A company is a group of persons (2 or more) who have been incorporated to function as a company. Essentially, a company is a vehicle of commerce, that is, the purpose of a company is for business and commerce.
Any two or more persons may seek to be incorporated as a company- Section18 of the CAMA. Any partnership exceeding 20 members must be registered as a company- Section 19 of CAMA.
When two or more persons are incorporated as a company, the surname and forenames of the partners are usually not the true name of the company. Where this is the case (i.e. the names of the partners differ from that of the company) then the name of the company must be registered.
A company is more advantageous than a partnership because in partnerships, capital can only be pooled from the partners. This capital is circumscribed and can only be pooled by a number of 20 people max partners. However, in the case of a company, there is generally no limitation to the number of ways to pulling resources. Larger capital can be raised from a wider base or target of contributors.
One of the distinct features of a company is that it is regarded as a corporate entity distinct and separate from the individual members unlike partnerships and sole traders/proprietorships which are indivisible from the owners.
Ways of bringing a company into existence
1. The use of corporation aggregate (chartered companies):
Where a Royal Charter is granted by the king or queen as an act of grace under a monarchical system to confer corporation status on the company. This was usually given to ecclesiastical bodies like the Church of England. This prevailed in Nigeria prior to 1963 when Nigerian became a republic.
2. Companies that emerge by an Act of Parliament:
In 1963, the Parliament became the supreme law making organ in the country so that it could make institutes corporate bodies since the charter status had been eroded. Examples include PHCN, CBN, NNPC (all federal) and LSDPC, Lagos State Water Corporation (both state).
3. Companies that emerge by way of registration: Registration of companies is the sole responsibility of the federal government. The CAMA 1990 is the enabling law which confers corporate status on these companies known as ‘Registered Companies’.
There are two categories of registered companies. They are:
a. Private Companies (S. 22, CAMA):
A private company is one which is stated in its memorandum to be a private company. By its articles, the transfer of its shares is restricted [S. 22(1) & (2) CAMA].
By virtue of S. 22(3) CAMA, the total number of members of a private company must not exceed 50. But there are exceptions: i. persons who are bonafide in the employment of the company ii. Persons who were bonafide while in that employment and have continued after the determination of that employment to be members of the company [S. 22(3)] iii. Where two or more persons hold one or more shares in a company jointly, they shall for the purpose of subsection (3) be treated as a single member [s. 22(4)].
Except authorised by law, a private company can’t invite the public to subscribe for shares or debentures of the company. Also, it can’t invite the public to deposit money for fixed periods or payable at call whether or not bearing interest. See S. 22(5) CAMA.
S. 23 CAMA provides that a company which fails to meet the requirements of S. 22 can’t be a private company and as such is not entitled to the privileges and exemptions conferred on private companies under the Act. But the court may order that such a company be relieved from such consequences if the court is satisfied that the failure to comply with the provisions of S. 22 was accidental or due to inadvertence or to some other sufficient cause or that on other grounds it is just and equitable to grant relief.
2. Public Companies (S. 24):
Any company other than a private company shall be a public company and its memorandum shall state that it is a public company.
Between your private and public companies, three other kinds of cos can be formed
- Companies limited by shares (Public or Private)
- Companies limited by guarantee ‘’ ‘’Unlimited liability company ‘’ ‘’