UNIT 8

COMPANY SECURITIES

Company securities are financial instruments issued by companies to raise capital. They include shares, debentures, and other financial instruments recognized under Nigerian law. See the Companies and Allied Matters Act (CAMA) 2020 which is the primary legislation governing company securities in Nigeria and the Nigerian Investment Promotion Commission Act which governs foreign investments and securities. See also the case of SEC v. Big Treat PLC which illustrates the enforcement of securities regulations by the Securities and Exchange Commission (SEC) in Nigeria. The types of company securities includes the following;

1. Shares: this represent ownership in a company. They confer rights such as voting at general meetings and receiving dividends.
2. Debentures: this is a type of debt instrument that a company issues to borrow money. Debenture holders are creditors of the company.
3. Bonds: this is similar to debentures but often secured by the assets of the company.

COMPANY MEMBERSHIP

Company membership refers to the individuals or entities that hold shares in a company. Members have certain rights and obligations defined by the company's articles of association and the Companies and Allied Matters Act (CAMA) 2020. Members have voting rights at general meetings, receiving dividends, inspecting company records and they also have the obligations to pay for shares, comply with the company articles and contribute to the company assets in the event of winding up. See sections 79-90 CAMA 2020 which outline the rules for company membership and the case of Akaninwo v. Nsirim (2008) 9 NWLR (Pt. 1093) 439 which discusses the rights of members in a company. Memberships can be acquired through the following;

1. Subscription: this is done by subscribing to the memorandum of association during incorporation.
2. Allotment: this is done by allotment of shares from the company.
3. Transfer: this is done by transfer of shares from an existing member.

TRANSFER OF COMPANY SHARES

The transfer of shares refers to the process by which a shareholder passes their shares to another person or entity. However, there can be restrictions on transfer which includes pre-emptive rights where existing shareholders may have the right to purchase shares before they are offered to outsiders and the articles of association may also impose restrictions on transferability of shares. See sections 151 - 157 which detailed the process and requirements for the transfer of shares and the case of Re Bagel (1998) 2 NWLR (Pt. 536) 60 which discusses the legal implications of share transfer and the necessary compliance. The process of transfer includes the following;

1. Instrument of transfer: this is a written document transferring the shares.
2. Lodgement: this is where the instrument must be lodged with the company along with the share certificate.
3. Board approval: this is where the board of directors must approve the transfer.
4. Update register: this is where the company's register of members must be updated to reflect the new ownership.

DEBENTURE/CHARGES

Debentures and charges are instruments used by companies to secure loans. A debenture is a long-term security yielding a fixed rate of interest, issued by a company and secured against assets. Debentures and charges is created by agreement between the company and the creditor and must be registered with the Corporate Affairs Commission (CAC) within 90 days of creation. See sections 197-208 CAMA 2020 which provide the framework for the creation and registration of debentures and charges and the case of Intercontractors Nigeria Ltd v. N.P.F.M.B. (1988) 2 NWLR (Pt. 76) 280 which discusses the priority of charges and the implications of non-registration. The types of debentures and charges includes the following;

1. Secured debentures: this debenture is backed by collateral.
2. Unsecured debentures: this debenture is not backed by collateral.
3. Convertible debentures: this debenture can be converted into shares.
4. Fixed charge: A specific asset is used as collateral.
5. Floating charge: A general charge over the assets of the company that allows the company to use the assets in the ordinary course of business until default.

CONCLUSION

Understanding the various aspects of company securities, membership, transfer of shares, and debentures/charges is crucial for compliance and effective management in Nigeria. Relevant laws and cases provide a framework to ensure legal and regulatory adherence.