The steps in the formation of a liability limited company, either a private or a public limited company. Have the areas of the document to consider in their operations. A private limited company can commence business after receiving the certificate of incorporation, but a public liability company must commence business after receiving the certificate of trading.
The promoter(s) are required to secure the services of a solicitor to prepare certain documents to be filed with the registrar of companies. The documents are:
Memorandum of Association
A Memorandum of Association is a document that defines a company’s objectives and powers as dealing with the world outside. It is the document containing the relationship of a company with outsiders. Once the external rules and regulations are registered, the memorandum becomes a public document.
- The right of shareholders
- How directors are to be elected
- How auditors are to be remunerated
- Method of sharing dividends
- Transfer and forfeiture
Articles of Association
An Articles of Association is known as a document whose regulations govern the internal management of the company’s affairs, and the duties, rights, and powers of the shareholders. It complements the memorandum of association.
- Particulars of directors and other officials
- Promoter’s remuneration
- The date of opening the lists
- The nature of capital offered for subscription
- The amount payable on application is an allotment on each share
- The number of founders’ shares
The contents of an Article of Association include:
- The method of issuing capital.
- The method of holding meetings.
Statement of Nominal Capital
The documents are stamped and lodged with the registrar of companies. The promoter(s) devise a scheme of capitalisation, bearing in mind the cost of formation, assets to be bought, and working capital.
Prospectus
A prospectus is a document to subscribe for shares of the company. A copy of such a prospectus, signed by directors or proposed directors in writing. The content of a prospectus includes:
- Particulars of the company’s history
- The restriction, if any, is on the power of the company.
- Information about the present position and prospects of the company.
After going through the documents, the registrar of companies then issues a certificate of incorporation to the company.
Certificate of incorporation
A private limited liability company is defined as one which by its articles restricts the right to transfer its shares, limits the number of its shareholders from two to fifty, prohibits any invitation to the public to subscribe to its shares, and the name of the private liability company must end with the abbreviation of “Limited”, e.g. Bluebird Nigeria Limited, Goodwill Nigeria Limited, and News watch Nigeria Limited.
Features of Private Limited Liability Companies
A certificate of incorporation, which confers legal status on the company to commence business, is issued by the registrar of companies; the company has put on a veil of incorporation. The certificate is given out as evidence that all the requirements of the Act in respect of registration have been complied with by the company and is therefore duly registered under the Act. It contains the name of the company, registration number, and signature of the registrar.
Ownership: The business is owned by shareholders who may be between two and fifty persons in number.
Objective: The major aim of a private limited company is to make a profit. The right of the company to own properties which are separate from the shareholders
- Right of perpetual existence
- Right to sue and be sued
- Right to transfer shares
Source of capital: The capital required to set up and run the business is provided by the shareholders in the form of shares. However, shares are not sold to the general public. They are sold privately.
Certificate of trading
Liability: The shareholders have limited liability. In the event of liquidation, the amount a shareholder can lose is limited to the fully paid-up value of his share or the capital he has invested in the business. His assets or properties are protected by the law.
Legal entity: The business is a separate legal entity and is different from the owners of the business. The business can sue or be sued in its name, without involving the owners.
A certificate of trading is a document that allows a public limited company to commence business activities. It is issued to the Liability Company to enable it to commence after the company has been given the certificate of incorporation. If it is a private limited company, it is at liberty to commence immediately without the certificate of trading.
Three Areas to Consider in Establishing a Liability Company
Power and energy: There are about five major sources of energy supply in less developed countries.
These include:
- Solar energy
- Power generated from gas
- Hydroelectric power
- Energy is generated from coal.
- Energy is generated from waste material deposits.
Power and energy are needed for both industrial and domestic purposes. Whenever there is no regular supply of power to the industry, many producers that cannot afford to power their machines with generators will be forced to relocate to areas where there is a regular supply of power or close down.
Those firms that can afford to power the machinery with generators will pass the cost to consumers in the form of high prices of goods and services. Almost all developing countries are short of power demand. This can be traced.d
Resources Control: There is agitation for control and management of resources by host populations in the host countries. Using some key case studies from Nigeria, namely grievances by population in the NigerDeltat and Indonesia, mainly those of the Aceh people affected by exploitation of resources, in tracing the historical process of resource control agitation, the antecedent can be located in the practice before the advent of the modern state and has developed since then through to modern times.
What seems striking is that the countries have resorted to the same arguments that fuelled their earlier struggles against their colonial masters, a central tenet being the right to self-determination. In so doing, the author seeks to establish the legitimacy of such claims by identifying international legal doctrine that seeks to address the rights espoused.
The case studies of Indonesia and Nigeria offer two perspectives on how states often manage such grievances through policy and responses to the resource control claim. The findings in Indonesia indicate several policy measures designed to address the quest for self-determination with some corresponding benefits, including improvement in the proceeds deriving from natural resources exploitation.
In contrast, the policy measures taken by the Nigerian government have not led to the same responses as did the Indonesian model. The inadequacy of the policies to satisfy the yearning for these policies rarely deals with the roots of the grievance.
There are the host community responses and the implications for further investment in the resource sector, contrasting the different models and their implications for the growth of private investment.
Corruption: Political corruption is the abuse of public power, office, or resources by elected and government officials for personal extortion, soliciting, or offering bribes. It can also take the form of officeholders maintaining themselves in office by purchasing votes or enacting laws that use taxpayer money.
Governmental corruption of the judiciary is broadly known in many transitional and developing countries because the budget is almost completely controlled by the executive. Systemic corruption is corruption that is primarily due to weaknesses of an organisation or process. It can be contrasted with individual officials or agents who act corruptly within the system.
Corruption is both a major cause and a result of poverty around the world. It occurs at all levels of society, from local and national government, civil society, the judiciary, the military, large and small businesses, and other services.
Corruption affects mostly the poorest rich or poor nations, though all elements of society are affected in some way as corruption undermines political development, democracy, economic development, the environment, people’s health, and more.
Around the world, the perception of corruption in public places is very high, but it isn’t just in governments that corruption is found; it can permeate through society.
At a national level, people’s effective participation and representation in society can be undermined by corruption, while at local levels, corruption can make day-to-day lives more painful for all affected.
A difficult thing to measure or compare, however, is the impact of corruption on poverty versus the effects of inequalities that are structured with law, such as unequal laws. Read our effective article on the Key Documents and Areas in Setting Up Liability Companies. Read further on this page.
Editors
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