Incorporation. Under the law a company incorporated under the Act is a distinct entity They exist in the form of entries in the book of depositories. This system . Company Law Textbook - [Free] Company Law Textbook [PDF] [EPUB] This listing of free Law Books Online TextBooks and tutorials they are. A company is a "corporation" - an artificial person created by law. A company thus has legal rights and obligations in the same way that a natural person does.
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Avatar Singh: Company Law, Eastern Book company, Lucknkow. 3. Anantha Raman, Lectures on Company Law, Wadhwa and Company. 4. Tadon M.P. UNIT 4 – DEVELOPMENT OF COMPANY LAW IN NIGERIA This study material is the first part of Company Law. Company law itself is . Anderson in his book. But for many purposes, a company is a legal person like a natural person. Separate Legal Entity: A company has a legal distinct entity and is independent.
Robert Lowe. This allowed investors to limit their liability in the event of business failure to the amount they invested in the company — shareholders were still liable directly to creditors , but just for the unpaid portion of their shares.
The principle that shareholders are liable to the corporation had been introduced in the Joint Stock Companies Act The Act allowed limited liability to companies of more than 25 members shareholders.
Insurance companies were excluded from the act, though it was standard practice for insurance contracts to exclude action against individual members. Limited liability for insurance companies was allowed by the Companies Act This prompted the English periodical The Economist to write in that "never, perhaps, was a change so vehemently and generally demanded, of which the importance was so much overrated.
In the later nineteenth century, depression took hold, and just as company numbers had boomed, many began to implode and fall into insolvency. Much strong academic, legislative and judicial opinion was opposed to the notion that businessmen could escape accountability for their role in the failing businesses. Further developments[ edit ] Lindley LJ was the leading expert on partnerships and company law in the Salomon v. The landmark case confirmed the distinct corporate identity of the company.
This inspired other countries to introduce corporations of this kind. The last significant development in the history of companies was the decision of the House of Lords in Salomon v.
In the United States , forming a corporation usually required an act of legislation until the late 19th century. Many private firms, such as Carnegie 's steel company and Rockefeller 's Standard Oil , avoided the corporate model for this reason as a trust. State governments began to adopt more permissive corporate laws from the early 19th century, although these were all restrictive in design, often with the intention of preventing corporations from gaining too much wealth and power.
In , Delaware followed New Jersey's lead with the enactment of an enabling corporate statute, but Delaware only became the leading corporate state after the enabling provisions of the New Jersey corporate law were repealed in Countries began enacting anti-trust laws to prevent anti-competitive practices and corporations were granted more legal rights and protections. The 20th century saw a proliferation of laws allowing for the creation of corporations by registration across the world, which helped to drive economic booms in many countries before and after World War I.
Another major post World War I shift was toward the development of conglomerates , in which large corporations downloadd smaller corporations to expand their industrial base. Starting in the s, many countries with large state-owned corporations moved toward privatization , the selling of publicly owned or 'nationalised' services and enterprises to corporations.
Deregulation reducing the regulation of corporate activity often accompanied privatization as part of a laissez-faire policy. Ownership and control[ edit ] A corporation is, at least in theory, owned and controlled by its members. In a joint-stock company the members are known as shareholders and each of their shares in the ownership, control, and profits of the corporation is determined by the portion of shares in the company that they own.
Thus a person who owns a quarter of the shares of a joint-stock company owns a quarter of the company, is entitled to a quarter of the profit or at least a quarter of the profit given to shareholders as dividends and has a quarter of the votes capable of being cast at general meetings.
In another kind of corporation, the legal document which established the corporation or which contains its current rules will determine who the corporation's members are.
Who a member is depends on what kind of corporation is involved. In a worker cooperative , the members are people who work for the cooperative. In a credit union , the members are people who have accounts with the credit union. In some cases, this will be a single individual but more commonly corporations are controlled by a committee or by committees. Broadly speaking, there are two kinds of committee structure.
