Once you have completed attendance to incorporation procedure, the Registrar of Companies will write a standard letter addressed to the company secretary confirming compliance with the provisions of the Act and granting registration of the company.
With this letter will be the Certificate of Incorporation and Certificate of Share Capital.
In the case of a private company limited by shares and a public company, the Registrar will draw your attention to sections 18(1) and 15(3) of the Act respectively as regards to minimum capital requirements before a company can transact any business, exercise any borrowing powers or incur any indebtedness, except for a purpose incidental to its incorporation.
After incorporation, the company is required to hold a post incorporation meeting which is also necessary for the Board of Directors. The holding of the 2 meetings should take place as soon as necessary. In the repealed Companies Act, there was a requirement to hold the statutory meeting within 6 months from the date of incorporation for purposes of clarifying crucial post incorporation matters.
(i) Members’ Meeting
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It is important for shareholders to hold their first meeting after the company incorporation for the purpose of transacting a number of businesses, namely:
(a) Formalization of any formation agreements such as loan acquisition, leasing agreements, agreements for transfer of assets from promoters to the company, etc;
(b) The formal appointment of the directors. Prospective directors will have signed some agreement before the incorporation contracts;
(c) Ratification of any pre-incorporation contracts;
(d) Execution of any shareholders’ agreements.
A company may enter into shareholders’ agreements at any stage of its life but it is important that these agreements are executed at the company’s inception so that the shareholders will know and agree the terms under which they will participate in the company and how the company will operate henceforth. Because of the importance of these agreements, it is advisable that all the shareholders of the company execute the agreements. If the shareholders cannot execute all the agreements, then at least those with majority shares must do so.
Why should there be a shareholders’ agreement despite the existence of binding articles of association, which equally avail specific protection to shareholders? The shareholders’
agreements perform the following functions:
a) The articles of a company only bind members with regard to membership rights.
Therefore, any relationship which members would like to create outside the provisions of membership rights would have to be provided for in a separate document outside the articles, i.e. shareholders’ agreements;
b) Articles are a public document registrable with the Registrar of Companies;
hence any busy body can conduct a search at PACRO to get information on them.
Therefore, shareholders may want some issues to be set out in a private document which is not accessible and may be kept as secret. In this case, the shareholders’
agreement provides the necessary privacy to the members.
c) Articles of a company can be amended at any time by special resolution requiring three quarter (3/4) majority vote by the shareholders. On the other hand, a duly executed shareholders’ agreement can only be amended by consent of all the members. In this way shareholders can entrench provisions they do not wish to easily be tempered with in these agreements.
(ii) Shareholders’ Agreements verses Articles of Association
What can be included in the articles vis-à-vis agreements is very much a matter of test.
Certain provisions of the articles may also be included in the shareholders’ agreements.
There however, third party rights are to be affected, then such should be reflected in the
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shareholders’ agreements. Articles restrict themselves to rights of members as shareholders while shareholders’ agreements may include non-members’ rights. You may decide when drafting a shareholders’ agreement to put a clause that in the event of a conflict arising between the provisions in the articles and those in the shareholders’
agreement, then the provisions in the shareholders’ agreement shall prevail.
Where it is important for a third party or a prospective third party to be put on notice to know what is contained in the shareholders’ agreement, it is important that these are included in the articles of association. Transfer of shares, control of conduct of company with third parties, etc, must be mirrored in the articles so that third parties are put on notice.
(iii) First Meeting of the Directors
The first meeting of the directors should be held within a reasonable period of time in order to:
a) Report on the incorporation of the company; and b) Authorize any further changes that may be required.
Specific business to be transacted includes:
a) To appoint chairman of the board;
b) To receive various reports of the chairman of the board;
c) Confirmation of the list of first directors;
d) Confirmation of the company registered office;
e) Tabling of the company’s articles and incorporation form;
f) Opening of bank account and appointment of signatories;
g) Production of company’s common seal (sections 195 and 196);
h) The changing of accounting date, if necessary; and
i) Writing up of statutory books, which every company is required to keep and maintain.
(iv) Registers to be Kept by Companies
The register of members (section 48) is arguably the most important register of a company because it constitutes prima facie evidence of membership of a company.
Therefore, section 55 of the Act provides that the register of members shall be prima facie evidence of any matter by the Act directed or authorized to be inserted therein.
Section 48(1)(e) provides that the register will show the number of shares in quantity and the amount paid or agreed to be considered as paid on the shares of each member.
Shares are property which can be owned and transferred and are therefore, numbered for identification. According to section 66(1), “a company shall, within two months after the
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allotment of any of its shares or after the registration of the transfer of any shares, deliver to the registered holder thereof a certificate under the common seal of the company stating :-
a) the number and classes of shares held by him, and the distinguishing numbers thereof (if any);
b) the amount paid on such shares and the amount (if any) remaining unpaid; and c) the full name and address of the registered holder and whether the holder is an
individual, a body corporate or an incorporated association.
Section 224(1) requires a company to keep a register of its directors and secretary or secretaries. Keeping of this register is mandatory.
Register of shares and debentures held by or in trust for directors and secretary (section 225)
A company shall cause minutes of all proceedings of:
Meetings of the company;
Meetings of its directors and of any committee of directors;
Meetings of its debenture holders or other creditors.
to be entered in books kept for that purpose (section 160(1) of the Act). These are called minute books.
Section 92(1) of the Act requires a company which issues or which has issued debentures to maintain a register of debenture holders.
The keeping of register of charges by a company is provided for under section 97(2) of the Act.
These books must be kept at the company’s Registered Records Office and the books are open to inspection by any member, officer, auditor, receiver or liquidator of the company and by the Registrar or is delegate (section 161).
(v) Confirmation of any Transfer of Shares
The company secretary will specifically be instructed to ensure that the transfer of any shares is duly registered.