CORPORATE LAW AND PRACTICE

UNIT 4

POST-INCORPORATION MATTERS

Post-incorporation matters refer to the legal and procedural requirements that arise after a company has been duly incorporated under Nigerian law. While incorporation grants a company its legal personality, there are various obligations and formalities that need to be complied with to ensure the company's continuous legal standing and proper governance. These obligations are crucial for the company’s operation, as non-compliance could result in penalties, fines, or even the company being struck off the register. The companies and allied matters act (CAMA) 2020 is the principal legislation governing corporate entities in Nigeria. Various sections of this act and case law have provided clarity on post-incorporation responsibilities. The post-incorporation matters includes the following;

  1. Company meetings: One of the key post-incorporation requirements is the holding of statutory meetings. These meetings are essential for the governance and decision-making of the company.
  2. Statutory meetings: A company must hold a statutory meeting within six months from the date of its incorporation. This meeting provides shareholders with information about the company's affairs, including its share capital and director appointments. See section 235 of CAMA which requires that the directors present a statutory report to members at the statutory meeting.
  3. Annual general meeting (AGM): According to section 237 of CAMA, every company is mandated to hold an AGM within 18 months of its incorporation and thereafter, once every calendar year. The AGM serves as a platform where shareholders discuss the company’s performance, approve financial statements, declare dividends, and appoint auditors. Failure to hold an AGM may lead to penalties as specified under the law. See the case of Oando Plc v Mr. Adewale Tinubu & Ors (2019) where the court held that the failure of a company to convene the AGM within the stipulated time contravenes the provisions of CAMA and the company would be penalized as stipulated by the law.
  4. Filing of annual returns: Annual returns are essential for regulatory compliance and provide updated information about the company's structure, directors, and shareholders. See section 417 of CAMA 2020 which mandates that every company must file annual returns with the corporate affairs commission (CAC) at least once every year, starting from the year following the company’s incorporation. The deadline for submission is 42 days after the AGM. Failure to file annual returns as required could result in fines, and persistent failure may lead to the company's name being struck off the register, pursuant to section 423 of CAMA. See the case of Auto Import Export v Adebayo (2005) where the court of appeal affirmed the importance of filing annual returns, stating that it ensures transparency and accountability and the failure of the company to meet this obligation exposed it to the risk of being struck off the register.
  5. Changes in company structure: Post-incorporation, a company may make several changes to its structure, including alterations to its share capital, directors, and company name.
  6. Alteration of share capital: See section 127 of CAMA 2020 which provides for the procedure for increasing or reducing a company’s share capital. This can only be done with the approval of shareholders through a special resolution. Additionally, the company must notify the CAC of any changes to its share capital.
  7. Appointment and removal of directors: The appointment, removal, or resignation of directors is a common post-incorporation matter. See section 273 of CAMA where directors can be appointed at the AGM or by the board, subject to the articles of association. Similarly, directors can be removed by an ordinary resolution at a general meeting as provided under section 288 of CAMA. See the case of Longe v First Bank of Nigeria Plc (2010) where the supreme court held that directors could be removed in line with the provisions of CAMA and the company’s articles of association. The court also emphasized that directors are entitled to fair hearing before removal.
  8. Amendment of memorandum and articles of association: Companies can amend their memorandum and articles of association (MEMART) post-incorporation. See section 44 of CAMA which provides that the MEMART can be altered by a special resolution at a general meeting, subject to CAC approval. The changes to MEMART may involve altering the company’s objectives, name, or other provisions to reflect the company’s current operations and strategy. See the case of Afro-Asian Agro-Allied Co. Ltd v N.I.D.B (2001) where the court reiterated that any alterations to the MEMART must be done in compliance with the provisions of CAMA and subject to the necessary approvals from the CAC.
  9. Dividends and distribution: Once a company becomes profitable, it may decide to declare and pay dividends to its shareholders. See section 379 of CAMA which allows companies to distribute profits to shareholders in the form of dividends, subject to the approval of the company in a general meeting.
    However, dividends can only be paid out of the company's distributable profits and directors must ensure that any dividends declared do not exceed the available profits; otherwise, they could be held liable for mismanagement. See the case of Nigerian Bottling Company Ltd v Anyawu (2014) where the court of appeal reiterated the principle that dividends should only be declared from the company's profits, stressing that any violation could lead to legal challenges by shareholders.
  10. Company secretary: Every company is required to appoint a company secretary after incorporation, as stipulated by section 330 of CAMA. The company secretary plays a critical role in ensuring that the company complies with statutory obligations, including filing returns and maintaining company records. The company secretary must be qualified, especially in public companies, where specific professional qualifications are required. See the case of Onyema v Oputa (2001) where the court highlighted the importance of the company secretary in ensuring corporate governance and compliance with statutory requirements, reinforcing that failure to appoint a qualified company secretary is a breach of CAMA.


CONCLUSION

Post-incorporation matters are critical for the continuous operation and legal compliance of a company in Nigeria. From holding statutory meetings, filing annual returns, appointing directors, to altering share capital and MEMART, companies must adhere to the provisions of CAMA and ensure that these matters are properly handled. Non-compliance could result in significant legal and financial consequences, making it essential for companies to stay vigilant and proactive in fulfilling their post-incorporation duties.