BUSINESS NAMES, PARTNERSHIP AND INCORPORATED TRUSTEES.

 

LEARNING OUTCOMES:

1. Identify various types of business and non-business organisation (Business name/partnership and incorporated Trustee) and their features and suitability.
2. List a checklist of content of constitution of incorporated trustees and basic terms of partnership agreement and legal presumptions to be modified in partnership agreement.
3. Conduct client interview and apply client instructions towards preparation of documents for registration of business name and incorporated trustee at CAC.
4. Give a checklist of documents and items required for registration of business and non-organisation (Business name and Incorporated Trustee) at CAC
5. Complete statutory forms for registration of business names and incorporated Trustees
6. State and draft basic terms of typical simple partnership agreement, and how to modify legal presumptions in partnership agreement.
7. List and draft the items to be included in the constitution of Incorporated Trustee as regulated by CAMA.
8. Identify ethical issues arising

 

BUSINESS NAME

A business name means “ the name or style under which any business is carried on whether in partnership or otherwise “ sec 588(1) CAMA

Two companies can set up a firm, because companies have separate legal personalities of their own. A firm, partners, an individual or corporation can register a business name – s 574

A business can be registered either by an individual or as a firm.

A firm is what wants to register their business.

A business name can be a partnership or sole proprietorship. An entity registered as a business name is not a juristic entity because it lacks corporate personality. Registering a business name only gives it priority over the name and reserves it.

 

Administration

• Business names is administered by the CAC – s 569 CAMA. This means if you’re writing any letter that has to do with business names, you have to write it to Registrar –General of business name.
• CAC regulates and supervises business names under part B CAMA (section 571)
• The registrar-general of companies doubles as the Registrar of Business Names. You write letters dealing with companies to the registrar-general of companies.
• The Business Names Registry is decentralized with offices in each state (section 572(3)) administered by the assistant registrars.

 

Advantages of business names over incorporation

1. Its cheaper to register
2. Simplicity of registration- there are no multiple forms
3. Privacy
4. Ease of dissolution - s 578(1) CAMA
5. Easy to manage
6. Less formalities
7. Decision making is simpler – there is no need to issue notice or pass resolution

 

Instructions to take from the client with respect to business

1. The firm’s name /names
2. General nature of business
3. Full address of the principal place of business and branches
4. Full names of partners or proprietors – they’re like subscribers. Partner is used for partnerships, while proprietors is for business name
5. Presence of illiterate or blind person as proprietors of the business
6. Date of commencement of business

 

 

Registrable names – Individuals

Registration of business name is not compulsory, but it prevents someone else from using it. 

Any addition to surname, or surname and forename or surname and initial. Or forename only. S 573 CAMA

e.g. Toun Oni- not registrable, T.Oni – not registrable; Toun Oni & Co – registrable ; TounBaby – registrable; Toun- registrable .

Surname only, surname + forename, surname + initial = can choose to be registered but not compulsory.

s 573(d) in the case of individuals if it consists of their surnames and forename alone there is no need for registration.

Examples

Ben Eke, Taye Okon and Laila Umar can carry on as

• eke, okon and umar
• Ben Eke, Taye Okoh and Laila Umar

You register becauseof the ‘& co’ not because of the ‘and’

If its Tunrayo Egbe , she doesn’t need to register but if its Tunrayo Egbe and co , she would need to register. Egbe bookshop, or Egbe enteprises would need to be registered because of the extra words “bookshop” and “enterprises”. Bookshop is not her surname.So if it includes a name that is not a surname or forename it would need to be registered. Mrs is not part of it, it’s just a title not a name.  Rainbow clinic would also need to be registered because it not a true surname and forename or initial. Tolu Alabi Consultant gynaecologist or Tolu Alabi legal practitioner would not need to be registered because that’s profession but Ben Oladayo bookseller would need to be registered because book seller is not a profession neither is it a surname or forename.If its just your true forename then you need to register it, but if its your true surname then you don’t need to register it.  You can’t do business with your true forename alone. See the CAMA provisions. This is about instances when its mandatory to register it and when you can register.

