Sunday, 14 February 2016

What Next After I Register My Company? (11 Simple Tips to Grow Your New Company)

It has been said that “no business can succeed in any great degree without being organised”- this is the truth that many failed Businesses have not mastered.

Unfortunately too, it is not all registered companies that have had the opportunity of being advised on the things that every company must take note of after becoming registered.

Many of my business students have been sparked to start their company as soon as they understood the details needed to start one, but not all of them waited to find out the details that are needed to give their company that solid foundation that will give them an organised outlook.

The tips that I will give to you in this article may be totally new, while some will come to you as a reminder, if you will put everything in place to comply with them, they will strengthen your hands to become a master Potter modelling the business ideas that you want and growing it into a reality.

Comments are welcome, and questions may be directed to my email address eyitayoogunyemi@gmail.com. Enjoy!

TIP NO 1:

As soon as you register your company, purchase a standard notebook to record the details of the members of your new company.

Put in the layman sense, your members are otherwise known as the co-owners of the company.

You can title the notebook as “Register of Members of ……. (Insert your company’s name)”.

The records of each member should include their names, address, extent of ownership in the company, date on which each person became a member, date on which the person ceased to be a member (i.e. where the person has ceased to be a member).

There are other technical details that you must bear in mind. For instance, the kind of entry that will be in your Register of Member for a Company Limited by Shares may be affected by whether or not each member has paid for the unit of shares owned by him/her. In the event too that you have converted your shares into stock with proper notice to the Cooperate Affairs Commission, your Register is supposed to show the details of the stock and not shares.

You must take inventory of the members that started the company within 28 days of registering your company, and you must take inventory of all subsequent members within 28 days of the conclusion of agreement for them to become members. Where a person ceases to be a member, you must take record of that fact within 28 days too.

You may decide to keep your Members’ Register at your registered office, or in another office of your company (if that is the place where you make up the content of the Register), otherwise, you can keep it with your Legal Adviser/ Solicitor particularly if he/she is responsible for using his/her professional competence to manage the Register on behalf of your company.

If you prefer to keep the Register at an office other than your registered office, or with your Legal Adviser/Solicitor, make sure that either your company secretary or your Solicitor notifies the Corporate Affairs Commission of the place where the Register is kept within 28 days of the company’s decision.

TIP NO 2:

Where your company has more than 50 members (maybe because there are members that are joint holders of your company’s shares or for some other reasons), you may either choose to keep an Index of the members of your company in your Register of Members, or buy a separate Standard Notebook to take inventory of the Index of members.

The index of your company will contain the alphabetic list of the names of the members of your company and must, at all times, be kept at the same place with the Register of Members.

Where you make any alteration in your company’s Register of Members which makes it necessary that a consequential alteration be made in your Index of Members, you must make the consequential alteration within 14 days after the date on which the alteration is made in the register of members.

TIP NO 3:

Your company must hold its first annual general meeting within 18 months of its registration, and within every 15 months thereafter.

An “Annual General Meeting” is the yearly general meeting of the members of a company to deliberate on the businesses of the company. By implication, the following people are entitled to receive notice of your company’s general meeting:

Ø Every member
Ø Every person upon whom the ownership of a share devolves by reason of law
Ø Every director of your company
Ø Every auditor for the time being of your company
Ø Your company Secretary

At the Annual General Meeting, your company may present the financial statements for the year ending, present directors and auditors’ report, elect new directors in place of those retiring, appoint members of Audit Committee, declare dividends, and fix remuneration for company’s auditor etc.

Every member is entitled to a 21 days’ notice prior to the day of meeting. A shorter notice may be valid if only all the members entitled to attend and vote at the meeting agreed for a shorter date.

You may opt to engage your solicitor to prepare the notice of meeting to be sent to the members of your company or otherwise get your company secretary to prepare it.

As a guide, here are the details that your Notice of Meeting must specify:

Ø the venue of meeting
Ø the date and time of meeting, and
Ø the nature of issues to be dealt with at the meeting   

There are other technical details that may have to be stated in the Notice of Meeting; for instance, where your meeting is meant to consider a special resolution, the terms of the resolution must be stated in the Notice of Meeting.