A single committee known as a board of directors is the method favored in most common law countries. Under this model, the board of directors is composed of both executive and non-executive directors, the latter being meant to supervise the former's management of the company.
Formation[ edit ] Historically, corporations were created by a charter granted by government. Today, corporations are usually registered with the state, province, or national government and regulated by the laws enacted by that government. Registration is the main prerequisite to the corporation's assumption of limited liability. The law sometimes requires the corporation to designate its principal address, as well as a registered agent a person or company designated to receive legal service of process.
It may also be required to designate an agent or other legal representative of the corporation. Once the articles are approved, the corporation's directors meet to create bylaws that govern the internal functions of the corporation, such as meeting procedures and officer positions. If a corporation operates outside its home state, it is often required to register with other governments as a foreign corporation , and is almost always subject to laws of its host state pertaining to employment , crimes , contracts , civil actions , and the like.
In other words, provided the appropriate majority are happy, the minority have to accept the terms of the contract as amended. The articles are not in any way a contract between the company and any employee as such.
In the case of Eley v. Ltd 1 EX. When later the company ceased to employ him and employed another solicitor, Eley sued the company for breach of contract in terms of the articles. He failed because the rights conferred on him by the articles were in his capacity as a member. Bye-laws of the company governing its management and embodying the powers of the directors and officers of the company as well as the powers of the shareholders as to voting, etc.
Articles deal with the issue of shares, transfer of shares, alteration of share capital, general meetings, votes and voting rights, directors including their appointment and powers managing director, secretary, dividends, accounts, audit of accounts, winding up, etc. Articles form a contract between the company and each member and between the members. A private company limited by shares must register a set of Articles of association together with the Memorandum of Association at the Registrar of Companies Office.
If it does not, then Table A applies. Table A in Schedule 1 to the Act is a model form of articles for a company limited by shares. Thus a company may: Articles must be a Printed.
Articles can be altered by Special Resolution. Rule in Foss v. The company may, therefore, alter the articles by special Resolution, subject to a number of restrictions. Prior approval of the Chief Registrar of Companies must first be obtained by filing for CR21 and the proposed change of name must be advertised in the Gazette and local newspaper. At least 14 days must elapse before applying to the Registrar for applying to the Registrar for approval of change of name.
Copies of all special resolutions must be filed with the Registrar of Companies on form CR 11 together with: Form CR. If the company is a public company then the persons who are named as directors in the articles, prospectus or statement in lieu of prospectus must each lodge from CR12, which is their consent to at as directors, with the Registrar of Companies. Providing the memorandum and articles are in accordance with the Companies Act and the registration fee has been paid and consents to act have been received from the proposed directors of a public company, then the Registrar will enter the name of the company in the Register.
Upon the incorporation of a company, form CR. Form CR6 is lodged at the same time as the memorandum and articles. Public companies will now register their prospectus or statement in lieu of prospectus with Registrar of Companies and commence to invite subscriptions for shares. When the minimum subscription has been obtained and all the directors have paid for the shares they agreed to take, then form CR.
This form is an affidavit that has to be sworn before a Commissioner of Oaths to the effect that the minimum subscription has been obtained and the directors have paid for their shares. The registrar will then issue the certificate that the company is entitled to commence business. The statutory meeting must be held within one to three months of this date and form CR. For all companies, form CR.
The share certificates must be issued to share holders within two months of the allotment. Richmon etc. Land Co. Grant, 2 CPD C. They have, in their hands, the creation and molding of the company.
They have the power of defining how and when and in what shape and under what supervision the company shall start into existence and begin to act as a trading corporation. He may not, either, misapply or retain any property belonging to the company Section of the Act. Anyone who acts merely as the servant or agent of a promoter is not himself a promoter.
A solicitor, therefore, who merely does the legal work necessary to the formation of a company is not a promoter. A promoter is not an agent for the company which he is forming because a company cannot have an agent before it comes into existence. This is a view which was held in the case Kelner v. Baxter LR2 CP A promoter must disclose a profit which he is making out of the promotion either: New Sombrero Phosphate Co.
