Corporate Law :- Memoranda & Articles of Association Under CAMA 2023- All You Need To Know
This article deals with the topic of Memoranda & Articles of Association being one of the mosr important pieces of documentation required for incorporation and their pursuant regulations as provided under the Companies and Allied Matters Act (CAMA) 2020.
A memorandum of association is a document which breaks down incorporation information of a company from its shareholder information to its objects clause while a company’s articles are a compilation of its bye-laws beyond which the company cannot act.
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This article will be focused on the requirements for Memoranda if Companies under CAMA 2020, articles of association, registration documents and statement of a company’s objects.
Requirements With Respect To The Memorandum Of A Company
The act provides that :-
-The memorandum of association of every company shall state :
(a) the name of the company ;
(b) that the registered office of the company shall be situated in Nigeria ;
(c) the nature of the business or businesses which the company is authorised to carry on, or, if the company is not formed for the purpose of carrying on business, the nature of the object or objects for which it is established ;
(d) the restriction, if any, on the powers of the company ;
(e) that the company is a private or public company, as the case may be ; and
(f ) that the liability of its members is limited by shares, by guarantee or unlimited, as the case may be.
-If the company has a share capital :
(a) the memorandum of association shall also state the amount of the minimum issued share capital which shall not be less than N100,000.00 in the case of a private company and N2,000,000.00, in the case of a public company, with which the company proposes to be registered, and the division thereof into shares of a fixed amount ; and
(b) each subscriber shall write opposite his name the number of shares he takes.
– A subscriber of the memorandum who holds the whole or any part of the shares subscribed by him in trust for any other person shall disclose that fact and the name of the beneficiary in the memorandum of association.
-The memorandum of association of a company limited by guarantee shall also state that:
(a) the income and property of the company shall be applied solely towards the promotion of its objects, and that no portion thereof shall be paid or transferred directly or indirectly to the members of the company except as permitted by, or under this Act ; and
(b) each member undertakes to contribute to the assets of the company in the event of its being wound up while he is a member or within one year after he ceases to be a member for payment of debts and liabilities of the company, and of the costs of winding-up, such amount as may be required not exceeding a specified amount and the total of which shall not be less than N100,000.
– The memorandum of association shall be signed by each subscriber in the presence of at least one witness who shall attest the signature.
– The memorandum shall be stamped as a deed.
Articles of Association
-A company shall have articles of association prescribing regulations for the company.
– Unless it is a company to which model articles apply by virtue of the relevant provisions of CAMA it shall register articles of association.
-Articles of association registered by a company shall be:
(a) contained in a single document, and
(b) divided into paragraphs numbered consecutively.
– Reference in this Act to a company’s “articles” are to its articles of association.
The Power of a Minister to prescribe Model Articles
-The Minister may by regulations prescribe model articles of association for companies.
-Different model articles may be prescribed for different descriptions of companies.
– A company may adopt all or any of the provisions of model articles.
– Any amendment of model articles by regulations does not affect a company registered before the amendment takes effect.
– In this section, “amendment” includes addition, alteration or repeal.
Default Application of Model Articles.
– The act provides that on the formation of a limited company if articles are:
(a) not registered ; or
(b) registered, in so far as they do not exclude or modify the relevant model articles, the relevant model articles form part of the company’s articles in the same manner and to the same extent as if those articles expressly included the relevant model articles in the form in which those articles had been duly registered.
– In this section, the “relevant model articles” means the model articles prescribed by the Commission for a company of that description as in effect at the date on which the company is registered.
Statement of a Company’s Objects
-The act provides that unless a company’s articles specifically restrict the objects of the company, its objects are unrestricted.
-Where a company amends its articles to add, remove or alter a statement of the company’s objects:
(a) it shall give notice to the Commission ;
(b) on receipt of the notice, the Commission shall register it ; and
(c) the amendment is not effective until after the entry of that notice in the register.
– Any such amendment does not affect any right or obligation of the company or render defective any legal proceeding by or against it.
Registration Documents
– The act provides that the memorandum of association shall be delivered to the Corporate Affairs Commission (CAC) together with an application for registration of the company, the documents required by this section and a statement of compliance.
– The application for registration shall state:
(a) the company’s proposed name ;
(b) the registered office address and head office address if different from the registered office address ;
(c) whether the liability of the members of the company is to be limited and, if so, whether it is to be limited by shares or by guarantee ; and
(d) whether the company is to be a private or a public company.
– If the application is delivered by a person as agent for the subscribers to the memorandum of association, it shall state the name and address of that agent.
-The application shall contain:
(a) in the case of a company that has a share capital, a statement of initial issued share capital and initial shareholdings ;
(b) in the case of a company that is limited by guarantee, a statement of guarantee;
(c) a statement of the company’s proposed directors ;
(d) a statement of the proposed registered office of the company ; and
(e) a copy of the proposed articles of association to the extent that these are not supplied by the default application of model articles.
