Registration is a core requirement for a company to gain legal status. Part A of the Company and Allied Matters, Act 1996, Laws of the Federation of Nigeria (CAMA) contain provisions that regulate companies operations from its formation to dissolution. Section 19 of CAMA makes registration a precondition for the formation of any association or partnership consisting of more than twenty persons with the purpose of carrying on business for profit or gain.
Upon incorporation, Corporate Affairs Commission (CAC) issues the company a certificate of incorporation. An incorporated company acquires a legal personality. It becomes an artificial person separate and distinct from its members and officers. Section 38 (1) CAMA provides that it has all the powers of a natural person to the extent that its memorandum of association or any other law permits. On that account, a company can sue and be sued in its own name. It has power to hold land, can enter into contractual relationships with individuals and other corporate bodies. Also, it has perpetual succession, that is, it does not die except it is being wound up. The effect of incorporation is copious but within the confines of the law.
Certain documents must be delivered to CAC for incorporation. Section 35 lists these documents as the Memorandum and Article of Association, the notice of the address of the registered office, list and particulars along with consent of the first directors, statement of the authorized share capital and any other necessary documents required by CAC.
Memorandum of association is a document that deals with the external affairs of a company. It is a contract under seal that defines the relationship between a company and outsiders such as investors and creditors. It outlines the objects or business of the company which must be legal, thus, checking its powers. Any purported act of a company, its members or officers that exceeds the objects spelt out in the memorandum is ultra vires its powers. The structure and scope of a company’s power is delimited by the memorandum.
A memorandum should state the name of the company, where its registered office is situate, the business for which it is formed, the nature of the company whether private or public, the liabilities of its member whether limited by shares, guarantee, or unlimited, authorized share capital, name, addresses and description of the subscribers to the shares, number of shares to be taken by each subscriber, association clause. A memorandum must be subscribed to at least by a witness who shall attest to the signatures of the subscribers. Subscribers to the memorandum are deemed members of the company.
On the other hand, articles of association regulate the internal affairs of a company. Matters not inserted in the memorandum are set out in the articles. Articles, like memorandum, are required to be under seal. Therefore, it defines the relationship of the company and its members, the company and its officers and members. It was held in Lapite v Nigeria Airways Ltd, suit no :CA/L/158/87 of 11/1/88 that any decision taken by a company in breach of its articles of association is valid against the whole world excepts it members who complain about it. Third parties have no locus standi with respect to articles of association as it does not constitute a contract between the company and outsider.
The content of articles of association include issues of shares, meetings of company, notice of meetings, appointment of directors, voting rights, alteration of capital, winding up, forfeiture of shares, and other matters that affect the company. The form and content of articles of association of companies are contained in the table A of the First schedule to CAMA. Additions, omission or alterations are allowed at the company’s discretion. Articles are required to be printed, divided into paragraphs numbered consecutively and should be signed by each subscriber to the memorandum in the presence of at least one witness who shall attest to the signatures.
In Evans v Chapman (1902) 86 L.T.381, the courts held that the contractual relations created by articles have statutory operations. Therefore, the court will construe each word contained therein literally and will not imply any terms. An aggrieved person has no equitable right and thus, cannot invoke the equitable powers of the courts in this regard. This is so even if the ordinary meaning does not reflect the intention of the company. Articles of association is a business document and should be interpreted as such. It should not be construed as other conveyance document under seal.
Articles of association must be delivered together with Memorandum. Every other matter not contained in the memorandum is outlined in the Articles. The memorandum supersedes the articles such that where there is conflict between both documents, the memorandum prevails. Section 41 of CAMA provides that subject to its provisions, the memorandum and articles when registered, shall have the effect of a contract under seal between the company and its members and officers and between the members and officers themselves whereby they agree to observe and perform the provisions of the memorandum and article, as altered from time to time in so far as they relate to the company, members, or officers as such.
Members of a company have rights to copies of memorandum and articles of association. Under the common law, members of the public were deemed to have constructive notice of the content of the documents whether or not they had access to them. However, Section 68 of CAMA has abolished the common law rule. Therefore, delivery of memorandum and articles to CAC qualifies them as public documents. Section 551 provides that any person can inspect the documents or obtain copies from CAC upon payment of the prescribed fees. A company may alter the content of its memorandum and articles of association subject to the provision of CAMA.
It has been established that memorandum of association and articles of association are essential documents without which a company cannot be incorporated. Operating a company with unascertainable objectives would be unfair to outsiders who deal with the company. The rationale behind the mandatory registration of memorandum and articles is the protection of shareholders, creditors, and outsiders in general. Imagine a company run without articles of association. How would matters which are neither clearly provided for in CAMA nor in memorandum be dealt with? One would readily give an answer with reference to the powers of the courts in this instance. The availability of articles of a company makes the duties of the court less tedious. However, where a company has neither documents, it can’t sue or be sued in its own name. Such a company is non-existent in the eyes of the law.