In English Common Law it is not possible to contract on behalf of a non-existent person. Even in our law which does allow it in the form of stipulatio alteri there are certain disadvantages, the principal one being that the person who negotiates the contract on behalf of the as yet, non-existent other person in this context a company yet to be formed must do so as principal in the hope that the company will ratify and adopt the contract when it is formed.
Form a business point of view, it is obviously necessary to have such contracts lined up in advance. Therefore, statute has come to the rescue and, in Section 32, provided for the ratification by a company, after it is incorporated, of a contract made on its behalf by a person who professes to be acting as agent or trustee of the company not yet formed provided that: The memorandum contains provision for such ratification in its objects clause and: The contract document or a copy is delivered to the Registrar along with the memorandum the contract must be in writing.
It is, of course, possible for the company to ratify the contract even if the memorandum does not provide for this, but until it does the contract is incomplete.
Write about his position and duties. A company downloadd and operated a rice mill beyond its powers. The rice was consigned to certain persons who paid the price.
The consignees had to sell the rice, owing to its inferior quality, at a considerable loss. The company gave them drafts promising to pay for the loss. The company went into liquidation and the question about the enforceability of the drafts arose. Explain this statement with reference to the position of the consignees above. Every company, even a small private one, must have at least two directors but of course large companies have many.
The first directors of any company are people who subscribe until others are appointed in terms of the Articles. These usually provide that the directors are appointed in general meetings, but often, particularly in small private companies, the appointment is informal. A director could well be a mere figurehead or cog in the machinery sitting on the board y virtue of his nobility of reputation or because his name looks good on company letter heads, thus giving it semblance of respectability.
Having said that, however, Section 1 of the Act disqualifies certain persons from holding office as a director of a company, the reason being that it wants to keep management out of the hands of unscrupulous persons.
The following are disqualified, according to the Section cited above: In terms of Section 1 every company shall have not less two directors other than alternate directors , at least one of whom shall reside in Zimbabwe. These are the common duties but in addition the Act puts many other liabilities on his shoulders. It will be noted also that Section enables a company at a general meeting by resolutions, special notice of which ahs been given,, to remove a director from office subject to his right to make representations and to be heard.
A director must, however, take shares where: If required to hold shares a director is not permitted to acquire them on terms more advantageous than those on which they are offered the public, and he must acquire them within tow months of his appointment Section It is outside the scope and compass of this condensed account of the company law to deal with the methods by which shares in a company are offered to the public.
But there is need for mention of one more important point about shares and share capital which is that, when an offer of shares to the public is made the prospectus or statement in lieu must state the minimum subscription which the original directors feel to be necessary to meet the expenses of establishing the company to provide the capital necessary for it to get into business.
Until this minimum sum is realized by offers from would-be shareholders a public company can neither allot shares nor start in business, because, in terms of Section 91 a company which has issued a prospectus will not be granted a certificate to enable it to commence business until the Registrar has received an affidavit signed by the Secretary or a director testifying to the effect that: A share means a share in the capital of the company.
Each share in a company is distinguished by its appropriate number, provided that it need not have a number if all the issued shares, or all the issued shares of a particular class, are fully paid and rank PARI PASSU for all purposes. A share certificate, which specifies the shares held by the member and which is prima facie evidence of his title to the shares is issued to a shareholder. Section 9 1 iv sets out the requirements of the capital clause of the memorandum.
This clause must state the amount of share capital with which the company proposes to be registered and the division thereof into shares of a fixed amount.
Ltd 1 Ch at p. A share is simply a fixed fraction of that total value and is represented by a certificate numbered for identification which is issued by the company to those who download shares.
It may be, however, that, in order to provide for future expansion and to avoid the necessity to amend its memorandum a company may set its level of nominal capital higher than its immediate needs to that it does not have to allot and sell its hares when it starts up. It is this unpaid capital which represents the liability of members in a company limited by shares. Of course the issued share capital may never exceed the authorized or nominal capital. If a company requires more capital than its memorandum states the memorandum must be altered by special resolution provided that the articles permit this, otherwise they must be amended first — if the memorandum does not preclude such amendment.