In a similar vein, you are not allowed to discuss any issue which you have not stated in your letter of notice of general meeting, and failure to give notice of your company’s general meeting will invalidate the meeting unless the failure was an accidental omission on the part of the person(s) giving the notice.

It is therefore necessary that you seek proper legal advice while planning to hold the annual general meeting of your company. You may contact me for further information or explanation, and you may likewise contact your Solicitor for additional assistance or information.

TIP NO 4:

Your company must keep minutes of its meetings. To do this effectively, I will suggest that you dedicate special notebooks for that purpose so that your minutes can be sequential and orderly.

The meetings which the Corporate Affairs Commission envisages that your company should take record of are:

Ø Proceedings of all General Meetings
Ø Proceedings of Meetings of Directors
Ø Proceedings of Meetings of Managers (where there are Managers)


TIP NO 5:

Your company must have at least two (2) directors.

Anytime the number of directors fall below two, your company must appoint new directors within one month, otherwise, it will be illegal to continue doing business after one month of refusal to appoint a director.

The power to appoint the directors reside in the members of your company and it may be exercised at the Annual General Meeting of the company.

TIP NO 6:

The first meeting of your board of directors must be held not later than 6 months after you register your company. All other meetings may be held at any time whatsoever.

Any issue that is to be resolved at the Board of Directors’ meeting must be decided by a majority vote, and if there is an equality of votes, the chairman may have a second vote.

TIP NO 7:

You must buy a standard notebook to take record of your company’s directors and secretaries.

The notebook may be headed “Register of the Directors and Secretaries of ………………………………………. (Insert the name of your company)”

The notebook is to be kept at your company’s registered office, and will take note of the following:

Ø Full names of Director/ Secretary
Ø Any former name (s) or surname
Ø Residential address
Ø Nationality
Ø Business Occupation
Ø Details of any other directorships held by him/her
Ø Date of Birth
Ø Where your Company’s secretarial duties are outsourced to a Law Firm or Corporation, the details of the registered name and registered address or head office must be noted.

Your company is expected to file its first update with the corporate affairs commission within 14 days from the day it is registered with the corporate affairs commission, and 14 days after every subsequent change.

The Register of the Directors and Secretaries of your company is supposed to be accessible to the public.

TIP NO 8:

Where your company changes its registered address, you must notify the Corporate Affairs Commission within fourteen days of such change.

Your Company Secretary may purchase and file the appropriate form for that purpose, or otherwise, engage a competent Solicitor to assist with the process.

TIP NO 9:

One of the things that you need to do after registration is to impress your company’s name and “Registered Company Number” (i.e. “RC No”) on every form of your company’s correspondence.

Unfortunately, this aspect of company obligation is usually overlooked by business owners and investors, and where the name of the company is stated, the “RC No” is often left out.

In more specific terms, you must paint or affix (and keep painted and affixed) your company’s name and “RC No” in a very clear manner on the outside of your office, on every of your company’s business letters, notices, advertisements, all official publications of the company, its bills of exchange, promissory notes, endorsements, cheques, bills or parcels, invoices, receipts, letters of credit, orders for money or goods purported to be signed by or on behalf of the company, and on the company’s metallic seal.

TIP NO 10:

Your company must prepare and submit to the Corporate Affairs Commission an annual report on matters specified in the Companies and Allied Matters Act which are applicable to your company.

The annual report is otherwise known as ANNUAL RETURNS, and if you are operating a limited company, It will usually contain your company’s registered address, address of place where the register of members is kept, summary of share capital and debenture, particulars of indebtedness of your company (if any), list of past and present members of your company, balance sheet, auditor’s report, and profit and loss account etc.

Keeping your annual returns up to date with the Corporate Affairs Commission is about the most important obligation that you must keep up with as soon as you register your company, and considering the technical nature of the task, it is important that your company secretary should be given the necessary training to handle the task, or otherwise, same should be outsourced to a Professional to handle.

