INTRODUCTION

Corporate law practice in Nigeria has its roots in the historical trade interactions with European nations. Initially, trading companies operating in Nigeria were governed by the laws of their home countries. Over time, English common law, doctrines of equity, and statutes were adopted in line with section 14 of the Supreme Court Ordinance of 1914. A Good example is the principle of separate and independent legal personality for companies, notably illustrated in the landmark case of Salomon v. Salomon [1897] AC 22[2].

The first significant legislation was the Company Ordinance of 1912 (though only applicable to the colony of Lagos), followed by the Companies Ordinance (Amendment and Extension) Ordinance of 1917, which applied nationwide. The regulatory landscape evolved through various laws until the enactment of the Companies and Allied Matters Decree in 1990, reprinted as Chapter C20 in the Laws of the Federation of Nigeria, 2004. Approximately, thirty years after the 1990 Decree, the National Assembly enacted the Companies and Allied Matters Act, 2020 (CAMA 2020), marking a pivotal shift in corporate governance in Nigeria [3].

GENERAL OVERVIEW

Corporate law generally encompasses both transactional and litigation aspects related to the establishment, ownership, operation, management, restructuring, and dissolution of businesses and non-business organizations [4]. For the purpose of clarity, the author considers the general overview of corporate law practice from two angles to wit: Pre-Incorporation and Post-Incorporation Matters; and limits his discussion to the first angle.

The pre-incorporation and post-incorporation matters are further breakdown as follows:

• Pre-Incorporation Matters:
• Legal Framework and Regulatory Bodies
• Choice of Business and Non-Business Organizations
• Promotion of Companies and Pre-Incorporation Contracts
• Foreign Participation

• Post-incorporation Matters:
• Legal Requirements for Corporate Name Publication
• Corporate Governance: Roles of Subscribers, Shareholders, Directors, and Secretaries
• Company Securities
• Restructuring and Dispute Resolution
• Winding Up and Dissolution

KEY INNOVATIONS IN CAMA 2020

CAMA 2020 introduces several innovations on corporate law practice as against what was tenable in the former Decree or Act, among which are:

• Sole Shareholder/Director: Unlike the repealed CAMA, a company can have a sole shareholder and a sole director (provided it is a small company) [5].

What is a small company?

A company qualifies as small in relation to its first financial year if the qualifying conditions are met in that year. It also qualifies as such in relation to a subsequent financial year if the following qualifying conditions are met:

• Limited by Shares: Must be a private company limited by shares;
• Turn-Over: Amount of its turn-over for that year is not more than N120 million or such amount as may be fixed by CAC from time to time;
• Net Assets: Net assets value is not more than N60 million or such amount as fixed by the CAC from time to time;
• Alien: None of its members is an alien;
• Government: None of its members is a government agent or nominee; and
• Directors: Directors among them hold not less than 51% of the equity share capital of the company [6].

From the above, a private company that does not fall under the above qualification is a company other than a small company. The difference is that it may have a sole shareholder but cannot have a sole director (it must be at least 2 directors) [7].

Under CAMA 2020 also, a small company do not have to hold annual general meetings, appoint auditors or a company secretary [8].

• Digital Engagement: Most, if not all pre-incorporation and post-incorporation processes can be conducted online via the CAC portal, facilitating easier compliance. E.g.: Search, Reservation and Availability, Registration, Download of Documents, Annual Returns, Change of Director, Address, etc.
• Online Meetings and e- Notice of Meetings: Private company may hold general meetings electronically provided that such meetings are conducted in accordance with the articles of the company; in addition to the notice given personally or by post, notice may also be given by electronic mail to any member who has provided the company an electronic mail address [9].
• Further Business Formation Options: CAMA 2020 introduced two new business formation options in Nigeria: Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs). LLPs combine features of partnerships and limited liability companies, allowing for a separate legal entity where partners enjoy limited liability, while LPs consist of at least one general partner with unlimited liability and one or more limited partners whose liabilities are capped at their contributions, enhancing flexibility in business structures [10].
• No Authorized Share Capital: Companies are only required to maintain a minimum issued share capital, simplifying capital structure.
• Disclosure of Persons with Significant Control (PSC): Mandatory disclosure for individuals holding 5% or more of voting rights in companies and limited liability partnerships. CAC will also maintain a register of such persons which will contain the information received from companies [11].
• Updated Insolvency Test: The threshold for insolvency (i.e. inability to pay debts as they fall due) has been raised from N2,000.00 to N200,000.00, reflecting current economic realities [12].
• Companies Limited by Guarantee: There is a need to obtain the consent of the Attorney General of the Federation prior to registration at the CAC. However, where all requisite documents have been submitted but the Attorney General does not grant his consent or communicate his refusal within 30 days, the promoters may place an advertisement in 3 national newspapers inviting the general public to make any objections to the incorporation of the company which will be considered by CAC.

