This article explains the salient features of a private company and how to register a private company in Nigeria under the Company and Allied Matters Act 2020. In Nigeria, a company can either be a Private company or a Public company. The Company and Allied Matters Act 2020 (CAMA) is the relevant Law for registering a private company in Nigeria. According to section 18 CAMA, one person can form a private company in Nigeria.
People who are disqualified in the formation of a company in Nigeria
There are some restrictions as to who can form a company in Nigeria. These restrictions apply to:
- Minors (people under the age of 18).
- Mentally challenged persons.
- Undischarged bankrupts.
- People who are disqualified from being a director under sections 281 & 283 of CAMA 2020.
Minors can, however, participate in the formation of a company if at least two (2) persons who are not disqualified have subscribed to the memorandum of the company. A corporate body in liquidation is also disqualified from forming a company in Nigeria.
Section 20 (4) of CAMA allows foreigners to join in the formation of a company in Nigeria subject to any regulations.
A public or private company in Nigeria could be:
- Limited by shares, i.e. Members have their liability limited by the Memorandum and Article of Association (MEMART) to the amount if unpaid on the shares respectively held by them.
- Limited by guarantee i.e. members have their liability limited by the MEMART to the amount if unpaid on the shares respectively undertake to contribute to the company asset if it should wind up.
- Unlimited liability Company i.e. The company doesn’t have any limit on the liability of its members.
Restriction on the transfer of shares of a private company in Nigeria
Pursuant to section 22 of CAMA 2020, a private company in Nigeria may restrict the transfer of its shares, and it may also provide that:
- The company cannot sell assets with a value of more than 50% of the total company asset value without consent from members.
- A member can only sell shares to non-members after the shares have been offered to existing members first.
- A non-member must offer all existing members’ interests at the same rate before members can share more than 50% of the company shares with a non-member.
When a company doesn’t follow the CAMA 2020 provision for registering a private company, the company can’t have privileges and exemptions given to private companies under CAMA 2020. However, when failure to comply is accidental, the company can make a court application to relieve the company of the consequences.
Characteristics of a private company
- A private company has a share capital.
- The name of a private company may end with ‘Ltd’, ‘Ltd/Gte’, ‘Ultd’ for the words, ‘Limited’, ‘Limited by Guarantee’ and ‘Unlimited’ depending on its type of shares.
- The Membership of a private company in Nigeria is between 1 -50. Members of a private company in Nigeria cannot be more than 50. However, this does not include persons employed by the company who are still members of the company. (e.g. Mr A is employed by the company and while employed he is also a member of the company. He will be regarded as a member even if the members of the company are up to 50)
- If two (2) people jointly hold more than one share, they are treated as one. (e.g. Mr A, Mr B & Mr C own one or more shares together, they will be treated as one member.)
- A private company in Nigeria can’t invite the public to subscribe for shares or deposit money for a fixed period.
- A private company is a separate entity from its members.
- Its members’ liability is Limited.
- The company can sue and be sued in its name.
- It can acquire property (eg land and vehicle)
Checklist for requirements for registration of a private company in Nigeria
- At least two (2) proposed names of the company: A proposed company name and an alternative name in case the proposed name isn’t available.
- The type of company to be Incorporated and the nature of the business.
- Memorandum and article of association (MEMART): This document shows the company structure and regulations.
- Company Share Capital: This is the total money used to start the business. The minimum is a hundred thousand Naira (100,000) for private companies.
- Company Share Subscribers: These are people who have a share or shares in a limited company
- Proposed directors and a secretary: CAC conditions for appointing directors & a secretary should be complied with (SECTION 271 & 333 CAMA)
- Company directors and secretary particulars: this is the personal data of the proposed company Directors and secretary.
- Proposed company office address.
Steps involved in the registration of a private company in Nigeria
Check for the availability of the proposed company name and reserve a new name for the company. The procedure for reserving a name for a private company in Nigeria is similar to that of a business name. You can find more information on the reservation of name here.
Complete the CAC pre-incorporation form and upload the necessary document:
A pre-corporation form is a form that contains all information about the proposed company. It includes:
- The approved company name, type of company (private limited liability). A trade classification code or a brief description of the business.
- A Registered address of the head office, phone number and email. If the head office address is different from the registered address, it can be indicated.
- The applicant will be required to prepare a Memorandum and article of association (MEMART) for the company. The CAC has a general MEMART that can be adopted. The company directors and secretary Particulars are registered. The particulars of at least one director is needed for a small company. The appointment of a company secretary is optional for a small company. A secretary can either be an Individual (Section B1 CAC form) or a Corporate secretary (Section C1 CAC form).
- Statement of issued share capital: it includes the class of shares, nominal values of issued share capital, total numbers of shares, aggregate nominal value, the total aggregate amount to be unpaid (if any).
- The Particulars of natural persons or a legal entity who is a significant person in control.
- Presenters data.
Payment of filing fee and stamp duty fee as recommended by the CAC and Federal Internal Revenue Services (FIRS).
The pre-registration form is signed, scanned and uploaded on the CAC website along with pre-registration documents for approval.
The necessary documents for upload include:
- Form CAC 1.1
- Memorandum and article of association
- Identification document (e.g. International passport, driver’s license etc.)
- Payment Receipt of stamp duty fees and filing fees
Collect the pre-incorporation Certificate and certified true copy of the document.
The registration process of a private company in Nigeria can be done only by a CAC accredited agent. While the above steps provide helpful information on registering a private company in Nigeria, there might be other regulatory compliances depending on the type of business of the company. It is, thus, advisable to utilize the service of a legal practitioner when registering a company.