TIP NO 11:

Register your company for Tax Identification Number and Value Added Tax at the Federal Inland Revenue Services (FIRS).

To apply for TIN and VAT, you may have to design your company letterhead, rubber stamp/metallic seal, and company logo.

You can reach me for further enlightenment on tax compliance in Nigeria.  

CONCLUSION:

Here, let me get back to the title of this article “11 simple tips to grow your new company”.

That title came to mind because I have seen many Businesses crumble not because they were bereaved of ideas, or money, but because they did not have somebody to put them through on their legal obligations, and as soon as they started getting penalised, they had to forfeit operating the company as it was too late to comply.

You have an opportunity to get the basic things right if you master the content of this article.

* Reviewed 17/1/2017

Eyitayo Ogunyemi

B.L| LL.B| LL.M| PhD [Legislative Drafting] –In View  

Sunday, 7 February 2016

Amazing Differences between Business Name and Limited Company Registration in Nigeria

*Updated 30/3/2017


One of the questions that I usually ask my students during my training sessions for Entrepreneurs is for them to tell me what they understand by a Limited Liability Company and a Business Name, and why they will choose the business option that they are opting for.
Unfortunately, I usually do not receive an answer that captures the basic differences, and it is unfortunate too that many Investors have chosen their business option without proper guidance.

This article proffers keynote differences between a Business Name and a Limited Liability Company in Nigeria. The points stated below are not exhaustive, but they constitute some of the basic differences between a Limited Liability Company and a business name under Nigerian Law:  


DIFFERENCE NO 1:
YOU WANT YOUR BUSINESS TO BE YOU OR DIFFERENT FROM YOU?

Business Name:   A Business Name is the name and style with which you trade; remember that it is just a "style", and it is therefore not different from you. Being a mere style, the business does not assume a separate legal entity; cannot sue, nor be sued and properties cannot be purchased in the name of the business.

Another point that you can identify with the above is that, when the owner dies, the business also dies (since in the first place, it does not have a life of its own).

Company:            The moment your Company is registered, it becomes a separate entity different from you (otherwise known in law as an "Artificial person"). The best way to understand this severance process is to consider pregnancy, and delivery process- once a child is born, the child has an independent life; can grow, stand alone (with time), and even die. The process of the growth of the child is not hinged as such on that of the mother.

By implication, 'your company' is considered to be different from you after registration; you can be broke while the company is rich, and the death of the founder does not necessarily mean the death of the company because the company has a life of its own.



DIFFERENCE NO 2: 
YOU WANT TO RUN A ONE MAN BUSINESS? ONLY A BUSINESS NAME WILL DO

Company:              If you intend registering a company, it takes two or more persons to form the company. The popular form of company is “Company Limited by Shares”, and at least two people must subscribe to being shareholders in the company.

Business Name:     If you are interested in running a one man business where everything will revolve around you and you alone, registration of a Business Name may be suitable.

Note however that you can also register Business Name where you and any other person intend to operate as partners.

DIFFERENCE NO 3:
DO YOU WANT THE VALUE OF YOUR INVESTMENT TO BE STATED IN THE PUBLIC DOCUMENTS OF YOUR PROPOSED BUSINESS? A COMPANY MAY BE YOUR BEST OPTION

Company:         If your level of ownership, stake, investment, or interest in your proposed business differs from that of your co-investors and you want this to be recorded publicly, you may choose to incorporate a company (i.e. Limited Company).

Business Name:   If you register a Business Name, your level of ownership, stake, investment, or interest will not be publicly recorded. If for any reason you prefer to register a Business Name and you want the extent of your ownership, stake, investment, or interest to be clearly spelt out, you can do this preparing a Memorandum of Understanding between you and your partners. You may consult your choice Legal Consultant for further information.

