Geometrical properties

The full procedure for formation, registration, and filing of specific documents and returns of companies whether private or public companies in Nigeria is governed by the Companies Decree No.51 of 1968.

In the formation of a company, the company has to be floated by a promoter who takes all the necessary steps to form the company before its incorporation. -A company is incorporated when its existence as a separate entity is recognized. A promoter will have to decide on the objects of the business, where it is to be carried out, as well as the name of the company and the amount of funds needed. The documents, which have to be sent .to the Registrar of companies for registration, are the memorandum of association, articles of association and prospectus.

3.3.1 Memorandum of Association

The memorandum of Association regulates the powers of the company and fixes its objects in relation to the outside world. The range of activities in which it is proposed to operate will

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usually be made quite wide so that any expansion of the firm‘s activities does not necessitate adjustments to the memorandum. The memorandum of association contains the following.

(i) Name of the company, the last word of which must be limited‘. This word has to appear on all documents of the company such as orders and correspondences so that people dealing with the enterprise know that its liability is limited. The only time when the word limited is not necessary is when companies are limited by guarantee. The name chosen must be distinct from any existing company but the addition of the name of a town is sufficient to distinguish the company from others. For example, Christoe Global Resources (Port Harcourt) limited is sufficient to distinguish the company from any other Christoe Global Resources limited.

(ii) The registered office-: The city or town where the head office of the company is located is usually stated.

(iii) The amount of capital-: This is the amount of authorized capital. The authorized capital may not have to be raised immediately. The company could raise part to start with and the rest will be called up when needed. The capital amount must be divided into shares. For• instance, if the authorized share capital is N80, 000,000 of N0.50 each, then the number of share will be 160,000,000 shares..

(iv) A brief statement that the liability of the company is limited.

(v) A statement stipulating the conditions for the alteration of the memorandum, which must be for the benefit of the company.

3.3.2 Articles of Association

The Articles of Association are sent to the Registrar of companies at the same time with the;

Memorandum of Association. They deal with the internal organization and functioning of the company. They cover the following.

1 Meetings: Three different types of meeting are stated in the articles of association. A statutory meeting, which a new public company must call within three months of starting a business, annual general meeting (AGM), which must be called once in every calendar year: and never more than fifteen months after the last one, and an extraordinary meeting, which can be called by

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one tenth (1/10) of the shareholders. The Articles will also include the ‗rights of members at these meetings. These rights will depend upon the type of share held in the company by the individual.

2. The procedure for the issue and transfer of shares.

3. Alteration of capital and the borrowing powers of the company. . . 4. Procedures for the appointment of directors.

5. Method and system of accounting and auditing.

6. The procedure for winding — up or liquidation: This refers to the process by which the assets of the business are sold and all debts paid, with the balance, if any going to the members.

Generally it means the company is bankrupt and is going out of business.

3.3.3 Prospectus

This is an offer of shares to the public, and must also be sent to the Registrar of Companies. It is intended as a means of getting the public interested in the company, and may contain statements by ‗experts‘ as to the profitability prospects of the company. The prospectus will be included in any advertisement in the press inviting members of the public to subscribe for shares. Careful watch is kept on the issue shares to ensure that unscrupulous operators do not issue shares in fictitious companies and then disappear with the money subscribed. It is necessary to protect the public from such activities or else the share holding habit will be discouraged, and the savings of many people will not be made available for development purposes. In Nigeria, the issue and sale of shares requires clearance from the Security and Exchange Commission, which is also concern with the implementation of the Nigerian Enterprises Promotion Decrees. The promoters of the company, who will often become the Directors, may enter into, contracts before they are incorporated, but these are not binding on the company unless later ratified.

36 3.3.4 Incorporation

Having received all the necessary documents and found them to be in order, the Registrar of Companies will issue a Certificate of Incorporation. The new company has come into existence from this moment. The public company must also receive a minimum subscription from the public in respect of shares issued, and each director must pay the amount due on his qualifying shares.