Corporate organizations can be formed by two ways to wit;:

  • Incorporation
  • A statutory enactment

The difference is that corporations formed by statutes are not registered under CAMA. Secondly, they are not regulated by CAC. Third, they do not have Memo and Articles of Association as their guiding rules are contained in the statute creating it. Example AMCON, NIPC, NAFDAC, SEC etc.

Similarity: They both enjoy the benefits of incorporation.

There are four types of business organizations under the Nigerian corporate law practice. They are:

  1. Companies
  2. Sole Proprietorship (not registered as business name)
  3. Business name (registered as sole proprietor or partnership)
  4. Partnership.

Part A and B of CAMA are business organizations as they can carry out business. On the other hand, incorporated trustees under part C of CAMA is non-business organization. Business organizations are profit-oriented.

Factors Affecting Choice of Business

  • Nature of Business
  • Capital available
  • Number of members
  • Extent of liability of members
  • Commercial expediency
  • Cost of Registration and expenses
  • Speed of Processing and completion of registration
  • Post Registration compliance
  • Desire of the client
  • Documentation and legal compliances
    CCSDDP(acronym for the last 6 points)

COMPANIES
Companies are the most widely used business organization. They are profit-oriented. Under CAMA in s. 18, it takes at least two persons to incorporate or form a company. There are certain advantages which companies have over other types of business organizations. Advantages in this sense are different from the features of company when compared to other business organizations. These advantages are:

  1. Perpetual succession: a company once incorporated, enjoys perpetual succession. In partnership, when one of two partners dies, that is the end of the partnership. For company where shareholders die, other persons will take over the shares.
  2. Limited liability: when it is a company that is either limited by shares or guarantee, the liabilities of its members are thus limited. For sole proprietorship and partnership, the owners and partners have unlimited liability.
  3. Investors for a company: investors invest in a company more than in any sole proprietorship and partnership.
  4. Availability of funds: a company can easily approach the bank for loan.
  5. Management: in a company the management is different from the owners.

Types of companies
N.b Companies are classified along their

  • Liability status (limited by shares or guarantee or unlimited)
  • Membership (private and public)

Generally, by a combined reading of s. 21(1) and (2) CAMA, there are six types of companies. These are

  1. Private company limited by shares
  2. Public company limited by shares
  3. Private company limited by guarantee
  4. Public company limited by guarantee
  5. Private unlimited company
  6. Public unlimited company.

However, in practice, the types of companies obtainable are those whose names and the acronyms therefore are provided in section 29 CAMA. They are four as:

  1. Private company limited by shares (Ltd)
  2. Public company limited by shares (Plc)
  3. Private company limited by guarantee (Ltd/Gte)
  4. Private unlimited company (unlimited)

One reason why it is impossible to have a public company limited by guarantee in practical reality is because one basic feature of public companies is that they offer their shares to the public, but a company limited by Guarantee does not have a share capital pursuant to section 26(2) CAMA and thus there are no shares in reality to offer to the public.

Also, an unlimited company cannot be a public company as the public cannot be exposed to the unlimited liability by subscription of shares of the unlimited company. It is for this reason that an unlimited company is prohibited from re-registering as a public company. – Section 52(2) CAMA.

There are instances where the law mandatorily requires that a company should be formed before a particular business can be carried out.

  • Banking business - Banks and other Financial Institution Act
  • Insurance business - The Insurance Act
  • Mortgage business - Mortgage Institution Act
  • Partnership of over 20 persons - s. 19 CAMA
  • Stock broking
  • Foreigners/Aliens - Nigerian Investment Promotion Act. S. 54 & 56 CAMA.