If CAC is satisfied that the memorandum and articles of association of the company are compliant with CAMA 2020, CAC will advertise the application in 3 national newspapers, inviting objections from the public to the proposed incorporation. If no objections are received from the public within 28 days (or the CAC receives, considers, but rejects such objections), the CAC can assent to the application and register the company without the consent of the Attorney General [13].

PRE-INCORPORATION INSIGHTS

The pre-incorporation matters stated above are specifically overviewed further for want of space on the broad areas of corporate law practice:

Relevant Laws

1. Companies and Allied Matters Act, 2020 as the principal legislation. The subsidiaries are:
2. Companies Proceeding Rules 1992;
3. Companies Regulations 2021; and
4. Companies Winding-up Rules 2001.
5. Investment and Securities Act (ISA) 2007.
6. Other Relevant Legislation:  Nigerian Investment Promotion Commission Act; National Insurance Commission Act; Insurance Act; Banks and Other Financial Institutions Act; Nigerian Communication Commission Act; etc.

Regulatory Institutions

1. Corporate Affairs Commission (CAC) is the apex regulatory agency for companies’ operations in Nigeria. Its key functions are to administer the registration, regulation and supervision of the formation, incorporation, management, striking off and winding up of companies, business names, and incorporated trustees; establish and maintain a companies registry and office in each State of the Federation; conduct investigations into the affairs of any company where the interests of shareholders or the public so demand; ensure compliance by companies with the provisions of CAMA and other regulations; and perform other functions specified in CAMA or any other law[14].
2. Securities and Exchange Commission.
3. Central Bank of Nigeria.
4. Federal Inland Revenue Service.
5. Nigerian Stock Exchange.
6. Central Securities Clearing System (CSCS).
7. Other relevant agencies: Nigerian Investment Promotion Commission; Nigerian Communication Commission; National Office for Technology Acquisition and Promotion; Federal High Court; etc.

CHOICE OF BUSINESS/NON-BUSINESS ORGANIZATION

The choice of business/non-business organization is crucial for legal and operational efficiency and understanding the legal framework and requirements for incorporation is essential in Nigeria. This includes choosing the right organizational structure and ensuring compliance with regulatory bodies.

By the provisions of CAMA 2020, the primary types of business organizations are considered as profit-oriented under Parts B – E of CAMA 2020[15]. They include:

1. Companies: Private and public companies in Nigeria, such as Private Company Limited by Shares (LTD), Public Company Limited by Shares (PLC), Unlimited Companies (ULTD), and Company Limited by Guarantee (LTD/GTE) with specific requirements for incorporation [16]. These requirements include having a minimum number of directors, a registered office address, a unique company name, and a stipulated minimum share capital, with additional documentation needed based on the company’s structure and business activities.
2. Business Names: Business name is covered in Part E of CAMA 2020. It is a convenient form for sole proprietorships and partnerships [17].
3. Partnerships: General and limited partnerships, governed by CAMA regulations particularly Limited Liability Partnership (LLP) and Limited Partnership (LP) [18].

We have Incorporated Trustees as the non-business organization under Part F of CAMA 2020, established for charitable or social purposes [19]. To be incorporated, there must be at least two (2) or more trustees to apply to CAC to be registered as a corporate body as it is the trustees that become a corporate body. The proposed name must contain “Incorporated Trustees of…”.

FOREIGN PARTICIPATION

Section 868 CAMA (the interpretation section) defines an alien as a person or association, whether corporate or unincorporated, other than a Nigerian citizen, association, company or business name, registered in Nigeria. By that definition, alien means foreigner (non-Nigerian citizen). Thus, foreign participation is the same as saying alien participation.  

By the provision of section 20(4) of CAMA, where a Nigeria company is wholly or partly owned by a foreign company/individual, such company has foreign participation. Hence, Foreign entities can engage in corporate law practice in Nigeria, provided they comply with local regulations and register with the CAC [20].

Exemption for Foreign Companies

Generally, a foreign company having the intention of carrying on business in Nigeria, shall obtain incorporation as a separate entity in Nigeria for that purpose. However, a foreign company or entity may be exempted from registration when it meets specific criteria:

1. Loan Projects – Foreign companies in Nigeria for the execution of a specific individual loan project on behalf of the donor country or international organization.
2. Invited Companies to Nigeria by or with the approval of the Federal Government to execute any specified individual project.
3. Foreign Government-Owned Companies: Foreign government-owned companies engaged solely in export promotion activities. 
4. Engineering consultants: 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 the Federal Government has approved such contract [21].

