Category Archives: Company Secretaries and CAC Matters

To educate and guide entrepreneur on how to incorporate a corporate name to carry on their business idea and how to handle post incorporation transactions with the Corporate Affairs Commission (CAC).

HOW TO SELECT THE MOST APPROPRIATE BUSINESS STRUCTURE TO REGISTER WITH THE CORPORATE AFFAIRS COMMISSION (CAC)

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The following are guidelines on which business structure will be suitable to register your business with.

(A) PROFIT MAKING STRUCTURES

  1. Business Name Registration as Sole Proprietorship

  • Participant is one and is called Sole Proprietor;
  • Liability of participant is unlimited (This means Decision Maker will avoid taking risk and thereby limit it’s commitments and business growth);
  • Decision Maker = One Participant (The Sole Proprietor);
  • Not useful for SEC listing (Shares is not involved, therefore no trading on stock exchange);
  • The Business is not a separate entity from Participants (This means its not legal for the business to enter into a contract with third parties);
  • Tax of the business are treated along side taxes of individual participants. That is, The income of the business is not taxable;
  • Fund contribution (in-kind or in-cash) by participants is not mandatory;
  • Number of participants involved: Minimum = 1, Maximum= 1;
  • Constitution is not involved and not mandatory for registration.

2. Business Name Registration as Partnership (General Partnership)

  • Participants are called Partners or Proprietors;
  • Liability of participants are unlimited (This means Decision Makers will avoid taking risk and thereby limit their commitments and business growth);
  • Decision Maker = Collective Participants (Partners/Proprietors). All Participants are involved in Decision Making process;
  • Not useful for SEC listing (shares is not involve, thus no trading on stock exchange);
  • The Business is not a separate entity from Participants (This means its not legal for the business to enter into a contract with third parties);
  • Tax of the business are treated along side taxes of individual participants. That is, The income of the partnership as a business is not taxable;
  • Fund contribution (in-ind or in-cash) by Participants is not mandatory;
  • Number of participants involved: Minimum =2, Maximum= 20;
  • Constitution is not involved and not mandatory for registration.

3. Limited Partnership (LP)

  • Participants are called Partners;
  • Liability of participants is a Mix of limited liability (participants to provide fund but no technical know-how) and unlimited liability participants (participants with technical know-how but has no fund);
  • Decision Maker = Collective Participants (Board of Partners). It can be few selected Participants or All participants depending on what is included in the constitution;
  • Not useful for SEC listing (No shares for trading on stock exchange);
  • The Business is not a separate entity from it’s participants (This means its not legal for the business to enter into a contract with third parties);
  • Tax of the business are treated along side the taxes of individual participants. That is, The income of the partnership as a business is not taxable;
  • Fund contribution (in-kind or in-cash) by few participants is mandatory;
  • Number of participants involved: Minimum =2, Maximum= 20;
  • Constitution is involved in the form of Partnership Agreement and mandatory for business registration.

4. Limited Liability Partnership (LLP)

  • Participants are called Partners;
  • Liability of participants are limited;
  • Decision Maker = Collective Participants (Board of Partners). It can be few selected Participants or All participants depending on what is included in the constitution;
  • Not useful for SEC listing (No shares for trading on stock exchange);
  • The Business is a separate entity from Participants (This means it can enter into contract with third parties);
  • Tax of the business are treated along side taxes of individual participants. That is, The income of the partnership as a business is not taxable;
  • Fund contribution (in-kind or in-cash) by participants is not mandatory;
  • Number of participants involved: Minimum =2, Maximum= Unlimited;
  • Constitution is involved in the form of Partnership Agreement and mandatory requirement for business registration.

5. Private Limited Liability Company (Ltd or Limited)

  • Participants are called Shareholders;
  • Liability of participants are limited (This means Decision Makers will always thrive to take calculated business risk needed for business growth);
  • Decision Maker = Usually Collective Participants (Board of Directors). However, One Participant Decision Maker (One Man Business) is possible;
  • Not useful for SEC listing (No shares for trading on stock exchange, however second tier market on the stock exchange might be available as option);
  • Business is regulated beyond CAMA. and ISA (Investment & Security Act) Laws are to be complied with
  • The Business is a separate entity from Participants (This means it can enter into contract with third parties);
  • Tax of the business are treated separate from taxes of individual participants. That is, The income of the company is taxable;
  • Fund contribution (in-kind or in-cash) by participants is mandatory in the form of shares;
  • Number of participants involved: Minimum =2, Maximum= 50;
  • Constitution is involved in the form of Memorandum and Article of Association and mandatory requirement for business registration.
  • Private limited liability companies are not mandated to publish their financial information for public consumption but are obligated to present to Tax authorities and related regulators.

