Lady Jasmine Abiola holds Master of Business Administration from the National Open University of Nigeria. Desirous of putting to practical use the learning and skills she acquired from the postgraduate programme, she decided to incorporate and register sole trading business (Lady Jasmine Fashions Ventures) as a company. Luckily, it is now possible to form and register a one-person company in Nigeria.
Thus, she registered “The
Jasmine Fashions Nigeria Company Limited.” The company has minimum share
capital of N1,000,000 divided into 1,000,000 ordinary shares of N1.00 per
share. Lady Jasmine is the only shareholder and director of the company. She
was employed by the company as Chief Designer and was paid salary for the
position. While running the business as a company the following issues and your
advice has been sought for their resolution:
(a) The business of the
company experienced a downturn. The creditors of the company are SME Bank Ltd
(N2.250 million), fabric suppliers (N500,000) and sundry creditors (N280,000).
Records showed that Lady Jasmine has only paid for 30% of her shares. The value
of company’s assets was assessed at N550,000.00. Since the loan was not
secured, the bank has threatened to sue her if she fails to repay the loan to
the full amount, because, according to the bank, “there is really no difference
between her and the so-called company.” Lady Jasmine is worried and confused.
She does not want to sell her personal property, which was a gift from her
father. With reference to the debts of the company, advise Lady Jasmine. (10
marks)
(b) Lady Jasmine
consulted a senior advocate of Nigeria over the issues she is facing. The
senior lawyer advised to keep her cool because as a married woman she lacked a
contractual right and disqualified from joining in the formation of the
company. Do you have any contrary view? (5 marks)
(c) List at least five
subject matters of a company’s articles of association. (5 marks)
(d)
Lady Jasmine believes that the best way out for her is to convene a statutory
meeting of the company. What do you think of this proposition? (5 marks)
Based on the Companies
and Allied Matters Act (CAMA) 2020 in Nigeria, here is the legal advice
regarding the issues faced by Lady Jasmine Abiola and "The Jasmine
Fashions Nigeria Company Limited":
(a) Legal Advice on
Liability for Company Debts (10 marks)
Lady Jasmine is not
personally liable for the full debts of the company, and she does not
need to sell her personal property, subject to certain conditions.
1. Separate Legal
Personality
Under Section 42 CAMA
2020, a company upon incorporation becomes a separate legal entity
distinct from its members. This principle, established in Salomon v. Salomon
& Co. Ltd, means the company owns its assets and liabilities
independently (Companies and Allied Matters Act [CAMA], 2020).
Thus, The Jasmine
Fashions Nigeria Company Limited is legally different from Lady Jasmine.
2. Limited Liability
By virtue of Section
21 CAMA 2020, a company limited by shares restricts the liability of its
members to the amount unpaid on their shares.
Lady Jasmine has paid
only 30% of her shares; therefore, her liability is limited to the remaining
70% unpaid capital, which may be called upon to settle company debts.
3. Position of Creditors
The creditors include:
- SME Bank Ltd – ₦2,250,000
- Fabric suppliers – ₦500,000
- Sundry creditors – ₦280,000
Since the loan is unsecured,
the bank cannot automatically pursue Lady Jasmine personally. Creditors can
only:
- Claim against company assets
(₦550,000), and
- Enforce payment of unpaid share
capital
4. Exceptions (Lifting
the Corporate Veil)
The bank’s argument that
“there is no difference between her and the company” would only succeed if
grounds exist to lift the corporate veil, such as:
- Fraud
- Sham or façade company
- Improper conduct (Section 119 CAMA
2020)
There is no evidence
of such misconduct here.
Conclusion
Lady Jasmine:
- Is liable only for unpaid share
capital (70%)
- Is not personally liable for
company debts beyond this
- Can retain her personal property,
including the gift from her father
(b) Advice of the Senior
Advocate of Nigeria (5 marks)
The advice given is incorrect
and outdated.
1. Legal Capacity
Regardless of Marital Status
Under Section 18(2)
CAMA 2020, any person may form a company. There is no restriction
based on gender or marital status.
Additionally, the 1999
Constitution of Nigeria (as amended), Section 42, prohibits discrimination
based on sex.
2. One-Person Company
Section 18(2) CAMA 2020
expressly allows one person to form and run a private company.
Conclusion
Lady Jasmine:
- Has full contractual capacity
- Validly formed the company
- Is legally competent despite being married
(c) Subject Matters of
Articles of Association (5 marks)
Under Sections 27–33
CAMA 2020, the Articles regulate internal management. Key subject matters
include:
1. Share
Capital and Variation of Rights
2. Transfer
and Transmission of Shares
3. Appointment,
Powers, and Removal of Directors
4. Proceedings
of General Meetings
5. Dividends
and Reserves
6. Accounts
and Audit Procedures
7. Company
Secretary (if applicable)
(d) Statutory Meeting
Proposition (5 marks)
Lady Jasmine’s belief is misguided.
1. Abolition of Statutory
Meetings
CAMA 2020 abolished
statutory meetings previously required under old company law.
2. Small Company
Exemptions
Under Section 237 CAMA
2020, small companies (including one-person companies) are exempt from:
- Annual General Meetings (AGMs)
3. Proper Course of
Action
Instead of a statutory
meeting, the company should:
- Assess solvency
- Consider winding up or
restructuring
- Settle debts using available assets
and unpaid capital
Conclusion
There is no legal
requirement for a statutory meeting; thus, her proposed solution is
unnecessary.
References
Companies and Allied
Matters Act, 2020 (Nigeria).
Constitution of the
Federal Republic of Nigeria, 1999 (as amended).
Salomon v. Salomon &
Co. Ltd [1897] AC 22 (HL).
Orojo, J. O. (2018). Company
law and practice in Nigeria (5th ed.). LexisNexis.
CLL804 - Business and Company Law
National Open University of Nigeria
Faculty of Law, Department of Commercial Law
