A lot of people carry on business by putting in all their assets without any form of security to cater for loses in the event that the business goes under, thus causing them to lose almost all they have in such circumstances.
Incorporating your own company gives you the security you need because your liability upon the dissolution of your company (if that ever happens) is limited to the amount of unpaid shares you own in the company.
I have set out below, the basic things you need to know if you choose to run your business as an incorporated company.
Name of the Company: You need to have a company name. It is advisable to have about three alternatives at the onset as your proposed name may not be available for use at the Corporate Affairs Commission (CAC).
Shareholders or Members of the Company: A share is a unit of ownership in a company and the members of the company are called shareholders. A company may be formed by a minimum of two (2) members and a maximum of fifty (50) members in the case of a private company and unlimited members in the case of a public company.
Objects of the Company: The objects of the company are the activities to be carried out by the company and are contained in the objects clause of the company’s Memorandum of Association (Memorandum). While a lot of people go to town with their object clause, it is advisable to stick to a line of business and couch your object clause along that line.
Type of Company: A company can be private or public. An incorporated company may also be one:
- having the liability of its members limited by its Memorandum to the amount, if any, unpaid on the shares held by them (a company limited by shares);
- having the liability of its members limited by the Memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up (a company limited by guarantee); or
- not having any limit on the liability of its members (an unlimited company).
Amount of Share Capital: For a private company, all you need is a minimum of Ten Thousand Naira (N10, 000.00) as your authorized share capital; while for a public company the minimum authorized share capital is Five Hundred Thousand Naira (N500, 000.00). The above mentioned minimum share capital may however be subject to the Regulatory Authority in charge of the sector of the economy in which an investor desires to operate. For instance regulators of the Banking, Aviation, Oil & Gas, Mining etc sectors require companies to have higher share capital in order to be licensed to operate in the relevant sector. Hence a promoter should seek necessary advice on the applicable minimum share capital for a proposed company. The subscribers to a company limited by shares must also take up at least 25% of the share capital of the company which can be paid for in cash or consideration other than cash.
….To be continued