Subscriber is for company, proprietor is for business name.

The fact that registration is not compulsory doesn’t mean that registration is not important. Registration aids the firm in enjoying the benefits in enjoying the benefits incidental to registration.

Registrable names – firms s 573(1)(a)

Firms refer to partnership; a name would be deemed registrable by a firm if the namedoes not consistof

• The true surnames of all individual partners of the firms without any addition
• The true forenames of the initial partners and the surname
• Initials of such forenames and their surname

 

Registrable names – corporation s.573 (1)(c)

If the name does not consist of its corporate name without any addition, they need to register. If its just the corporate name they don’t need to register

 

Exceptions: business carried on by a receiver or managers 573(2), where a business is carried under succession or new manager, the addition of “s” where two or more individual partners have the same surname.

 

 

Classwork

Joy stone, Susan woods and Mark silver are desirous of opening a laundry outfit without registering the name.

 1) Is this possible?

 2) Assuming you’re their solicitor advise them on 5 possible names they can us they can use.

Answer

1. Yes it is possible. s 573 of CAMA makes provisions for instances where a business name would not be registered
2. Five possible names they can use are :

• STONE, S.WOODS AND M. silver
• Joy stone, Susan woods and Mark silver
• Stone, woods and silver
• Susan woods, J.Stone and M.Silver
• stone, woods and silver
• Stone, woods, silver
• Woods, Stone, and Mark silver

 

 

Prohibited and restricted names

s.579

A business name that

• Contains the word ”national”, “government”, “municipal”, “state”, “federal”
• Contains the word “co-operative” or its equivalent in any other language or any abbreviation thereof;
• Contains the word “chamber of commerce”, “trustee”, “Guarantee”, “bank”, “investment”, “building society”, “insurance” or any word or similar connotation
• Is identical with or similar to name already registered under this act; (Ogunlende v Babafemi (1971) 1.U.I.LR (part IV) 417; Niger chemist Ltd v Nigeria Chemists (1961) 1 ALL N.L.R. 171 or
• Is similar to any trade mark registered in Nigeria,

And the registrar is of opinion that registration would likely to mislead the public, then the registrar shall unless the consent of the commission has been first obtained by the person, refuse to register the business name or as the case may be cancel the registration thereof

Prohibited names is under s.579(2) and this includes:

• Contains misleading words as to the nationality, race or religion of the proprietors of the company
• Deceptive or objectionable words in the opinion of a registrar

 

Registration of a minor when it’s a business name, the registrar may or may not, but in a company it’s an absolute bar except there are two other person not disqualified

 

Regulation 55 of the companies’ regulation provides that the person countersigning must state his full name, address and telephone number

 

S 574 (1) of CAMA – they can commence business for up to 28 days without registering.

 

Also see s30 for restricted and prohibited names for companies.

 

Ordinarily you cannot register a trademark or name where there is already one in existence which is sufficiently similar, unless consent is obtained.

 

S 574 – procedure for registration

1. Apply for availability and reservation check
2. Then deliver an application

 

The application will contain: for business - The business name on it , general nature of business , full postal address of the principal place of business, date of commencement of business

Additional requirement for a firm: names of the partners, present and former names, nationality / origin of each partner, sex and age of each partner, usual place of residence of each partner, other occupation of each partner

Name of the individual including present and former names, passport photograph, nationality /origin of the business, age and sex, other occupation

Additional content for company: corporate name of the company, registered address of the company, the company’s RC number

 

Execution of an application 574(5)

Individual- must be signed by him/hear

Firm - Must be signed by each individual partner

Company – secretary and director

 

The

Form of approval of proposed business name  - s 576

Duly completed and signed application form

Two photograph for individual and firm, For a company  - a copy of the certificate of the incorporation and CTC of ,.., updated annual returns,