Notice of any increase in share capital must e given to the Registrar within a month of the passing of the special resolution. See section 64, 65, On the other hand should a company wish to reduce its share capital and if authorized by its articles to do so, it may again effect this by special resolution but, in this case in order to safeguard the interests of creditors the resolution has to be confirmed by order of court before it can be registered and put into effect Sections There are heavy penalties imposed on any officer of a company who conceals from the court the existence of any creditor who is entitled to object to the reduction.
Certain special items on which moneys can be spent from the Share Premium account are sated in Section The articles of the company will include details a regards the varieties the company proposes to issue and of the rights and liabilities attaching to them.
Remember what has been said regarding the status of the articles as a contract between the company and member and between members themselves. Quite apart from the blurb in the prospectus the prudent would-be member of a company should therefore study its articles to find what he is letting himself in for and what his rights will be. The common types of shares are: The dividends representing the income earned by the capital invested may be quite high — in poor years of course there may be none al all.
Thus the preference shareholder is on a relatively safe be at low odds. There is a legal authority for the cumulative nature of preference dividends — i. They are usually created as cumulating preference shares. The Shares can also be redeemed out of the proceeds of a fresh issue.
Section 6. Any share may now be issued as redeemable. In other words they rank together with ordinary shares for ordinary dividends but have preference in the first bite at distributable profits.
They are sometimes called deferred shares because the payment of dividends to their holders may be deferred until all shareholders who have brought their shares have received a fair dividend. It should also be noted that because these shares have not been paid for in cash there must be lodged with the Registrar within one month of their allotment, a written contract showing the terms and reason for the grant, and details of any such arrangement must be published in the prospectus.
Their main liability is to pay, on call, any portion or any other amount of the download price of their shares which is outstanding.
As regards the rights of shareholders these are as follows: The right to his fair dividend if a dividend is declared. The right to his fair share of the net assets of the company on winding up. The right to be put on or taken off the register of members as appropriate rectification. The right to resist oppression by the majority shareholders. The limited right to sue for damage done to the company. The first three of these rights are self-explanatory and 4 and 5 need some further consideration.
Taking no The obvious snag about this rule is that, if the defaulters are majority shareholders they can outvote the complaining minority, so exceptions to the rule have evolve3d, the first being that where any attempt to obtain a remedy in the company itself will be defeated by a fraudulent or otherwise culpable majority, the minority can bring an action on behalf of the company. See Section which gives any member who believes he is being oppressed the right to make application to the court for redress.
Section now wider, though. The other exceptions are: The common law rule here is really an extension of the first exception to the rule in Foss v. Harbottle as elaborated in the case of Atoll v. Merryweather L. Eq n as relating to fraud on a minority. In brief if a minority cannot gain redress for a fraud on it by a majority in general meeting, that minority, by a legal fiction can sue in the name of the company. The statutory remedies available to minorities fall into two groups: Those where the individual shareholder needs the requisite support of others; these are: Those where an individual shareholder may seek the remedy; these are: Section as read with — the right to apply for an order of judicial management.
But there is one section of the Act to which your particular attention is drawn viz. What does management of a company entail and how is this achieved in practice? Describe the position of a director of a company under the following headings: What are the various rights of shareholders? Shares have been allotted to a total amount of not less than the minimum subscription as stated in the prospectus.
Every director has paid to the same extent as other members for all shares taken or contracted to be taken by him for which he is liable to pay in cash. If the public company has not issued a prospectus it must register a statement in lieu. Only when these formalities have been observed will the registrar issue a certificate to enable the company to commence business. Once a company is in business the main pre-occupation of the law is naturally to protect the interest of the people to whom the company owes money — its shareholders, creditors and debenture holders.