6. Public Limited Liability Company (PLC)

  • Participants are called Shareholders;
  • Liability of participants are limited (This means Decision Makers will always thrive to take calculated business risk needed for business growth);
  • Decision Maker = Collective Participants (Board of Directors);
  • Useful for SEC listing (shares are involved and can be traded on the floor of the stock exchange);
  • The Business is a separate entity from participants (This means it can enter into contract with third parties);
  • Tax of the business are treated separate from taxes of individual participants. That is, The income of the company is taxable;
  • Fund contribution (in-kind or in-cash) by participants is mandatory in the form of shares;
  • Number of participants involved: Minimum =2, Maximum= Unlimited;
  • Constitution is involved in the form of Memorandum and Article of Association and mandatory requirements for Business registration.
  • Public limited liability companies are mandated to publish their financial information for public consumption, Tax authorities consumption and other related regulators.

7. Unlimited Liability Company (ULC)

  • Participants are called Shareholders;
  • Liability of participants are unlimited (This means Decision Makers will avoid taking risk and there by limit their commitments and business growth);
  • Decision Maker = Usually Collective Participants (Board of Directors). However, One Participant Decision Maker (One Man Business) is possible;
  • Not useful for SEC listing (No shares for trading on stock exchange, however second tier market on the stock exchange might be available as option);
  • The Business is a separate entity from Participants (this means it can enter into contract with third party);
  • Tax of the business are treated along side the taxes of individual participants. That is, The income of the company is not taxable.
  • Fund contribution (in-kind or in-cash) by participants is not mandatory;
  • Number of participants involved: Minimum =1, Maximum= 50
  • Constitution is involved in the form of Memorandum Only. Article of Association is not mandatory for registration.
  • Unlimited liability companies are not mandated to publish their financial information for public consumption and Tax authorities consumption
  • Unlimited liability companies are usually use as against Private limited company because the owners wish to keep information that could be valuable to competitors, such as turnover and the amounts paid in dividends, out of the public eye. Also, Amounts contributed by shareholders can be refunded to them.
  • Unlimited liability company is like a company version of Business Name Registration (either as Sole Proprietor or as Partnership). They can be registered with or without shares capital. They can also be registered as private or public company.

(B) NOT FOR PROFIT

  1. Incorporated Trustees
  2. Company Limited by Guarantee

1. Incorporated Trustees

  • Participants are called Trustees
  • Decision Maker = Collective Participants (Board of Trustees)
  • Minimum participants = 2, Maximum = Unlimited
  • Constitution is involved in the form of By-Laws and mandatory requirement for registration purpose

2. Company Limited by Guarantee (Ltd/Gte)

  • Participants are called Guarantor or simply put, Members
  • Decision Maker = Collective Participants (Board of Directors)
  • Minimum participant = 1, Maximum Participant = Unlimited
  • There is no Shareholders
  • Constitution is involved in the form of Memorandum and Article of Association and mandatory requirement for registration purpose

TEN (10) CRITERIA TO USE IN DETERMINING A SUITABLE BUSINESS STRUCTURE FOR YOUR BUSINESS

(a) is the business for Profit motive?

  • If the answer is YES, then it’s for Profit motives, then only business structures listed under category A above will be suitable for your business
  • If the answer is NO, it’s mean the business is not for Profit Motives, then either Incorporated Trustees or Company limited by Guarantee will be considered for use

What will then determine which one to use between incorporated Trustees and Company Limited by Guarantee will depend on the following understanding:

  • (i) A company limited by guarantee is allowed to venture into business or profit making agenda but cannot share the profit among members; but Incorporated Trustees are not allowed to venture into profit making business.
  • (ii) Willingness to make publication in newspapers before registration? Company by Limited by Guarantee does not require public awareness before registration while it is a requirement for incorporated trustees to carry the public along.

*IF THE ANSWERS TO THE ABOVE IS “NO” (THAT IS, NOT FOR PROFIT MOTIVE), THERE IS NO NEED TO CONSIDER OTHER CRITERIA BELOW. THE REMAINING CRITERIA BELOW FROM (b) to (j) ARE RESERVED FOR BUSINESSES WITH PROFIT MOTIVES

(b) Liability of participants to be limited?