 

The original certificate of the registration must be displayed in the principal place of business while photocopies must be displayed in other offices  – 576 (4)

 

Effect of registration

1. Does not give legal personality of the business but just apprises the public of the true identity
2. Gives priority to the use of name
3. Does not authorise the use of prohibited names
4. Does not show proof of partnership

 

Refusal to register

(3) the registrar may refuse to register if partner or proprietor is less then 18 years

(4) where an individual, firm or corporation that has previously been involved  in fraudulent trade malpractices.

 

In a company a minor can be a subscriber provided that there are two other people who are qualified, but can’t be a partner. In a business name a minor can be a partner but when he signs, some specific persons have to counter signs e.g. magistrate, legal practitioner, police officer above the rank of SPA  s 574(6).

Time for registration – s 574(1), within 28 days of commencement of business

 

Within 28 days of further refusal , they can file an action

Registration document of business name - Regulation 54

Form CAC 1 – availability and reservation of name

Form CAC/BN/1 – application form for the registration of business name, duly completed and signed

2 passport photographs, each of the proprietors

Photocopy of certificate of incorporation and CTC of resolution and updated annual returns 

 

Registrable Names – Firms/Partnership

• Any addition to surname, or surname and forename or surname and initial
• Or forename only of partners

 

Jurat

Note (i) (section 579 (i) and (ii) need for illiterate jurat in the case of illiterate proprietor.

 

Effect/advantage of registration of business names

• It doesn’t give them corporate personality but it is a means of apprising and identifying the true identity of the people behind the business.
• It gives priority in respect of name
• It is not a proof of partnership

 

Document – regulation 54

 

Document to hand over to clients after registering the business name

1. Certificate of registration
2. CTC of form CAC/BN/1

 

Post incorporation

Publication of true names in trade catalogues

 

Annual return must be filed not later than 30^th June in each year except the calendar year in which the business name was registered  – s 587(1) 

 

Removal of name – s 578 (1)

 

Classwork

List the advantages of incorporation under part A as opposed to Part B

• It’s easier for a company to get loans from the bank because the corporate form is a modern vehicle for doing business.
• The corporate form separates ownership and management but under part B management and ownership are fused.
• It has perpetual succession

 

Disadvantages

• It has a minimum capital threshold however this is not required in a business name
• It is highly regulated and there are a lot of formalities
• Cost of incorporation

 

Advantages of registering ABC ventures under part B over Part A

• Registration process is faster and less formal
• Decision making is faster because management and control are not separated under business name
• There is no minimum capital threshold

 

PARTNERSHIPS

 

This is a relationship that subsists between two or more persons carrying on business in commonwith a view to making profit - S 4 partnership law of Lagos state.

There must be nexus, they must act in unity, they must do the business in common and make profit.

You must make profit for it to be partnership. If they’re making profit but give the profit to charity it is still partnership. What they use their profit for is inconsequential to it being a partnership so long they make profit.

If they’re not in business together they are not partners.

Henshaw v Roberts 1966 NNLR 158

Uredi v Dada (1988) 1 nwlr (pt 69) – this says it can be one undertaking or consortium can be a business, doesn’t have to be continuous business

Ugorji v Uzoukwu (1972) 1 All N.L.R (pt.1 ) 289 – it was held in this case that they weren’t doing business in common.

Partnership could be made orally or in writing. Number required for partnership is minimum of 2, maximum of 20 – S20 Akinloshe v AIT. An alien can be involved in a partnership subject to the permits required in alien participation and he must register with NIPC

Partners are personally liable for all the debts and liabilities.