The law is determined but not always successful to ensure that, if any danger of the company being unable to meet its obligations should arise people should know as soon as possible. Hence the number of reports and returns which a company has to render, and the penalties At the end of this topic, the participant should be able to: It has been seen that a company may by observing the terms of the Act lawfully alter its share capital in certain ways but its perhaps more important to note the various provisions hidden away in various sections which are intended to ensure that the current issued share capital of the company is actually represented by assets.
It must be remembered, however, that share capital and the various reserve accounts e. Sections of the Act designed to prevent the general public from being taken for a ride are discussed below: Section 58 prohibits a company from providing any financial assistance to anyone for the download of share sin the company or in its holding company unless its business is that of a money lender and the loan is made in the ordinary course of business or the shares are to be held by or in trust for employees.
Section 59 insists that if a company issues shares at a premium — i. Section 60 puts limitations on the power of a company to issue shares at a discount; in particular it makes such an issue subject to sanction by the court.
Section 61 we have already seen this limits the conditions under which redeemable shares may be issued. Bonus issues can of course be made only out of profits. Section 65 and 70 make it obligatory for any alterations in share capital in terms of section 64 and 69 to be notified to the registrar so that the public have constructive notice of these alterations and in the latter case, of course, sanctions by the court is also required.
Section 67 limits the power of a company to pay interest due on money owed out of capital only to cases where such payment is authorized by the articles or by special resolution and it is in respect of capital expended on capital projects. The payment must also have the prior approval of the minister, who may, at the expense of the company, enquire into the circumstances.
Section requires the presentation of audited accounts at the annual general meeting of every company and its subsidiaries, the form of account being specified by Section and the seventh Schedule and article of the First Schedule.
Section prohibits the issue to directors of shares on more advantageous terms than they are issued to any member of the company and prohibits the disposal of the directors of any or all of the assets of the company, unless the transaction, in specific terms is approved by the company in general meeting.
There are many other subtle provisions in the Act which attempt to protect the public from the evil machinations of the company and the people who run it; but these are enough. The requirements regarding accounting are really the final security for both members and public because, one way or another they are publicized.
In spite of the ingenuity of the legislature which, of course is limited, companies do go to the wall. Perhaps this is due to the legislation with which we have been dealing. It may be thus wound up voluntarily by its owners or compulsory by its creditors.
It may also be struck off the Register as a result of error. Section of Act provides that the Registrar may strike a company off the Register if he has reasonable grounds to believe it is no longer in business. The death of a company is accompanied by formalities much more complicated than those of a requirements mass. But before we call in the undertaker and put the company to its last resting place we ought to give the Doctor a chance and discuss whether and how the life of a sick company can be restored.
There are, I fact, many devises to this end such as mergers, takeovers, amalgamations, arrangements with creditors, etc.
We will At the end of this topic, the participant should be able to: If at any time the judicial manager comes to the conclusion that he is flogging a dead horse and that the company connoted be resolved he may apply to the court for cancellation of the order and the issue of a winding up order instead. On the other hand if the judicial manager or other interested party is of the opinion that the company has been rehabilitated they may apply to the court for cancellation of the order, a request whiny may be granted subject to such directors as he court may give regarding resumption of management, including the holding of a general meeting to appoint directors.
Indeed this subject occupies most of Part IV of the Act and is further dealt with in a lengthy set of regulations known as the Companies Winding Up Rules as subsequently amended. However, since winding up is really only of interest to the Company Secretary when it is a voluntary winding up by the members, you are thus referred to those sections of the Act dealing with winding up.
The practicalities of winding up an unwanted company is dealt with the secretarial side of this module. Winding up by order of the court.
Voluntary winding up: Voluntary winding up under court supervision. The provisions are extensive and complicated and can be dealt with only very superficially here. It should be noted that some of the provisions apply to every mode of winding up, some only to winding up by court, some to voluntary winding up by members and others to voluntary winding up by members and others still to voluntary winding up by creditors.
This is general provision which sets out the parameters as it were, by which the court must guided in deciding or not to grant a winging up order. The next 90 odd sections deal with the legal procedures and requirements for winding up. For our purposes these are not important except to the extent that one should know in general terms what is involved.
