HISTORY OF (NIGERIAN) COMPANY LAW



            Corporate evolution in terms of associations of persons united for a common purpose began in the Church of England. Monasteries and the Church were the earliest forms of corporations known to Englishmen. These ecclesiastical bodies procured (royal) charter from the crown as ‘Corporation sole’ for the propagation of their objects. This idea was translated into two notable directions- in the administration of civil society and in propagation of private commerce.


            In the administration of civil society, it was conceived that a charter could be obtained from the Crown to recognize a designated community as a corporation with powers to regulate all aspects of communal life.  On the commercial front, the idea of a corporation took its roots in two forms of commercial undertakings in earliest times known as guilds and partnerships. The gilds are in essence a group of traders who, in order to protect their commercial interests, have provided that all persons carrying on like businesses must come under its auspices. The gild essentially protect the interests of its members in the course of their trade. Partnerships maintained the gild tradition of brotherhood and closeness. Commercial partnerships of this period took two forms: 
a. Commenda: Here, a merchant (commendator) lends money to a partner (commendatarus) to employ in trade. The latter is entitled to his expenses and generally to a quarter of the profit. If the capital is lost through no fault of his, the merchant bears the loss. 
b. Societas: a larger and more permanent group having certain rules which bound members and promote the commercial venture of the undertaking.  A later form of partnership evolved often described as “Regulated Companies” where each member traded with his own stock and on his own account subject to obeying the rules of the company.

            By the 17th century, it was clear that overseas trade could not be financed by separate individuals because the duration of enterprise was too long, costly and risky; the capital needed was thus enormous. The concept of joint stock Company being the merchandise collectively provided by members of the company was therefore introduced. Charters of incorporation were granted to existing or new partnerships as merchant adventurers to trade in foreign markets that had been opened up by voyages of discovery. The Muscovy Company was the first to blaze the trail that instead of each member participating separately with his own capital, a joint stock company could be established for a common purpose. Because of the commercial advantages and legal incidents thereto, propensity to form the joint stock company ensued. Unfortunately, private trading associations were not granted charters of incorporation as they were not considered deserving of encouragements on grounds of public policy. The absence of general law which facilitated promotion and regulation of company activities, led to social and legal problems. Unscrupulous people enriched themselves by forming sham companies with gross misrepresentations of objects and unsubstantiated financial projections. There was growing exploitation of the unwary and gullible public. At the end of the 17th century, another form of enterprise emerged; their business was lending money to the state at an interest in exchange for a royal charter incorporating the group as a Joint Stock Company plus other trading privileges. The South Sea Company emerged on this premise. The company’s closeness to the government brought about great publicity which got the people’s confidence. There was therefore a need to curb the speculative tendencies of promoters. The Bubble Act 1720 was therefore passed to that effect.

            What the Bubble Act did was to strangulate Joint Stock companies. The Act made it both difficult and costly to obtain the necessary legal authorization, for starting a new enterprise that required large capital. In essence, what was passed was an Act which deliberately made it difficult for Joint Stock societies to assume a corporate form and contained no rules at all for the conduct of such societies, if, and when, they assumed it. In response to the provisions of the Bubble Act, lawyers borrowed the principles of equity and trust in order to maintain the existence of Joint Stock companies. They argued that a group of people could call itself a company: so long as they did not invite public subscription or presume to be a corporate body with transferable shares, they could carry on Joint Stock trading. These arguments were upheld in R v Webb and Pratt v Hutchinson where the courts held that the Act was not contravened.

            In 1844, the Joint Stock Companies Act was enacted. Unlike the Bubble Act, the 1844 Act made detailed provisions or rules for the guidance of the operations of Joint Stock companies and how they may assume a corporate form. It introduced certain principles which constitute the basis of company law. For example, the Act provided for incorporation by mere registration as opposed to a special Act of Parliament or Charter. The next Act was the Joint Stock Companies Act of 1856. This Act gave companies their toga virilise as commercial citizens within the law. It repealed the existing Acts and enthroned a laissez faire policy in company regulation. The result was that most of the restrictions placed upon limited companies in the 1855 Act were eliminated. For example, no minimum amount of shares was required any longer.

            The next major historical development was the enactment of the Companies Act 1862. By this Act, some of the modern provisions of company law e.g. memorandum and articles of association forming the integral part of the formation of a limited liability company under the Act were clearly laid down.

 

THE NIGERIAN PERSPECTIVE


            The Nigerian perspective of the history of company law is traceable to the era of the grant of charters to commercial associations. Some of these companies carried on their commercial operations in Nigeria, but were already incorporated outside the country. At this time, there were no laws governing companies operating in Nigeria.

            By the Supreme Court Ordinance 1876, the English Companies Act 1862 became applicable and effective in Nigeria but the Act couldn’t be applied because the facilities for the administration of the Act were not available. However, in 1912, the first Company Ordinance was introduced to provide for the incorporation of companies by registration but this legislation was limited to Lagos. Due to its inability to satisfy commercial aspirations, the Ordinance was later amended in 1917 to extend to the whole country.
            Upon attainment of independence, company matters were put in the Exclusive Legislative List (by virtue of the 1960 Constitution) giving only the Federal Government the power to make regulations on company matters. Even under the 1963 Constitution, companies were still centrally regulated to the exclusion of the regions. In 1968, the Companies Act was promulgated and S. 369 made provision for compulsory registration within six weeks of the establishment of the place of business. Even under the 1979 Constitution, incorporation and company matters remained on the Exclusive Legislative List. It was in pursuance to this Constitution that the Companies and Allied Matters Act (CAMA)1990 was established. CAMA introduced the Corporate Affairs Commission, a regulatory regime for unit trust schemes and the role of the Securities and Exchange Commission in securities issues. The situation has remained the same under the 1999 Constitution. But we must note that: i. company matters are within the exclusive purview of the National Assembly ii. the Federal High Court is vested with judicial regulation of companies to the exclusion of the state High Courts (S. 251 Constitution). But it must be noted that the exclusive jurisdiction the Federal High Court has pertains to civil matters only. This means that in exercise of criminal jurisdiction, it appears that both the Federal and the State courts may exercise jurisdiction [S.251(3)]. See Momodu v State.

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