  • If YES, it means, participants will sell their property to settle any debt that the business cannot be settled.

(c) Needed for listing on Stock Exchange?

  • If YES, it means more compliance burden as more professional will be employed to keep to the rules of SEC. This will make cost of running expensive.

(d) Business is a separate entity from individual participants?

  • If YES, It means the Business can do any PUBLIC BID. They can tender for any Government Bid. Other business structure can only do Professional Service related public bids.

(e) Tax of business is treated separately from that of individual participants?

  • If YES, it means more tax obligations. Engagement of Tax consultant, Auditors is a must and their fees will make cost of running the business to more expensive

(f) Fund contribution by Participants is mandatory?

  • If YES, it means, financial commitments determine your rights to some benefits in the business. In also implies that Investors can be attracted. NOTE: If share capital will be involved, it simply means fund raising is involved and therefore YES will be an answer.

(g) Want decision making process to be fast?

  • If YES, it means a business structure with ONE participant will be appropriate. Two Participants too can make fast decisions but not as fast with ONE participant.
  • If NO, it means business structures with Collective Body Decision Maker will be suitable.

(h) Any requirement of the Law, CAC, Professional and regulatory bodies on the appropriate structure penciled down to carry on a trade or profession?

  • For example, Corporate Affairs Commission (CAC) has mandated that all Schools are to be registered as Limited Liability Companies, Accounting and Legal practice are not to be carried out as Limited liability Companies, Banks, Insurance companies and other related financial institutions are to be carried out as Limited Liability Company.
  • In some cases with Limited Liability Company , it is regulated with Minimum Share Capital to be in issued and be fully paid otherwise no business operations.

(i) Will there be need for a constitution that will guide business operations?

  • If YES, it means a lot of paperwork and timing will be involved in the registration process thereby making it a complex process as against simplicity
  • If NO, it means lesser timing and paperwork and more simple to register.
NOTE: Constitutions takes the form of Bye-laws, Partnership Agreement, Shareholders Agreement and Memorandum and Article of Association (MEMART)

(j) Which of the following will be the numbers of participants that will be involved (To Achieve Perpetual Succession) ?

1 (one)
Greater than 1 (one) but limited
Unlimited
NOTE: Perpetual Succession cannot be achieved with single participant
  • If the answer is Greater than 1 (one) but limited, it means Business name registered as Sole Proprietor, Business name registered as Partnership (General Partnership), Private Limited Liability Company, Public limited Liability Company, Limited Liability Partnership, Limited Partnership are all available for use.
  • If the answer is 1, it means Public Limited Liability Company and Limited Liability Partnership ( LLP) cannot be used
  • If the answer is Unlimited, it means only Public Limited Liability Company and Limited Liability Partnership can be used.

Feel free to ask us anything about Corporate Affairs Commission and your business formation in Nigeria.

Registration,forgery scandal rocks the Corporate Affairs Commision (CAC)

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The Corporate Affairs Commission (CAC) is enmeshed in a directorship registration and forgery scandal involving Gateway Estates Limited, a multi-billion naira firm. Two siblings, Mrs. Eunice Odirri and Mr. Sunny Esiso, children of the owner of the firm, the late Chief E.A. Esiso, and a lawyer, Mr. Wilfred Okoli, were allegedly arrested last week by the Special Fraud Unit (SFU) of the police in connection with the case.

The suspects were, however, said to have been released on bail while the SFU was alleged to be on the trail of their suspected collaborators in CAC. SFU sources said the suspects may be arraigned before a Magistrate Court in Warri, Delta State, this week on charges of fraud and forgery.

Founded by the late Esiso, Gateway Estates Limited has substantial real estate holdings across the country, particularly in Warri. The deceased and his wife, Mrs Iketiti Esiso, were registered as co-directors.

Esiso’s death in 2011, according to a petition by his first son, Y. Esiso, and upon which the SFU is acting, left the firm with one director. This threw up the need to appoint at least one more director to the company’s board.

The family, in the petition to the Commissioner of Police, SFU, Milverton Road, Ikoyi, dated February 15, 2014 headed to a Delta State High Court, sitting in Effurun, which granted Esiso’s first son and the eldest daughter as interim administrators of his estate.