 

 

Advantages of private company over partnership

1. Limitation of liability of members s
2. Legal personality
3. Perpetual succession
4. Number of members – more than 20 people cannot operate partnership. One person cannot operate partnership. Partnership is 2-20 s19(1) CAMA. EXCEPTION – where there are more than 20 person they can still be a partnership: 1) accountancy, 2) legal partnership, 3) co-operative society registered under any enactment in Nigeria, 4) any association or partnership that is formed pursuant to the provision of any statute 

 

Advantages of partnership over corporation

1. Cheaper to manage
2. Simplicity
3. Easy to dissolve

 

Capacity – s 574

 

S 8 immigration act says aliens cannot be a member.

 

Forms of partnership agreement

It can be in wiring, by deed, oral, or by conduct.

 

Note it is not compulsory for a partnership to be registered it is still a business name. 

Where a person does not want the provision of common law to take effect you need to draft a partnership agreement. Partnership agreement is not necessary for every partnership transaction but only when the partner doesn’t want the implied terms of common law to take effect.

Implied common law terms include:

• Equal sharing of loss
• Equal contribution of capital
• Equal sharing of profit
• Death of a partner automatically dissolves the partnership
• No payment of salaries to partners
• No suspension

 

Clauses in a partnership agreement

• Parties clause
• Place of business clause
• Nature of business
• Capital
• Bankers and signatories
• Salaries
• Commencement and duration

 

Read Part B

Document – regulation 54

 

Relevant authority / applicable law

• CAMA
• Partnership act 1890
• Partnership laws of Lagos & all former western & Mid western states

 

Reasons why you would suggest a partnership agreement? /What is the advantage of putting the partnership in writing?

• Clarity - it would remove a lot of uncertainties. Certainty of terms
• Parties are bound by their agreement in case of breach
• It serves as evidence to prove a partnership is in existence.
• It helps the partners move away from the presumptions of the law and waive presumptions of the law.
• It enhances business profile and reputation with certain regulated authority. It facilitates business transactions they might want to have with outsiders.

See the partnership law of Lagos state

 

What are the presumptions under the partnership law?

• Death of a partner ends the partnership
• Equal distribution of capital
• Presumption of equal sharing - Profit and losses are shared equally amongst the partners
• Agency – each partner is presumed to be the agent of the other
• Presumption of active right of management- it’s presumed that every partner is involved in partnership.
• Equal ownership of partnership property
• Presumption that there is no salary – so if the partners want salary, they ought to include it in their agreement
• Its presumed to be a partnership at will, so a party ought to state the duration of their partnership if they don’t want it to be dissolved at any time
• There is no suspension, so if the parties want there to be suspension as a form of discipline upon misconduct they ought to include it..
• Death/retirement /resignation of a partner will end the partnership, if partners don’t want this they ought to modify the partnership agreement

Note that presumption of the law is different from clauses in a partnership agreement

 

Clauses in a partnership agreement

Not every clause in a partnership agreement has issues of presumptions. Note them.

 

Commencement clause – “this partnership agreement is made this ………….. day of ………..” the commencement date raises a rebuttable presumption that they are in partnership and it gives contemplated partnership  

 

Parties clause – this partnership agreement is made this ………….. day of ………..between Supreme Unukegwo of 35 awolowo street, Ikoyi, Lagoslegal practitioner of the first part and Edward Osike of 12 kemi street lekki,  Lagos legal practitioner of the second part and Koptang of 33 banire road, GRA, Ikeja  legal practitioner of the third part.

If there are more than 4 partners. Then its “ this partnership agreement is made this ……….day of ………….between persons whose names ,addresses occupations are listed  in schedule A of this agreement.

 

Importance of the parties clause: it tells you the date, it gives a clue as when the partnership commences and when they are supposed to register (you’re meant to register within 28 days of commencement of the parties clause), also lets you know the members of the partnership

 

Place of business clause

Place of businesswill act as the place of service of court document. Determine the applicable law to governthe partnership, as different states have their partnership law.