The Capacity & Powers Of Companies Under CAMA 2023
Companies are well known to be juristic persons, meaning that they have legally recognized personalities distinct from those of their directors, founders and members.
This article however looks at the provisions of the Companies and Allied Matters Act (CAMA) on the extent of the powers and capacity granted to companies as well as the exercise of those powers.
Powers of Companies & Prohibition of Donations for Political Purposes
The act (CAMA) provides that :
– Except to the extent that the company’s memorandum or any enactment otherwise provides, every company shall, for the furtherance of its business or objects, have all the powers of a natural person of full capacity.
– A company shall not have or exercise power either directly or indirectly to make a donation or gift of any of its property or funds to a political party or political association, or for any political purpose, and if any company, in breach of this subsection makes any donation or gift of its property to a political party or political association, or for any political purpose, the officers in default and any member who voted for the breach shall be jointly and severally liable to refund to the company the sum or value of the donation or gift and in addition, every such officer or member commits an offense and is liable to a fine equal to the amount or value of the donation or gift.
Effects of Ultra Vires Acts
– A company shall not, carry on any business expressly prohibited by its memorandum and shall not exceed the powers conferred upon it by its memorandum or this Act.
-A breach of the above-mentioned provision, may be asserted in any proceeding under the relevant provisions of this Act .
-Notwithstanding the provisions of the act, no act of a company, conveyance or transfer of property to or by a company shall be invalid by reason of the fact that such act, conveyance or transfer was not done or made for the furtherance of any of the authorized business of the company or that the company was otherwise exceeding its objects or powers.
– On the application of:
(a) any member of the company, or
(b) the holder of any debenture secured by a floating charge over all or any of the company’s property or by the trustee of the holders of any such debentures, the Court may prohibit, by injunction, the doing of, any act,conveyance or transfer of any property in breach of the relevant provisions of the act.
– If the transactions sought to be prohibited in any proceeding under this act are being, or are to be performed or made pursuant to any contract to which the company is a party, the Court may, if it deems the same to be equitable and if all the parties to the contract are parties to the proceedings,set aside and prohibit the performance of such contract, and may allow compensation to the company or to the other parties to the contract for any loss or damage sustained by them by reason of the setting aside or prohibition of the performance of such contract but no compensation shall be allowed for loss of anticipated profits to be derived from the performance of such contract.
The Effect of Reliance on Restrictions in the Memorandum
The act provides here that :-
– Where there is provision in the memorandum of association of a company restricting the powers and capacity of the company to carry on its authorised business or object, the restriction may be relied on and have effect only for the purpose of proceedings-
(a) against the company by a director or member of the company, or where the company has issued debentures secured by a floating charge over all or any of the company’s property, by the holder of any of the debentures or the trustee for the holders of the debentures ;
(b) by the company or a member of the company against the present or former officers of the company for failure to observe any such restriction ;
(c) by the Commission or a member of the company to wind up the company ; or
(d) for the purpose of restraining the company or other person from acting in breach of the memorandum or directing the company or such person to comply with the same.
– A person may not in the proceedings referred to in the relevant provisions of this act, rely on a restriction of the power or capacity of the company contained in the memorandum in any case where he voted in favour of, or by conduct agreed to the doing of an act by the company or the conveyance by or to the company of property which, it is alleged in the proceedings, was or would be contrary to the restriction.
Legal Effects of Memoranda & Articles
– Subject to the provisions of this Act, the memorandum and articles, when registered, shall have the effect of a deed 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 articles, as altered in so far as they relate to the company,its members, or officers.
– All money payable by any member to the company under the memorandum or articles shall be a debt due from him to the company and shall be of the nature of a specialty debt.
– Where the memorandum or articles empower any person to appoint or remove any director or other officer of the company, such power shall be enforceable by that person notwithstanding that he is not a member or officer of the company.
– In any action by any member or officer to enforce any obligation owed under the memorandum or articles to him and any other member or officer, such member or officer may, if any other member or officer is affected by the alleged breach of such obligation, with his consent, sue in a representative capacity on behalf of himself and all other members or officers who may be affected other than any who is a defendant and the provisions of this Act shall apply.
Restrictions on Alteration of Memorandum
– The act provides that a company may not alter the conditions contained in its memorandum except in the cases and in the manner and to the extent for which express provision is made in this Act.
– Only those provisions which are required by any specific provision contained in this Act, to be stated in the memorandum of the company concerned, are deemed to be conditions contained in its memorandum.
Alteration of Memorandum
– Under CAMA 2020, the name of the company shall not be altered except with the consent of the Commission in certain circumstances.
– The business which the company is authorised to carry on or, if the company is not formed for the purpose of carrying on business, the objects for which it is established, may be altered or added to in accordance with the provisions of the act.
– Any restriction on the powers of the company may be altered in the same way as the business or objects of the company.
– The share capital of the company may be altered in accordance with the provisions of CAMA 2020, but not otherwise.
– Under CAMA 2020, any other provision of the memorandum maybe altered in accordance with outlined conditions and procedures , or as otherwise provided in this Act.