TYPES OF REGISTERED COMPANIES

 

There are broadly three types of registered companies provided for by section 21 of the Companies and Allied Matters Act 2020. They are:

1. Company Limited by Shares.
2. Company Limited by Guarantee.
3. Unlimited Company.

Any of the above may be:

1. Private Company or;
2. Public Company. See Section 21(2). CAMA

Thus, the species of registered Companies are:

1. Private Company limited by Shares (LTD)
2. Public Company limited by Shares. (PLC)
3. Private Company Limited by Guarantee (“LTD/GTE”)
4. Public Company Limited by Guarantee
5. Private Unlimited Companies (ULTD)
6. Public Unlimited Companies.

However, it should be noted that both Public Companies Limited by Guarantee and Public Unlimited Companies are rarely formed in Nigeria because they defeat the purpose of shareholding which is principally to share in the profits of a Company and avoid personal liabilities in business.

Private Company Limited by Shares “Ltd.” : A Private Company is generally employed where the capital available to start off business is relatively small. It is also employed where small and medium scale business organizations need to acquire incorporated status or where family and friends want to engage in business expected to last over a long period and enjoy corporate personality.

The features of a Private Company include:

1. A Private Company restricts the transfer of its shares to the public.
2. The authorized minimum share capital is N100,000.
3. The membership is between 1 to a maximum of 50 persons.
4. It cannot invite the public to subscribe to its securities except as authorized by law.
5. It can have a written Resolution of the AGM instead of actually convening a formal meeting. 
6. It can send modified Financial Statements to the CAC and they must not be published.
7. No specific qualification of a secretary is needed except knowledge and skills for the job.
8. It is not required to hold a statutory meeting6 months after incorporation.
9. The name of a private company must end with the word “limited”
10. Directors over 70 years can be appointed without complying with any formality.

Public Company Limited by Shares “Plc.”: A Public Company Limited by Shares is employed where the capital available to start off the business is relatively large or where a medium or large scale business needs to acquire corporate status. In a Public Company, the business organization would have access to public funds through offering its shares for subscription and membership is not limited or restricted.

The features of a Public Company include:

1. It is stated in its memorandum to be a Public Company.
2. It can invite members of the public to subscribe its shares and debentures.
3. It has the tendency of being larger and having more funds than many private Companies because they offer shares to the public.
4. It has an unlimited number of members.
5. The name ends with “Public Limited Company” or “PLC”.
6. The authorized minimum share capital is N2,000,000.
7. There is no restriction on transfer of shares in a Public Company.
8. A person who is above 70 years to be made a Director in a Public Company must give special Notice of his age to the members.
9. It must hold its statutory meeting within 6 months of incorporation.
10. It must publish additional notice of its General Meeting to its members in 2 daily Newspapers at least 21 days before each Annual or Extraordinary General Meeting. 
11. The Secretary of a Public Company must be qualified in accordance with Section 332 CAMA.
12. The removal of the company secretary of a PLC must accord with the procedures laid down by law. Section 333 CAMA.

Differences Between a Private Company Limited by Shares and a Public Company Limited by Shares.

1. The name of a Private Company must end with the word “Limited” (Ltd.) while the name of a Public Company must end with the words “Public Limited Company” (Plc.).
2. A Public Company can offer its shares to the public but a Private Company cannot
3. The minimum authorized share capital for a Public Company is N1,000,000 while for a Private Company is 100,000
4. A Public Company is mandated to hold a statutory meeting, unlike a Private Company.
5. There are mandatory qualifications for secretaries of Public Companies.
6. Special notice to the General Meeting required for the appointment of persons over the age of 70 as a director in a Public Company.
7. A Private Company may employ written resolutions whereas a Public Company cannot.
8. Public Companies are required to prepare annual audited accounts.
9. The notice of the General Meeting of a Public Company must also be published in a daily newspaper.
10. Public Companies are required to maintain a register of members having substantial interest in shares.
11. Private Companies can appoint multiple directors via a single resolution whereas Public Companies must appoint each director via a separate resolution unless a different resolution authorizing the use of a single resolution with respect to a specific vote is first passed. 

 

Companies Limited by Guarantee “Ltd/Gte”: A Company Limited by Guarantee is best suited for the promotion of commerce, art, science, religion, sports, culture, education, charity.  The company’s profits are not to be distributed to members. It is recommended as a subsidiary company set up to render corporate social responsibility obligations for the main company.

The features of a Company Limited by Guarantee are:

1. Members guarantee to contribute to its assets/ liabilities on winding-up to a minimum of N100,000.
2. It does not carry on business for the purpose of making profit for distribution to its members but for the attainment of its objects. 
3. The Company and every such member is liable to a daily default fine if it carries out business for profit sake. 
4. It has no share capital upon incorporation. 
5. The liability of its members are limited by the memorandum to such amount as the members may respectively thereby undertake to contribute to the assets of the Company in the event of its being wound up. 
6. The memorandum of such a Company shall not be registered without the authority of the Attorney-General of the Federation.
7. The number of people forming it must be clearly stated.
8. Upon winding up, after the discharge of its debts, any assets of the company remaining shall not be distributed among the members, but shall be transferred to some organizations with similar objects.
9. Its name must include the word “limited by guarantee” (Ltd/Gte.). 

 

Differences between a Company Limited by Guarantee and a Private Company Limited by Shares.

1. A Company Limited by Guarantee does not operate by share capital whereas a Private Limited Company operates by share capital.
2. A Company Limited by Guarantee must obtain the consent of Attorney General of the federation before it can be registered whereas there is no such requirement in the Private Unlimited Company.
3. A Company Limited by Guarantee is not a profit oriented company whereas a company limited by shares is aimed at making a profit. 
4. The profit made by a Company Limited by Guarantee is directed towards achieving the objectives of the company whereas the profit made by a Private Company Limited by Shares can be directed towards dividends to the shareholders.
5. A Company Limited by Guarantee has liabilities upon winding up limited by the amount that the members may have respectively undertaking to contribute to the asset of the Company upon winding up.  However, a Private Company Limited by Shares has the liability of its members limited by the amount remaining unpaid on the shares held by them.  

Unlimited Liability Companies: Unlimited Liability Companies are suitable for enlarged partnership and professional service companies with core values of honesty and integrity. The Law may impose that certain organisations involved in the management of public funds be set up an Unlimited Liability Companies. It may also be employed where contributed funds are to be managed by a company exhibiting due honesty e.g. stock brokers, insurance companies, etc.

The features of an Unlimited Liability Company include:

1.         An unlimited company is a company not having any limit on the liability of its members.

2.         An unlimited company must be registered with a share capital.