The duo then approached the CAC to request that they be allowed to appoint new directors to the board of their father’s firm. This, the petition claimed, became necessary because the passing of their father had left the company with only one director, in contravention of the legal requirement of a minimum of two directors.

“The CAC rejected their request on the grounds that an order from a state court does not suffice to command the compliance of CAC. “CAC insisted that the duo must go to yet another court, this time the Federal High Court to get an order for an extraordinary general meeting.

“The strident objection of Barrister Ama Etuwewe, acting for the court appointed administrators to the illegality of this peremptory command, did not sway CAC from her flagrant contempt of an order of court,” the petition said.

This notwithstanding, the interim administrators reportedly instructed their counsel to approach the Federal High Court for the further order as insisted upon by the CAC.

“In January 2013, the Federal High Court, sitting in Abuja, granted the said order subsequent upon which an extra ordinary general meeting was summoned by the administrators at which resolutions were passed and adopted and a list of new board members nominated and forwarded to CAC,” the petition stated.

CAC was said to have made a U-turn and rejected the administrators’ list of directors mandated by the Federal High Court order. The petition alleged: “When pressed, they refused to give reasons for their second, more egregious contempt of court but a quick perusal of the files of CAC revealed that while CAC was sending the administrators on a wild goose chase for more court orders, they had proceeded with the acceptance of a list of directors from one Barrister Wilfred Okoli of C84, Banex Plaza, Wuse 11, acting for the duo of Mrs. Eunice Oddiri and Mr. Sunny Esiso, siblings and the fifth and sixth children of the late Chief Esiso.

“Ostensibly, CAC accepted the list from the duo on the basis of a form purported to be signed by the sole surviving director, Mrs. Iketiti Esiso and one Mr. Anthony Chikwendu, who had acted as Company Secretary at the time of formation of Gate Way Estates Ltd. in March 1973, 41 years ago.”

‘What the parties did not know is that the interim administrators had made spirited efforts to locate Mr. Anthony Chikwendu many years prior and had established the fact that he had been deceased for over a decade and had consequently proceeded to the court option for the summoning of an extraordinary general meeting’

A family source said: “When the name of Mr. Anthony Chikwendu was appended to the April 2013 form and when, on examination, it was discovered that the name was incorrectly spelt and the affixed signature suspected to be forgery, the case was reported to the Special Fraud Unit of the police.”

 

FG Slashes Registration Of Business Cost By 50%

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The federal government has reduced the cost of registering businesses by half, starting October 1, 2013, to encourage investments in the country.

Minister of industry, trade and investment Mr Olusegun Aganga, who made this known yesterday, explained that the Corporate Affairs Commission (CAC) had reduced capital registration costs by 50 per cent for equity registrations of N500million or lower, and by 25 per cent for equity registrations from N500million and above.

The minister revealed this during the signing of a Memorandum of Understanding (MoU) between his ministry and the Ministry of Development, Industry and Foreign Trade of the Federal Republic of Brazil on the promotion of trade and investment, in Abuja.

The 19-man Brazilian delegation was led by the country’s deputy minister of development, industry and foreign trade, Mr Richardo Schaefer.

Aganga said the initiative was in line with the ministry’s investment climate reform programme aimed at strategically repositioning Nigeria as the preferred destination for both local and foreign investments.

“Following the directive from the president, the Corporate Affairs Commission has since October 1, 2013, slashed fees for business registration by 50 per cent. Under the new regulations, capital registration fees for companies (under Part A) have been reduced across board. While capital registrations below N1million will retain a flat fee of N10, 000; all registrations between N1 million and N500 million are reduced by 50 per cent; and all registrations above N500million are reduced by 25 per cent.

“By this action, Nigerian companies will now save well over N2bn per annum, which can be used to sustain their businesses, hire more staff, and expand operations. The new regulation has been deliberately set up to ensure the bulk of these savings go to smaller businesses, which need the lower fees more,” he said.

He added that the signing of the MOU with Brazil would make it possible for various agencies responsible for skills development, industry and development finance in both countries to work together to deliver better services for the citizens of their respective countries.

“The aim of the MOU is to strengthen the economic cooperation between the two countries at the bilateral and multilateral level; increase and promote the bilateral trade of strategic items of mutual interest, and support cooperation between institutions of both countries responsible for the promotion of trade and investment and official financing such as Banco Nacional do Desenvolimento Economico Social (BNDES) and the Bank of Industry (BOI).