If any company reaches the court, legal practitioners would have been involved for months before hand. What is important form a practical point of view are the provisions of section , and it is recommended that you read this carefully. In essence the section provides that where Registrar has reasonable grounds to believe that a company is defunct, he may strike it off after due notice.
In practice, therefore, if the secretary of a company gives notice to the Registrar that a company has no assets and liabilities and has by special resolution resolved to be wound up Section he has reasonable grounds to believe that particular company is defunct. The only delay usually arises from that the Collector of Taxes always files an objection as a matter of course, until he is satisfied that no tax is due. It is, therefore not necessary for any company to go through the rigmarole of voluntary winding u as provided in the Act, provided it has liquidated all its debts etc.
You should simply be aware of the fact that the Act does deal with winding up is some detail, with carefully conceived safeguards to protect creditors, innocent third parties and members of the company. These safeguards revolve around the requirement that the liquidator must, one he has managed to sort out the accounts, give debtors and creditors a chance to inspect and object to the accounts, and in order to give this opportunity he must advertise in the Gazette and hold meetings of creditors.
That is why you will see your company secretary on a Friday afternoon of Monday morning reading the Government Gazette. He is reading it not because it is more fun than The Herald and or The Chronicle, but because he is obliged to wade through dozens of notices to ensure that the company does not have amongst other problems, debtors who are about to be struck off by the Registrar, debtors who are about to wound up by other creditors, or debtors in liquidation whose final distribution accounts are lying open for inspection.
Incidentally, be wary of proving a claim to an insolvent estate or liquidated company too soon. If the estate does not have sufficient assets to pay the liquidator, you may find yourself making a contribution. Wait until the liquidator has located enough assets to cover his fees and then decide whether it is worth proving a claim. The remuneration so fixed is not to be increased in any circumstances, whether with or without the sanction of the court. Once this is agreed upon and the liquidator is thus dully appointed, the company then gives notice to the Registrar.
The liquidator has to inform the Registrar of his appointment and all this is published in the Government Gazette. Upon the appointment of the liquidator, all the powers of the board of directors come to an end except when the company or the liquidator, or both, sanction them to continue. It is managed entirely by the members and the liquidator is appointed by them. No meeting of the creditors is held and no other committee is necessary to be appointed. To obtain the benefit of this form of winding up, usually a declaration of solvency is filed.
The resolution for voluntary winding up will usually be a Special Resolution.
This is not so with the creditors winding up. The winding up order is deemed to be a notice of discharge to the officers and employees of the company to be wound up.
As from the commencement of the winding up, the company must cease to carry on business, except so far as is required for its beneficial winding up although the corporate state and powers continue until the company is dissolved. No transfer of shares can be made without the sanction of the liquidator and any alteration in he status of he members is void. After the winding up order has been issued, no suit or legal proceedings can be commenced against the company except by leave of the court and subject to such terms and conditions as the court may impose.
This is necessary for the purpose of preserving the limited assets of the company in the best way possible, for distribution among all the persons who have claims on them. What is Judicial Management? What is it sometimes resorted to? Does it have any effects? How may a company be wound up voluntarily? Explain, in some detail, the requirements of winding up by court under Section of the Companies Act. Are there any consequences in winding up a Company?
Half of the capital of a private company belonged to a father and the other half to his tow elder sons. His three younger sons were employed in the company. The father died bequeathing his shares equally between the younger sons. Comment fully d Do you thing the elder sons were justified in their actins? Show why. The affairs and activities of a company, its functions, rules and regulations relating to statutory requirements, etc.
Not all companies have a professional or qualified Company Secretary. There re many reasons for this, ranging from size of company being too small to justify the employment of a full-time Secretary to preference of secretarial work being done outside by professional firms of accountants and consultants.
It may be any person possessing the proper qualifications, appointed to perform the duties which may be performed b a Secretary. The Act is silent on the requirements, in terms of academic and in particular professional qualifications.
He is appointed, usually, by the directors.