 

Name and style of the business clause – there is no presumption for it but there is value

• It determines whether the name is registrable and where its registrable the issue of prohibited/ restricted names comes in
• It shows you the availability of name,
• Whatever is done under that name and style binds the other partners.
• It restricts liability to the scope of the business

 

Nature of the business clause

It governs the extent to which a partner can bind the fellow partners. This is about the objects of a business. Once a partner goes beyond the object then the other partners cannot be bound by it.

 

Duration clause

If the partners don’t state the duration then is partnership at will which can be dissolved at any time but if there’s a duration clause then the issue of how to dissolve it is modulated

 

Capital – if there is a clause saying the capital a partner contributed they’re escaping from the presumption of law that says all profit and losses will be shared equally.

 

Bank and signatories clause

There is a presumption that every partner is involved in signing check

 

Salary

There is a presumption that no partner is entitled to salary, so if they want salary a clause must be created

 

Expulsion and Retirement clause

There is a common law presumption that if a partner retires that will be the end of the partnership, so there can be clause modifying this presumption.

 

Every clause has a meaning but not every clause has a presumption.

Death, retirement and suspension can be lumped together as a clause = death, retirement and suspension clause.

 

Testimonium

 

Attestation

 

Dispute resolution clause

 

Presumption of the law

• Capital
• Profit and loss
• Remuneration
• Expulsion
• Suspension
• Death
• Retirement
• Duration
• Partnership property

Be able to explain the presumptions

 

Taking instructions is different from documents. Taking instruction is interviewing your clients to get the information that will be used to prepare the documents.

 

First schedule, table B. Say “the name of the company is” don’t say the name of “The company shall be”. This is the name clause. Issue of name starts from s 29

Note also the issue of prohibited names and restricted names.

Regulation 20 – Requirements for consent of the Commission to use the word “group” in the name of a company so it cannot be less than 3 in total. For group you need at least 3 associate companies.

Regulations 21 - Requirements for consent of the Commission to use the word “Holding” in the name of a company.But for holding you’re talking of subsidiary company so you need at least two subsidiary companies.

Regulations 22 - Requirements for consent of the Commission to use the word “Consortium” in the name of a company

S 338 of CAMA – the holding company is the one holding the subsidiary company, so the holding company controls the subsidiary company. Controlling is not just about the amount of shares you have but also about the directorship, so controlling the composition of the board of directors 

Drafting a memorandum of association

Schedule 1, Table B – pg. 285

Say the registered office is situated, not ‘will be situated’. Also say Nigeria, not Lagos state, Nigeria.

Object clause – This is statement of their mere intention (Edekpolo v sem-odo wire, NIPC V Thompson, read the case). A company can do things outside their object clause but someone can bring a case against it S 39(3)

Status clause – don’t say the company is a private company limited by shares because limitation of company is different from shares. Just say the company is either private or public. Don’t join limited liability with status clause

Limited liability clause – this states the limited liability of its members. Liability of a company is never limited. S 21 provides the type of companies

Authorised share capital clause

Association/subscription clause

 

 

Pre-emption rights clause – this gives the shareholders opportunity to retain their percentage shareholding by taking more shares where there is proposed increase in the authorized share capital. So the shareholders can maintain their holding in the company. This can be in the memo of a public company because its targeted at maintaining the existing status quo.

Restriction of shares clause can be in private company.

 

A company limited by guarantee is usually a private concern and they can do business but its usually for non-profit.

In practice we have 3 types of private companies in Nigeria. How many companies with limited liability do we have in Nigeria? Private limited by shares, public limited by shares and private limited by guarantee. We have only one unlimited company in practice – private unlimited company.

 

Share capital:

Authorised share capital: 

 

 

Form of partnership

• Oral
• Writing
• Deed
• Contemplated partnership
• Does registration of business name mean partnership? No it just gives a rebuttable presumption that they intend to do business. See Henshaw v

 

Limited partnership

Read limited partnership under s 46 of partnership law Lagos

It must be registered

Effect of non-registration?