Mandatory Application for Exemption

Despite the above criteria, a foreign company is not automatically exempted from registration until an application for exemption is made to the Minister of Trade [22]. The application must specifically contain the following particulars:

1. The name and place of business of the foreign company outside Nigeria;
2. The name and place of business of the foreign company within Nigeria;
3. Each director, partner, or other principal officer of the foreign company, name and address;
4. CTC of the charter, statutes or memorandum and articles of association of the foreign company (if not written in English language, a CTC translation be attached);
5. Authorized person’s name and address in Nigeria to receive any correspondence or process;
6. The business or proposed business in Nigeria and the duration of such business;
7. Previous project particulars as an exempted company; and 
8. Other particulars the Minister of Trade may requires.

Once exemption is granted, an exempted foreign company has the status of an Unregistered Company [23]. The effect is that the unregistered foreign company is exempted from payment of all company taxes, it can sue and be sued in Nigeria where liable (either in its corporate name or that of its agent) [24]. 

CONCLUSION

The corporate law practice in Nigeria is shaped by a complex interplay of historical influences, evolving legislation, and regulatory oversight. The article explores the fundamentals of corporate law practice in Nigeria, focusing on key concepts such as pre-incorporation insights, relevant laws, regulatory institutions, choices of business or non-business organizations, and foreign participation.

However, the field of corporate law is vast, and the article has only scratched the surface of its many facets. Understanding corporate law is crucial, especially in the context of cross-border transactions that involve Nigerian entities and their foreign counterparts. While some aspects may seem unfamiliar, gaining insight into these topics and their practical applications will significantly enhance our appreciation of corporate law practice.

Ahmod B. Ariyibi, Esq. is an Associate at Synergy Attornies. He is a Dispute Resolution Practitioner | Writer | Researcher | Hybrid Lawyer | Founder of YouTube Channel – AribabLawTV He can be reached via ahmod.ariyibi@synergyattornies.com

References:

[1] Extract from The LawQuity Virtual Three Weeks Mentorship Training 1.0. A topic addressed by Ahmod B. Ariyibi, Esq. on Friday, 26 July 2024.

[2] Oloworaran, Oloworaran & Olowononi: Companies and Allied Matters Practice Manual; pg.2.

[3] Ibid.

[4] Overview of Corporate Law Practice by Onyekachi W. Duru, Esq.; https://www.linkedin.com/pulse/overview-corporate-law-practice-well-relevant-onyekachi-duru-esq/; visited 20 July 2024.

[5] Section 18 (2) CAMA.

[6] Section 394 (3) CAMA.

[7] Section 271(1) CAMA.

[8] Sections 402 (1)(b) and 330 CAMA. See also Ogiemudia and Sijuwade, 20 Innovations in the Companies and Allied Matters Act 2020; https://uubo.org/wp-content/uploads/2022/08/20-innovations-in-the-companies-and-allied-matters-act-2020.pdf; visited 20 July 2024.

[9] Ibid.

[10] CAMA 2020 and the Introduction of Limited Liability Partnership- https://nexianigeria.com/cama-2020-and-the-introduction-of-limited-liability-partnership/ visited 20 July 2024; [PDF] Registration of Limited Liability Partnership and Limited Partnership – G. Elias https://www.gelias.com/images/Newsletter/Client_Alert_-_LLP_LP_CAMA_2020_opt.pdf – visited 20 July 2024; and  Aluko-Oyebode: Limited Partnerships and Limited Liability Partnerships under the Companies and Allied Matters Act 2020 – https://www.aluko-oyebode.com/insights/limited-partnerships-and-limited-liability-partnerships-under-the-companies-and-allied-matters-act-2020/ visited 20 July 2024.

[11] Supra. See also sections 119 and 791 CAMA.

[12] Ibid

[13] Ibid.

[14] Sections 1-17 CAMA 2020.

[15] Sections 18 to 822 CAMA 2020.

[16] Sections 18(1), 21(1) and (2), 22(3), 26(1),(4), (12), 27(2)(a), 29(1), (2), (3), (4) and (5) CAMA 2020. See also See Ostankino Shipping Co. Ltd v. The Owners, The MT “Bata 1” (2022) 3 NWLR (PT. 1817) @ 367

[17] Sections 811-822, and 868(1) CAMA 2020.

[18] Sections 746 (1)-(3), 757(1), 795 (1)-(4), 797(1) and (2), 802 and 806 CAMA 2020. NB: A partnership cannot consist of more than 20 persons except it is a) co-operative society; b) partnership is a law firm; or c) partnership is for the purpose of practicing as accountants – section 19(2)(a) and (b) CAMA 2020.

[19] Sections 823 to 850 CAMA 2020.

[20] The minimum share capital of a company with foreign participation (whether wholly or partially) is N100,000,000.00. 

[21] Sections 78(1) and 80(1) CAMA 2020.

[22] Section 80(2) CAMA 2020.

[23] Section 82 CAMA 2020.

[24] Section 84(b) CAMA 2020.