CAPACITY AND POWERS OF A COMPANY

Introduction
One of the consequences of the artificial nature of a company is that decisions are inevitably made while actions are taken on its behalf by natural persons. A company can therefore be exploited and used to perpetuate fraud. In what situations can the decisions and actions be said to be attributable to the company?

The constitutional and administrative framework of a company is set out in two separate documents, its memorandum and articles of association. The memorandum is the charter containing the fundamental information about the nature and structure of the company while the articles supplement the provisions of the memorandum. In essence, the memorandum is the fundamental constitution of the company while the articles are mere subordinates and as such cannot modify the memo (Guinness v Land Corporation of Ireland). S. 35(2) CAMA obligates the promoters to file the memorandum and articles of association as part of the incorporation documents.

The Contents of a Memorandum of Association (S. 27 CAMA)
1. The name of the company:
            S. 29 CAMA provides that: a. the name of a private company limited by shares shall end with the word "Limited" b. the name of a public company limited by shares shall end with the words "Public Limited Company" c. the name of a company limited by guarantee shall end with the words "(Limited by Guarantee)" in brackets d. the name of an unlimited company shall end with the word "Unlimited" e.  A company may use the abbreviations "Ltd", "PLC" "(Ltd/Gte)" and "Ultd" for the words "Limited", "Public Limited Company", "(Limited by Guarantee)" and "Unlimited" respectively in the name of the company.
            S. 30 covers prohibited and restricted names. For example, a company can’t register under a name already in existence or under a name that largely resembles that of another company. Also, the name must not violate any existing trade mark or business name registered in Nigeria.

2. The registered office of the company:
            The registered office of the company shall be situated in Nigeria. But there is a difference between the registered office and head office of a company. A head office is only relevant where a company has more than one office. It is unlikely that a company which has not begun operations would have a head office.
            Under S. 407 CAMA, it is the Federal High Court within the area where the registered or head office of the company is located that has jurisdiction to wind up the company.

3. The nature of the business(es) or object(s) of the company:
            This refers to the nature of business the company is authorized to carry on. Where the company is not authorized to carry on business, the memorandum shall state the nature of object for which it was established.
            The point must be noted that a company cannot be formed for an illegal purpose (R v Registrar of Companies). Also, note that a company is not limited to one undertaking; it may be formed for two or more businesses or objects. This is why S. 27(1) (c) states ‘businesses or objects’. However, it is advisable to register different companies to pursue different businesses especially where the businesses are totally unrelated.
            The object clause of a company may be altered in accordance with S. 46 or Part XVI CAMA under a scheme of arrangement. Also, S. 38(1) CAMA reinforces the fact that the powers of a company shall be used for the furtherance of its authorised business(es) or object(s).

4. Restrictions (if any) on the powers of the company:
            It must be noted that from the provision of S. 27(1) (d), it is optional, that is, a company need not have restrictions on its powers. But the memorandum is not the only instrument that can limit the powers of a company. S. 38(1) CAMA provides that an extant enactment can also do this. S. 38(2) CAMA bars companies from making donations of their properties or funds to political parties. A breach of this provision makes the officers or members in default liable to the company.

5. Status:
            The memorandum must state whether the company is a private or public company. The question may be asked that what it is the purpose of asking a company to state this when its name includes ‘ltd’ or ‘plc’. Perhaps the answer is that the earlier requirements relates only to company limited by shares while the provisions of S. 27(1) CAMA applies to all types of company.
            It is worthy to state that being a private or public company is not about the nature and character of the shareholding structure. A company owned by a state or federal government can be either a private or public company.
            A company can be changed from one form to another e.g. private company to public company. All that has to be done is winding up the former company.

6. Liability:
            The memorandum must also state expressly that the liability of its members is limited by shares or by guarantee or is unlimited, as the case may be.
            By S. 49 CAMA, the extent of a member’s liability cannot be increased without his consent in writing.

7. Share Capital:
            If the company has a share capital, the memorandum must state the authorized amount. The authorized share capital of a private company shall not be less than 10,000 naira while that of a public company shall not be less than 500,000 naira. But the practice is that proposed companies can’t be registered with staggering share capital.
            Please note that the share capital determines the cost of incorporation. 

8. Subscription:
            The memorandum identifies the shareholders, their addresses and the number of shares they subscribe to. The subscribers are the first shareholders to be stated in the constitutional framework.

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