Registry of limited partnership – this is not with CAMA but with Lagos state partnership office

General partner – unlimited liability, management

Limited partner-limited liability, investor

 

To avoid unlimited liability

Looks more like a company

Owen

e.g. Olaniwun Ajayi LLP

 

NON- BUSINESS ORGANISATION

PART C – INCORPORATED TRUSTEES

Purpose – s 590, the purpose is almost the same as s 26 , but the difference is that  a company under s 26 can do business

Constitution – s 593. There are clauses that must be in the constitution, one of which is the special clause.

Special clause – s 603(1) compare with S27 (4) which contains the special clause of company limited by guarantee. 608(4) talks about what happens in the event of winding up or resolution, this is also part of the special clause. Learn how to draft them. So the special clause is s 603 (1) & (2) and s 608(4) but the exception to 603(1) is s 603(2)

Remuneration of officers, council of management and members of governing council – s 603(2)

Documents of incorporation – s 591, reg 65

Note – trustees are registered not association or body.

 Whether for part A, B or C you need to do availability of names. The issue of name cuts across everything. The name has to start “Incorporated Trustees of…..”s 591

It must be available and not conflict with any existing name or trademark– s 593

s 30

 

Who is qualified to be a trustee? – s. 592 , an infant cannot be a trustee

How many? – s 590 

 

Its called incorporation of

Advertisement – it must be advertised in two newspapers (one national and one local)

Try to find an advertisement and learn how to draft the advertisement

S 594 CAMA , Reg 65 (3) and (4)

Must be in two news papers

 

Procedure

• Obtain instructions from client
• Availability check
• Fill form CAC/IT/1
• Appoint trustees
• Prepare constitution, common seal, trustee declaration form
• Advertise, wait for objection

 

Differences between company limited by guarantee and incorporated trustees

• Company can do business, the incorporated trustee cannot do business
• Company require the authority / consent of the Attorney General for it to be registered while this is not needed for incorporated trustees
• Company can sue and be sued its own name but incorporated trustee can only sue through their incorporated trustees
• Company is governed by its memorandum and article of association while incorporated trustee is governed by its constitution
• Company limited by guarantee doesn’t need an Impression of common seal but it is needed for incorporated trustees.

 

Similarities between company limited by guaranteed and incorporated trustees

• They both cannot disburse the profit to its members
• They are both exempted from paying taxes
• The objects are similar
• Upon winding up they both have to devolve their property to a body or organisation similar to them

 

 

Availability of name

Laws that govern this area include: s 30 CAMA, Common law passing off. It’s reserved for 60 days.

After name clause, is the registered office. A registered office is important for service of documents and service of court processes.

 

Rule 315 says that underwriting shall be at the discretion of the issuer

 

Incorporated trustees – part C

Incorporated trustees can operate without registration but cannot take advantages of the incidents of incorporation. 

 

Features

• The trustees are the only person who obtain legal personality not the members i.e. Incorporated Trustees of Redeemed Christian Church of GOD
• It does not do business and does not distribute profit
• It receives income from grant, levies, dues and undertaking
• The income must be applied solely towards the promotion of its objects
• Minimum of one trustee but in practice two are needed – s 590

 

They must show within two years that they have acquired properties. It can only be dissolved by the FHC upon petition of governing council.

 

S 593 – they can carry out their objects prior to registration because registration is not compulsory but desirable 

 

Disqualification of trustees – s 592

• Persons of unsound mind
• Person below 18 years: a minor cannot be appointed as a trustee
• Undischarged bankrupt

 

Procedure for incorporation of incorporated trustees

• Complete the form CAC `/IT /01
• Then write a formal application letter, it must be signed

 

Effect of registration

• Trustees become a body corporate including: they have perpetual succession, common seal, power to sue and be sued through its incorporated trustees, power to hold and dispose land

 

You cannot register prohibited names but you can register restricted names