DIFFERENCE NO 4:
DO YOU WANT AN EXISTING COMPANY TO OWN SHARES IN A BUSINESS THAT YOU ARE ABOUT TO START? ONLY A COMPANY REGISTRATION WILL BE SUITABLE

Company:              If you operate a company that is registered, and you want that company to own shares in a business that you are about to register, or you are a foreign investor with a company already registered in your Country, you may choose to register the intended business as a Company and then purchase shares for the existing company from the allotted shares of the proposed company.

If the existing company is however undergoing a process of being wound up, it cannot join in the formation of the company to be incorporated.

In a like manner, if you already have a company in operation and what you intend to register is a Business Name but you want your existing company to have a stake in the Business to be registered, you can give instruction to your Legal Consultant to record the existing company as a partner in the new Business Name to be registered.

Business Name:     You cannot use your Business Name (as an entity) to own shares in a company neither can you start a partnership in the name of your registered Business Name.

For non- Nigerians (aliens) and foreign companies seeking to do business in Nigeria, once you have complied with Nigerian laws regulating the rights and capacity of aliens who want to undertake or participate in trade or business in Nigeria, you will be allowed to join in forming company in Nigeria.

DIFFERENCE NO. 5:
IF YOU HAVE MORE THAN 20 PARTNERS, YOU MIGHT JUST HAVE TO REGISTER A COMPANY

Company:              Where a business is intended to be carried on as a partnership, and the partners are more than 20 people, the business can only be registered as a company but not as a business name.

Business Name:    You can register these three businesses as a business name notwithstanding that the partners are more than 20 are;

a.     Co-operative Societies registered under any law in Nigeria;

b.    Partnership of more than 20 Lawyers each of whom is qualified to practice as a lawyer in Nigeria; or

c.     Partnership of more than 20 Accountants each of whom is qualified to practice as an accountant. 

DIFFERENCE NO. 6:
IF YOU HAVE MORE THAN 50 INDIVIDUAL INVESTORS, YOUR ONLY OPTION MAY BE TO START A PUBLIC COMPANY     
                                                      
Company:              Where the total number of persons who intend to own the shares of a proposed company is more than 50 people, the company can only be registered as a public company. In other words, a private company in Nigeria must not have more than 50 shareholders.
There are exceptions to this rule; for instance, where an employee becomes a member/shareholder upon his employment, or where the employee continues to be a shareholder during and upon the expiration of his employment; his tally may not be taken for the purpose of numbering the 50 members.

Consider the following illustrations:

1.    If AZ Private Company has 50 shareholders and Bob was given a number of shares in AZ Private Company upon his employment, he is not going to be numbered as Number 51 shareholder; rather, the number of shareholders will still stand at 50 in the eye of the law.

2.    In a similar vein, if Bob continues to hold shares as an employee until he stops working for AZ Private Company, and he continues to own the shares after his employment, he is not going to be numbered for the purpose of counting the 50 benchmark.

3.    Two or more people, or even an Association or a Group can invest in a company jointly. They are treated as a single member for the purpose of numbering the members of the company. It is however important that your Association or group must have been registered under the appropriate law. You may check my article titled How to Register Your NGO, Church, Mosque, and Other Associations with Corporate Affairs Commission (C.A.C.) for further information under this heading.

DIFFERENCE NO. 7:
THE STATUS OF YOUR KEY INVESTORS DETERMINES THE KIND OF BUSINESS ARRANGEMENT

Company:              In a company arrangement, your shareholders are considered as the joint owners of the company. The shareholders elect the Board of Directors who are responsible for the daily affairs of the company and also give periodic account of management to the shareholders.
Note however that a shareholder may also be a director or even the company secretary.

Business Name:     In a Business Name arrangement, there is no clear-cut difference between the business holder and the director because in most cases, the director is the owner of the business.

CONCLUSION:

The list of points that may be mentioned is not exhaustive but further points will be introduced in my subsequent blogs, you may therefore stay glued to my weekly updates.

This article has been designed for information purposes alone and is not intended to take the place of a legal advice. Readers are therefore advised to seek proper legal advice.


For more enquiries, you can contact me on my mobile contact: 08060623454, or address a mail to me via eyitayoogunyemi@gmail.com