UNIT 1

OVERVIEW OF LEGAL FRAMEWORK ON CORPORATE LAW PRACTICE IN NIGERIA

Corporate law in Nigeria is primarily governed by several statutes, regulations, and judicial decisions aimed at regulating the formation, management, and operations of companies. The principal legislation is the companies and allied matters act (CAMA) 2020, which is the foundation of corporate practice in Nigeria.
The CAMA 2020 is the most comprehensive statute governing corporate law in Nigeria. It replaced the 1990 act and introduced reforms aimed at promoting ease of doing business, corporate accountability, and corporate governance. The act is divided into various parts, each dealing with specific aspects of company law. Key provisions of CAMA include the following:

1. Incorporation of companies (sections 18-40): The law defines the procedure for incorporating companies in Nigeria. It stipulates the requirements for registration, including the submission of a memorandum and articles of association to the corporate affairs commission (CAC).
2. Corporate personality and consequences of incorporation (section 42): Once registered, a company becomes a separate legal entity distinct from its shareholders. It can own property, sue and be sued, and carry out activities in its own name. See the case of Salomon v Salomon (1897) AC 22 where the court established the principle of corporate personality, which is now codified in Nigerian law under section 42 of CAMA 2020.
3. Shareholders and directors: The rights and duties of shareholders, directors, and officers of the company are outlined in the act. The law provides for the appointment, removal, and remuneration of directors. See sections 269-291 and their fiduciary duties to the company under section 305.
4. Corporate governance: The CAMA 2020 introduced provisions on corporate governance to improve transparency and accountability. These include the mandatory appointment of company secretaries for certain categories of companies. See section 330 and audit committees for public companies under section 404 and the case of Kotoye v Saraki (1995) 5 NWLR (Pt. 395) 256 where the court addressed issues concerning the rights of shareholders and the duties of directors, emphasizing the importance of corporate governance principles.
5. Company meetings and resolutions: The act stipulates the types of company meetings which are annual general meetings and extraordinary general meetings and the procedures for passing resolutions which also are ordinary and special resolutions.
6. Insolvency and winding up (sections 573-613): CAMA provides for the procedures in cases of insolvency, receivership, and the winding up of companies. See the case of Re: Eng. Nigeria Ltd (1976) 1 NMLR 237 where the court dealt with the principles of winding up and the rights of creditors in insolvency proceedings under the companies act.

REGULATORY BODIES ON CORPORATE LAW PRACTICE IN NIGERIA

Several regulatory bodies play crucial roles in ensuring compliance with corporate laws and practices in Nigeria. These bodies monitor and enforce corporate governance, financial reporting, and other legal requirements and they include the following:

1. Corporate affairs commission (CAC): The corporate affairs commission (CAC) is the primary regulatory body for corporate practice in Nigeria established under section 1 of CAMA 2020, the CAC is responsible for the registration and regulation of companies. See the case of APEX Finance v West Africa Oilfield Services Ltd (1995) 4 NWLR (Pt. 388) 59 where the court highlighted the role of the CAC in investigating the affairs of companies when there are allegations of fraud or misconduct. Its functions include the following:
   
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   1. Registration of companies, business names, and incorporated trustees (section 7).
   2. Supervision of companies to ensure compliance with the provisions of CAMA.
   3. Maintenance of the register of companies and related filings, including annual returns (section 370).
   4. Investigation of the affairs of companies when necessary.
2. Securities and exchange commission (SEC): The securities and exchange commission (SEC) is the apex regulatory body for the Nigerian capital market, established under the investment and securities act (ISA). The SEC regulates companies that issue shares to the public and ensures transparency and fairness in the capital markets. See section 13 of the investment and securities act (ISA) which provides the legal framework for the SEC’s functions and the case of SEC v Big Treat Plc (2014) 9 NWLR (Pt. 1411) 15 which involved a dispute over securities transactions, with the SEC exercising its regulatory powers to impose sanctions for non-compliance. Its key functions include the following:
   
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   1. Registration of public companies intending to offer securities to the public.
   2. Regulation and supervision of the capital market to protect investors.
   3. Enforcement of compliance with securities laws.
3. Nigerian stock exchange (NSE): The Nigerian stock exchange (NSE) plays a significant role in the regulation of publicly listed companies. It ensures that companies adhere to listing rules and provides a platform for trading securities. It also promotes corporate governance by requiring listed companies to publish financial statements and adhere to regulatory filings. Companies listed on the NSE must comply with the rules and regulations set forth by the SEC and the NSE itself, particularly those dealing with financial disclosure and corporate governance.
4. Financial reporting council of Nigeria (FRCN): The financial reporting council of Nigeria (FRCN), established under the financial reporting council act 2011, regulates the accounting, auditing, and financial reporting standards of companies in Nigeria. It ensures compliance with international financial reporting standards (IFRS) and promotes good corporate governance. The FRCN act mandates companies to file financial statements and ensures that auditors and other financial professionals meet the required standards for corporate reporting.
5. Central bank of Nigeria (CBN): The central bank of Nigeria (CBN) regulates financial institutions and plays an indirect role in corporate law through its regulation of banks and other financial entities. The banks and other financial institutions act (BOFIA) 2020 empowers the CBN to supervise and regulate banks’ corporate governance structures and financial reporting. See section 57 of BOFIA 2020 which deals with corporate governance in the banking sector, ensuring that banks adhere to best practices.

OTHER RELEVANT BODIES

1. Nigerian deposit insurance corporation (NDIC): they regulate deposit-taking institutions and ensures compliance with corporate governance practices in the banking industry.
2. National insurance commission (NAICOM): they regulate insurance companies and their corporate practices.

CONCLUSION

The legal framework for corporate law practice in Nigeria is robust, with key statutes such as CAMA 2020, the investment and securities act, and various other regulatory laws forming the backbone of corporate governance and practice. Regulatory bodies like the CAC, SEC, NSE, and others play essential roles in monitoring corporate compliance, ensuring transparency, and fostering a conducive business environment.