Definition of a registered company
A registered company is defined as an “artificial person”, invisible, intangible, created by or under law, with a discrete legal entity, perpetual succession and a common seal. It is not affected by the death, insanity or insolvency of an individual member of the company. A registered company may be a “corporation, partnership, association, joint-stock company, trust, fund, or organized group of persons, whether incorporated or not, and (in an official capacity) any receiver, trustee in bankruptcy, or similar official, or liquidating agent, for any of the foregoing”. In Nigeria a registered company gets its legal status through its registration with The Corporate Affairs Commission (CAC) which is the governmental body responsible for registering business names and companies in Nigeria.
Types of registered companies
- A company limited by guarantee: This is commonly used where companies are formed for non-commercial purposes, such as clubs or charities. The members guarantee the payment of certain (usually nominal) amounts if the company goes into insolvent liquidation, but otherwise they have no economic rights in relation to the company. This type of company is common in England. A company limited by guarantee may be with or without having share capital.
- A company limited by shares: This is the most common form of company used for business ventures. Specifically, a limited company is a “company in which the liability of each shareholder is limited to the amount individually invested” with corporations being “the most common example of a limited company.” This type of company is common in England and many English-speaking countries. A company limited by shares may be a publicly traded company or a privately held company.
- A company limited by guarantee with a share capital: This is a hybrid entity, usually used where the company is formed for non-commercial purposes, but the activities of the company are partly funded by investors who expect a return.
- A limited-liability company: This is a company—statutorily authorized – that is characterized by limited liability, management by members or managers, and limitations on ownership transfer”, i.e., L.L.C. LLC structure has been called “hybrid” in that it “combines the characteristics of a corporation and of a partnership or sole proprietorship”. Like a corporation it has limited liability for members of the company, and like a partnership it has “flow-through taxation to the members” and must be “dissolved upon the death or bankruptcy of a member”.
- An unlimited company with or without a share capital: This is a hybrid entity, a company where the liability of members or shareholders for the debts (if any) of the company are not limited. In this case doctrine of veil of incorporation does not apply.
Less common types of companies are:
- Companies formed by letters of patent: Most corporations by letters patent are corporations sole and not companies as the term is commonly understood today.
- Charter corporations: Before the passing of modern companies legislation, these were the only types of companies. Now they are relatively rare, except for very old companies that still survive (of which there are still many, particularly many British banks), or modern societies that fulfill a quasi regulatory function (for example, the Bank of England is a corporation formed by a modern charter).
- Statutory companies: Relatively rare today, certain companies have been formed by a private statute passed in the relevant jurisdiction.
Note that “Ltd after the company’s name signifies limited company, and PLC (public limited company) indicates that its shares are widely held.”
In legal parlance, the owners of a company are normally referred to as the “members”. In a company limited or unlimited by shares (formed or incorporated with a share capital), this will be the shareholders. In a company limited by guarantee, this will be the guarantors. Some offshore jurisdictions have created special forms of offshore company in a bid to attract business for their jurisdictions. Examples include “segregated portfolio companies” and restricted purpose companies.
There are however, many, many sub-categories of types of company that can be formed in various jurisdictions in the world. Companies are also sometimes distinguished for legal and regulatory purposes between public companies and private companies. Public companies are companies whose shares can be publicly traded, often (although not always) on a stock exchange which imposes listing requirements/Listing Rules as to the issued shares, the trading of shares and future issue of shares to help bolster the reputation of the exchange or particular market of an exchange. Private companies do not have publicly traded shares, and often contain restrictions on transfers of shares. In some jurisdictions private companies have maximum numbers of shareholders.
A parent company is a company that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors; the second company being deemed as a subsidiary of the parent company. The definition of a parent company differs by jurisdiction, with the definition normally being defined by way of laws dealing with companies in that jurisdiction.
Processes involved in creating a new company
- Choose a business name: Take your time and be sure that your business name is highly related to the product you want to produce/sale and/or services you want to render. Choose your business name wisely.
- Visit corporate affairs commission (CAC): At the CAC, you will be given a business name search form (Form008). This form is used to search for business name availability. Fill in the form appropriately and submit it. Payment of filling fees at the corporate affairs commission at the time of writing this article is N500. This form acts as an application for business name registration and should clearly state the business name that you intend to register.
- Visit corporate affairs commission (cac) after some days: Business name search usually takes about a week. If your business name is not available you repeat step 1-3. If your proposed business is available, collect another form called Registration of Business Name (Form001), fill it and proceed to payment of the registration fee which at this time cost N10,000 only. Upon payment of the registration fee, collect affidavit/attestation form and proceed to the any magistrate court nearer to you for endorsement by the court magistrate. Here you will pay N250 only as court fees.
- Collect your business name certificate of registration: You are done with business name registration in Nigeria. You can then think about incorporating it to either Ltd or PLC.
Documents involved in creating a new company
Articles of association
The Articles of Association (often referred to as just ‘articles’) is the document which sets out the rules for the running of the company’s internal affairs. The company’s articles delivered to the Registrar must be signed by each subscriber in front of a witness who must attest the signature.
In the event that articles are not registered for the new company, model (default) articles will be registered. These model articles can be chosen to be adopted in the IN01 form. This new procedure was introduced by the Companies Act 2006, Section 20.
Form IN01
This contains the intended situation of the registered office, the details of the consenting secretary and director(s), details of the subscribers and, in the case of a company limited by shares, details of the share capital. The form also includes the Statement of Compliance that the requirements of the Companies Act have been complied with.
Memorandum of association
This contains the names and signatures of the subscribers that wish to form the company and, in the case of a company limited by shares, a commitment by the subscribers to take at least one share each. It sets out Constitution of a company and the foundation on which the structure of a company is based. In other words memorandum of association is considered as the charter or constitution of the company because it lays down the objectives of the company precisely and clearly, defines scope of its relation with the investor and outside world
References
Ajaero, T. (2014). How to register a company in Nigeria. Retrieved from http://www.mytopbusinessideas.com/ register-a-company- nigeria/ on 5th June, 2015.
Bryan, A. (2011). Black’s Law and lee Dictionary. Second Pocket Edition. New York: Prentice Hill.
Dignam, A. & Lowry, J. (2006). Company Law. Oxford: Oxford University Press.
John, M. & Adrian, W. (2013). The Company: a Short History of a Revolutionary Idea. New York: Modern Library.
