In Nigeria, the pre-incorporation and post-incorporation regulation of operations and activities of Company Limited by Guarantee, (Company Ltd/Gte) are governed by statutory law, that is the Companies and Allied Matters Act.
A company Limited by Guarantee unlike any other company cannot be formed by one person. A reservation code is needed when incorporating a company Limited by Guarantee, and this reservation code shall be accompanied by both incorporation and registration particulars of the proposed company. A company Limited by Guarantee is formed for the promotion of commerce, art, science, religion, sports, etc. GTE’s are not to be incorporated with the object of carrying on business for the purpose of making profits for distribution to members. The memorandum of a company Limited by Guarantee shall contain both the winding-up clause and the property clause.
Requirements for the incorporation of a Company Ltd/GTE
1. Memorandum and Articles of Association (MEMART): The MEMART shall not carry any object with the intention of making profits. The MEMART shall not be registered without the authority of the Attorney General of the Federation. The memorandum of a company limited by guarantee shall contain the Property Clause and also the Contribution Clause with an aggregate of not less than 100,000.00 Naira (One Hundred Thousand Naira) at the event of winding up.
2. The Attorney General of the Federation (AGF) shall within 30 days, grant authority to the promoters of the company Limited by Guarantee, where there are no objections or reasons to decline to grant approval to register the company as a company Limited by Guarantee.
3. Where all valid documents are furnished, and no decision has been made by the AGF within the thirty-day period:
- The promoter shall place advertisements in three national dailies and shall invite objections from the public (if any) to its incorporation.
- Where there is an objection, the objection shall state the grounds on which it was made and same forwarded to the Corporate Affairs Commission (CAC) within 28days from the last publication in the newspapers.
- The Commission shall consider the objection and may require the objector to furnish further information. The Commission may uphold or reject the objection as it deems fit.
4. If the Commission is satisfied with the MEMART, it shall cause the promoter’s application to be advertised in the prescribed form in three national daily newspapers.
5. The Commission’s advertisement shall invite objections and if there are any, the grounds for the objection shall be stated and same shall be forwarded to the Commission within 28days of the date of the last publication.
6. If after the advertisement, no objection is received within 30days, the Commission assents to this application, the Commission shall register the company and issue a certificate of incorporation.
A company Limited by Guarantee is not expected to carry on business with the aim of making profits for its members, where the Company does otherwise, all officers who are cognizant of this shall jointly and be severally liable for the payments and discharge of all debts the company incurred while carrying on that business. The Company and every official shall be liable to a penalty as prescribed by the commission for every day during which the Company carried on that business.
Companies Limited by Guarantee are exempted from paying taxes and upon winding up after the discharge of debts and liabilities, any property left shall not be distributed among the members but shall be transferred to another Company Limited by Guarantee which objects are similar or to some charitable Object, such shall be discussed by the members before dissolution.
Below is a list of filings to be made at the Corporate Affairs Commission after Incorporation.
After a company has been incorporated and has commenced operation, these companies from time to time still have some obligations to the Corporate Affairs Commission, that is post-incorporation matters. the filing of post-incorporation returns enables the Corporate Affairs Commission to keep abreast of the activities being carried out in the company, and failure of filing could render such a company inactive.
1. Annual Return
Every company is expected to file its annual returns once every year to the Corporation. For a company Limited by Guarantee, it shall file its annual returns in accordance with Sec 420 of CAMA and an annexed statement containing the total amount of the indebtedness of the company in respect of all mortgages and charges which are required to be registered with the Commission.
When the annual returns are being filed timely, it gives notice to the Commission of the company being in existence. It also saves time, for example when the company is in need of other post-incorporation services that would require the status of the company to be updated before proceeding with such updates of its records with the Commission. This can be avoided by the prompt filing of annual returns. The filing of annual returns is inexpensive but when not done on time will attract late filing fees.
2. Notice of Changes in Registered Address:
Notice of any change in the registered Address or Head office shall be sent to the Commission within 14 days. Failure to comply with this provision by CAMA shall attract a penalty on the company and every officer for everyday business has been carried out. Where the change in address has been completed in the annual returns, it shall be taken to satisfy the obligation imposed by CAMA.
A company Limited by Guarantee is mandated to have a Secretary. If not appointed at incorporation IT is expected that this is done within 6 months of incorporation.
4. Change of Director
Where changes are been made with the Directors, such is to be filed with the Commission within 14days of this change. A statement of particulars of the new director shall be required to be imputed in the Director’s Register. Where there is default in complying with this provision, each officer is liable to a penalty for every day during which the default continues.
5. Notice of Meeting
Every director is entitled to receive notice of directors’ meetings unless he is disqualified by any reason under the act. Some reasons for disqualification include a lunatic or an unsound person, a person suspended, an insolvent person. Failure to give notice of meeting to persons entitled to receive it invalidates the meeting.
6. Statement of Guarantee
A statement of Guarantee shall contain information of the subscribers to the Memorandum of Associations. And each member undertakes that if the company is wound up while he is a member or within one year after he ceases to be a member, he shall contribute to the assets of the company such as amount as may be required viz:
i. Payment of the debts and liabilities of the company contracted before he ceases to be a member, payment of the cost, charges, and expenses of winding up, and
ii. Adjustment of the rights of the contributories among themselves, not exceeding a specified amount.