd. to Unlimited Company

4. Unlimited Company to Limited (Private of public)

5. Public Limited to unlimited Company

See generally section 55 of CAMA