I discussed how an individual or group of individuals can become an entrepreneur in my piece titled, “On becoming a business owner” in the Business a. m. of February 28, 2022. In that article, I stated that a business can be established either by one, copying an already existing business and maintaining status quo or try to surpass the standard of the existing business to be on top, or two, by modifying an already existing business, or three, by innovating or inventing a new product or service entirely. Examples of the first method are opening a restaurant or dry cleaning shop or supermarket (established businesses). Examples of the second method are bagless vacuum cleaner, bladeless fan and online sales outlet, while the example of innovation and invention are electric cars, driverless vehicles, dispensing machines, man-less guest houses etc.
While doing business in Nigeria, it is important to register the business as an enterprise. An enterprise may take one of the following forms: a private company limited by shares, a public limited company (PLC), an unlimited liability company, a company limited by guarantee, a partnership/firm, a sole proprietorship, and an incorporated trustees. The Companies and Allied Matters Act, 1990 (CAMA) is the principal statute governing the registration of enterprises in Nigeria. The administration of CAMA is the responsibility of the Corporate Affairs Commission (CAC), with headquarters in Zone 5, Abuja, FCT, and zonal offices all over the country.
The functions of the CAC, established in 1990, among other things include the following: to administer the Act, including the regulation and supervision of the formation, incorporation, management and winding up of companies; to establish and maintain companies’ registry and offices in all the states of the federation suitably and adequately equipped to discharge its functions under the Act or any law in respect of which it is charged with the responsibility; to arrange and conduct an investigation into the affairs of any company where the interests of the shareholders and the public so demand; to undertake such other activities as are necessary or expedient for giving full effect to the provisions of the Act; to accept annual reports of companies, etc.
The types of companies and enterprises under CAMA are:
(a) Company limited by shares: This is also known as limited liability company and is a company having the liability of its members limited to the amount (if any), unpaid on the shares respectively held by them.
(b) Company limited by guarantee: This is a company without a share capital. It is a not-for-profit company where the liability of its members is limited to such amount as the members respectively undertake to contribute to the assets of the company in the event of its being wound up. The consent of the Attorney General and Minister of Justice of the Federation is required for the registration of this type of company due to the tax exemption and other benefits granted.
(c) Unlimited company: This is a company where the members’ liability is not limited to any stated amount. The companies may be a private or a public company. A private company is one, which places restrictions on transfer of shares by members, and limits its membership to 50 persons. It is also prohibited from inviting the public for subscription to its shares or debentures. On the other hand, a public company has no such restrictions as its shares can be freely traded on. There is no restriction on the number of subscribers to its shares. It can be listed or unlisted. It is usually listed when it is quoted on the Stock Exchange.
Business Names: This is the name or style under which any business is carried on, whether in partnership or other form. The expression firm is used when 2 or more persons have entered into a partnership with the aim of carrying on business activities. Business names are to be registered under CAMA where the name consists of an addition to a person’s name.
Sole Proprietorships: This is a one-owner business, and should be registered with the CAC as a Business.
Partnership/Firms: This has the same format as a registered sole proprietor, except that there is more than one person involved. Starting from June 2000, there is no provision in CAMA for what is known as limited liability partnerships (“LLP”) as we have in some countries. Nevertheless, the Partnership Laws of most states in Nigeria provide for the registration of limited liability partnerships. There are two types of partners; the general partners who carry the risk and liability of the business, and the limited partner, whose level of liability is limited to a defined amount. The benefit of partnership is that two good heads are better than one. While one partner may have the idea (the technical partner); the other may have the finance (financier).
The process of registration of company names
The process for the registration of a company name for use by a “sole proprietor” or “partnership/firm” essentially involves the submission of a duly completed Application Form to the CAC signed by the appropriate persons. This form which must disclose certain particulars must be accompanied by a number of documents, as follows: –
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reservation of Name Form;
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the proposed name;
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passport size photographs of the owners;
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the general nature of the business or proposed activities;
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the full address of the principal’s place of business and place of business of every other subsidiaries;
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where the registration to be effected is that of a firm; the present forenames and surnames, nationality, age, sex, occupation and usual residential address of each of the individuals who are to become partners, and the corporate name and registered office of such corporation which is an intending partner as the case might be;
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the proposed date of commencement of the business or activities;
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certificates of professional qualification where the business is professional in nature.
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Where one of the partners is a non-Nigerian and intends to work in Nigeria, evidence of his immigration status.
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